Nova SBE, BPI, and Fundação “la Caixa” analyze the main factors in the intergenerational transmission of poverty
Research | 20 October 2023 Nova SBE, BPI, and Fundação “la Caixa” analyze the main factors in the intergenerational transmission of poverty

This work is a complementary note to the project Portugal, Balanço Social [Portugal, Social Balance], by Nova SBE Faculty members Bruno P. Carvalho, Miguel Fonseca, and Susana Peralta, from the Nova SBE Economics for Policy Knowledge Center. It was carried out as part of the Social Equity Initiative, a multi-year program established between the three institutions, and analyzes the transmission of poverty from parents to their children, assessing the various reasons that can trigger it: level of education, employment, household composition, and other social-demographic situations (such as nationality and material deprivation).

The study is based on data from the special module of the "2019 Survey of Living Conditions and Income (ICOR)", which collected information from each respondent about their current economic situation and the same information about their household when they were 14 years old.

One of the conclusions revolves around the father's education and its decisive impact on his children's poverty situations as adults. Children whose fathers have only completed elementary school are twice as affected by poverty as those whose fathers have completed secondary school. Among adults whose fathers had basic education, only 20 % completed higher education; this percentage rises to 58.5 % and 75.6 % for adults with fathers with secondary or higher education, respectively. Thus, "having a father with higher education almost quadruples the likelihood of an adult having higher education.

Concerning employment, the study reveals that one in four adults who had an unemployed parent at the age of 14 is poor. This suggests that "the employment situation of parents is a determining factor in the poverty situation of their children when they reach adulthood". The parent's job is also relevant: children of farmers and less-qualified workers have a risk of poverty rate three times higher than children of specialists in intellectual activities (22 % and  7%, respectively).

In terms of household composition, adults from single-parent families are 20 % more likely to be poor. For adults who, at the age of 14, lived in large families, this probability rises to 23 %. Adults who did not live with their fathers at the age of 14 have a poverty rate of 17 %, which increases to 23 % when they have no contact with their fathers at all.

The household financial situation is also a determinant of intergenerational transmission of poverty. One in four people who grew up in a household with a poor financial situation is poor. In addition, one in three adults whose family was unable to meet their school material needs at the age of 14 is now poor (in adults whose family was able to meet these needs, the poverty rate is halved). Adults whose families were unable to provide a daily protein meal face a poverty rate of 22 %, more than double that of other families (10 %).  "Adults who lived in households that were deprived of meeting school and food needs have poverty rates more than twice as high as those without deprivation," said the researchers. Finally, one in four adults living in care at the age of 14 is poor.

A comparison between the generations born in the 60s, 70s, and 80s shows that adults living in well-off households at the age of 14 have poverty rates of between 11 % and 13 %, regardless of the decade in which they were born. For adults who lived in households with a poor financial situation, poverty rates vary between 22 % and 24 %. Thus, the difference in the poverty rate of adults who lived at the age of 14 in households with a good or bad financial situation is systematically between 11 and 12 percentage points, regardless of the generation considered. Therefore, "there is no evidence that the intergenerational transmission of poverty is decreasing."

Finally, the Nova SBE researchers analyzed other sociodemographic situations that may affect the respondents' poverty rate, such as nationality (one in four children of immigrants is poor) and the degree of urbanization of the area where their parents lived (adults who grew up in rural areas have a higher risk of poverty).

Read the full report here.

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