Keeping it in the family: How nepotism in the workplace helps the rich stay wealthy

• A Canadian economist said wealthy people hire their children as a way of holding onto their money
• Research found sons with rich fathers are more likely to work for the same firm at some point in their lives than sons with less wealthy fathers
• Social mobility expert Miles Corak said nepotism combined with labour markets and public policies, are damaging the American dream

A Canadian economist has demonstrated that it really is who you know rather than what you know that helps some sons of wealthy fathers get jobs

A Canadian economist has demonstrated that it really is who you know rather than what you know that helps some sons of wealthy fathers get jobs.
Wealthy people hire their children as a way of holding onto their money, the study said.
Social mobility expert Miles Corak said the strategy enables money and power to stay within a family instead of being distributed to others.
He found sons with rich fathers are more likely to work for the same firm at some point in their lives than sons with less wealthy fathers.
He believes nepotism as well as other factors including labour markets and public policies, are damaging the American dream.
Dr Corak's research shows the likelihood of a son working at the same firm as one that his father either works at or has worked at, at some point in his life.
The study examined elite businessmen in Canada and Denmark and found the proportion of sons sharing an employer with their father is high.
The Professor of economics at Ottawa University, studied workers in Canada and Denmark, but noted the pattern is very probably applicable to the composition of workplaces in more places, including the U.S.
The study said a rise in income of the top one per cent of businessmen, their access to sources of high quality education and enrichment for their children and the inter-generational transmission of employers and wealth, 'implies a much higher rate of  transmission of economic advantage at the very top, in a way that many  will perceive as evidence of inequality in opportunity'.

A U.S. economist said nepotism enables money and power to stay within a family instead of being distributed to others. The graph shows the proportion of sons who work or have worked at the same firms as their fathers as well as examining the earnings of the fathers studied

Dr Corak believes declining mobility is eroding the concept of the American dream.
Writing in the study, he said: 'Evidence suggests that more inequality of incomes...is likely to make family background play a stronger role in determining the adult outcomes of young people, with their own hard work playing a commensurately weaker role.'
The research found inter-generational earnings mobility is low in countries with more inequality, such as the U.S. Italy and the UK.

 

Earnings mobility is much higher in Nordic countries such as Denmark where income is distributed more equally.
Dr Corak said countries with more inequality at one point in time also experience less earnings mobility across the generations, which he has illustrated with a chart dubbed 'The Great Gatsby curve'.

Dr Corak said countries with more inequality at one point in time also experience less earnings mobility across the generations, which he has illustrated with a chart dubbed 'The Great Gatsby curve'

The study says: 'the interaction between families, labour markets and public policies all structure a child's opportunities and determine the extent to which adult earnings are related to family background'.
Dr Corak suggested these factors will probably curb earnings mobility across generations and arguably deter less advantaged Americans coming-of-age from climbing up the corporate ladder in a polarised labour market.
He wrote: 'This trend will likely continue unless there are changes in public policy that promote the human capital of children in a way that offers relatively greater benefits to the relatively disadvantaged'.

Dr Corak believes declining mobility is eroding the concept of the American dream. Writing in the study, Dr Corak said: 'Evidence suggests that more inequality of incomes...is likely to make family background play a stronger role in determining the adult outcomes of young people and with their own hard work playing a commensurately weaker role'