Intergenerational earnings persistence in Aotearoa New Zealand

We present estimates of intergenerational earnings persistence (IEP) in New Zealand using linked administrative data. We assemble a dataset of around 288,000 individuals born between 1986 and 1992 and link them to their parents using data from various administrative datasets, 2013 and 2018 Censuses, and household surveys. We examine inter-generational persistence in outcomes including income source and access to employment. For around 198,000 cases where both parents and children are actively participating in the labour market (defined as earning wages and salaries for more than 6 months a year), we estimate IEP, including by ethnic groups. Our preferred (IV) overall rank-rank slope of parent-child earning is 0.27. This implies that children experience about one quarter of the earnings advantage or disadvantage of their parents, and that within-family persistence of inequality can explain only a small proportion of sustained inter-family or ethnic disparities. We examine both relative and absolute intergenerational earnings persistence and explore whether persistence depends linearly on parental earnings, varies by ethnicity and gender, or is accounted for by persistence in observed characteristics of children and parents. We discuss the possible causes and consequences of earnings persistence, and the influence of discrimination and racism in the labour market and elsewhere.