Wealth stratification in the early school career in Germany

Parents’ social background predicts their children’s educational achievement, thus reproducing social inequality between generations. This finding is internationally well-known and a constant cause for public and academic discussion. But which aspects of parental social background are relevant in this context? So far, research has identified parents’ education, occupation and income as important determinants of their children’s educational achievement. In our study, we focus on wealth as an additional predictor. Wealth has received broader attention, not at least since Pikettys (2014) book on “Capital in the Twenty-first Century”, in which the author showed that wealth inequality is rising in most Western countries. We analyse the relationship between parental wealth and childrens cognitive abilities in primary school as well as their transition to secondary school in Germany. Germany is an interesting study case for at least two reasons. First, despite that education is largely free of charge, educational success is strongly linked to parental origin. Second, in Germany, the consequential track choice after primary school happens earlier than in most other countries. This should make an early parental investment in education particularly important and may thus increase advantages for children from wealthy families.

Der soziale Hintergrund der Eltern beeinflusst den Bildungsstand ihrer Kinder und reproduziert so die soziale Ungleichheit zwischen den Generationen. Dieser Befund ist international bekannt und bestimmt öffentliche und akademische Diskussionen. Doch welche Aspekte von sozialer Herkunft der Eltern sind in diesem Zusammenhang relevant? Bislang hat die Forschung Bildung, Beruf und Einkommen der Eltern als wichtige Determinanten für den Bildungserfolg ihrer Kinder identifiziert. In unserer Studie konzentrieren wir uns auf Vermögen als zusätzlichen Prädiktor. Nicht zuletzt seit Pikettys (2014) Buch ” Das Kapital im 21. Jahrhundert“, in dem der Autor aufzeigte, dass die Vermögensungleichheit in den meisten westlichen Ländern zunimmt, hat das Thema Vermögen größere Aufmerksamkeit erfahren. Wir schauen uns den Zusammenhang zwischen elterlichem Vermögen und den kognitiven Kompetenzen von Grundschulkindern sowie ihrem Übergang in die Sekundarstufe im deutschen Kontext an. Deutschland ist aus mindestens zwei Gründen eine interessante Fallstudie. Erstens ist trotz der Tatsache, dass Bildung weitgehend kostenfrei ist, der Bildungserfolg stark mit der elterlichen Herkunft verknüpft. Zweitens erfolgt in Deutschland die Entscheidung für die Schulform der Sekundarstufe früher als in den meisten anderen Ländern. Diese zwei Faktoren machen eine frühe elterliche Investition in Bildung sehr wahrscheinlich und sollten somit die Vorteile für Kinder aus vermögenden Familien auch in Deutschland erhöhen.

DOI: 10.34879/gesisblog.2020.17

Primary and secondary effects of social origin or ‘What about wealth?’

Children from families with higher social origin on average have higher competences and perform better in school as compared to children from lower social origin, translating into more ambitious educational decisions, for example to attend the highest secondary school track Gymnasium. This effect has been named the “primary effect of social origin”. But even if children from higher social origin do not differ in their competences and performance from children from lower social origin, they still more frequently choose a more ambitious educational track, which is referred to as the “secondary effect of social origin” (Boudon 1974). The sizes of the primary and secondary effects of social origin depend on their measurement. Usually parental income, education or occupation are used as such measures, ignoring wealth.

Wealth has crucial differences from the other measures of social origin. Wealth can serve as a private insurance for families, since they can fall back on their wealth if needed. Wealth can directly be transferred over generations. Compared to income, wealth is more stable, making it a better indicator for long-term consumption potential (Spilerman 2004). In Germany the correlation between income and wealth is particularly low at 0.3 (Pfeffer and Hällsten 2012).

How can parental wealth improve children’s competences?

We suggest four ways through which higher parental wealth can increase children’s competences. The first way is through family investments referring to the fact that wealthier families can invest in the purchase of competence-fostering resources like learning materials or stimulating activities (Becker and Tomes 1986). The second way is through family stress reduction. Wealth can prevent economic hardship (caused for example by longer unemployment or severe diseases), which can cause stress for parents, leading to parenting behavior detrimental to competence development (Conger and Conger 2002). The third way is through residential segregation, as wealthier families can afford moving to areas with high-quality childcare and schools (Pfeffer 2018). The fourth way is through pro-educational norms: Wealthier parents are more likely to promote pro-educational norms among their children because they aim at securing and legitimizing their wealth, while enabling them to plan their future, not being busy with getting by (Hällsten and Pfeffer 2017).

The early tracking in Germany makes pro-educational norms more salient already in primary school and should lead to early investments in children’s education in order to ensure that the highest secondary school track can be realized. Children with wealthier parents should thus show higher competences already at the beginning of primary school and especially at the end just before the transition to the secondary school track is made.

How can parental wealth increase children’s chances to attend Gymnasium?

Independent of their children’s competences and performance, wealthier parents can be expected to be more likely to send their children to the highest secondary school track, Gymnasium, as compared to less wealthy parents. The reasons for these differences in educational behavior are different calculations of costs, risks and benefits made by families with different levels of wealth.

For less wealthy families, higher education comes with higher opportunity costs, as their children spend more years at school instead of in a wage-generating job.Also, families with no or low wealth have no financial cushion to fall back on in case their child needs additional training or must repeat a grade. Finally, while low wealth families have not much to lose if their child does not acquire a high(er) level of education, for wealthy families, higher education helps avoiding intergenerational wealth decline and legitimizes wealth advantages(Conley 2001).

High wealth and high debts foster higher competences

As expected, our results depicted in Figure 1 show substantial differences in children’s competences by parents with different levels of wealth but otherwise similar characteristics (e.g., education, migration background). We found that children in households with a net worth (i.e., total real assets plus total financial assets net of debts on them) of €100k score about 0.15 standard deviations higher in math test scores than children in households with zero or little negative net worth. The size of the parental wealth effect is smaller than the effect of parental education, but similar to the size of the effects of parental income and occupational class. Against our expectations, however, the differences in math competences by wealth do not increase throughout primary school but remain rather stable. This means that the differences by parental wealth may have already occurred before children entered school (for more details on this see also Dräger and Pforr 2020). Interestingly, we also find that more net worth is not always associated with higher competences. In fact, children in households with high level of negative net worth (i.e., debts are larger than assets) show higher math competences than children in households with little or small amounts of negative net worth. A reason for this could be that high debts do not necessarily imply financial hardship but quite the opposite: High amounts of debts can only be accumulated if families have financial securities. High negative net worth may therefore be a sign of financial capacity, while little negative net worth is more likely to indicate unsecured debts and economic hardship.

Figure 1: Predicted mathematical competence by parental net worth

Figure 2: Predicted probability of Gymnasium attendance by parental net worth

High wealth and high debts foster a higher secondary school track

The competence gap by parental wealth translates into a similar gap in Gymnasium attendance as illustrated in Figure 2. Children living in households with net worth of €100k are almost 10 percentage points more likely to attend Gymnasium compared to children in households with zero or little negative net worth. Even when we only compare wealth effects only for children with similar competences and marks, we still see a five percentage points gap by parental wealth – the secondary effect of parental wealth on educational decisions. Thus, about half of the difference in Gymnasium attendance between wealthy and less wealthy parents can be attributed to differences in competences, half to different decisions patterns net of competence differences.

‘Advantage finds its way’

While wealth should be of little importance for education in a country with little to no tuition fees, the early tracking brings wealth back in also in Germany and thus fosters already existing inequalities in the German educational system. Our findings demonstrate the importance of wealth for the explanation of educational inequality. By ignoring wealth, previous studies even underestimated the effect of social origin on educational achievement.

Original Paper: Dräger, Jascha, and Nora Müller (2020). “Wealth stratification in the early school career in Germany.” Research in Social Stratification and Mobility. https://doi.org/10.1016/j.rssm.2020.100483

References

Becker, Gary S., and Nigel Tomes. 1986. “Human Capital and the Rise and Fall of Families.” Journal of Labor Economics 4 (3): 1–39. https://doi.org/10.1086/298118.

Boudon, Raymond. 1974. Education, Opportunity and Social Inequality: Changing Prospects in Western Society. New York, NY: Wiley.

Conger, Rand D., and Katherine J. Conger. 2002. “Resilience in Midwestern Families: Selected Findings from the First Decade of a Prospective, Longitudinal Study.” Journal of Marriage and Family 64 (2): 361–73. https://doi.org/10.1111/j.1741-3737.2002.00361.x.

Conley, Dalton. 2001. “Capital for College: Parental Assets and Postsecondary Schooling.” Sociology of Education 74 (1): 59–72. https://doi.org/10.2307/2673145.

Dräger, Jascha, and Klaus Pforr. 2020. “Investment, Stress or Neighborhood – The Underlying Mechanisms of Competence Disparities by Parents’ Financial Resources among Pre-Schoolers in Germany.” SocArxiv. https://osf.io/preprints/socarxiv/q7prw/.

Hällsten, Martin, and Fabian T. Pfeffer. 2017. “Grand Advantage: Family Wealth and Grandchildren’s Educational Achievement in Sweden.” American Sociological Review 82 (2): 328–60. https://doi.org/10.1177/0003122417695791.

Pfeffer, Fabian T. 2018. “Growing Wealth Gaps in Education.” Demography 55 (3): 1033–68. https://doi.org/10.1007/s13524-018-0666-7.

Pfeffer, Fabian T., and Martin Hällsten. 2012. “Mobility Regimes and Parental Wealth: The United States, Germany, and Sweden in Comparison.” SOEPpapers on Multidisciplinary Panel Data Research 500.

Piketty, Thomas. 2014. Capital in the Twenty-First Century. Cambridge: The Belknap Press of Harvard Univ. Press.

Spilerman, Seymour. 2004. “The Impact of Parental Wealth on Early Living Standards in Israel.” American Journal of Sociology 110 (1): 92–122. https://doi.org/10.1086/424943.