Falling for someone educated can increase inequality

The phenomenon whereby the highly-educated have partners who are also highly-educated has gained attention in popular media and academic research as a driver of inequality.

Lead author Omoniyi Alimi of Waikato University, together with Motu’s Senior Fellow Dave Maré and Waikato’s Emeritus Professor Jacques Poot, have just released a Motu working paper examining this kind of ‘matching’. The paper, which is a chapter of Mr Alimi’s about to be submitted PhD thesis on income inequality in New Zealand, shows that, for the full-time employed, people living together with someone with a similar education level leads to bigger income gaps between high-income and low-income couples.

“Our study provides new insights into how inequality within and between New Zealand cities is shaped by the interaction of educational, labour market and social trends,” said Dr Dave Maré.

About 20% of the income inequality between different couples is due to this pattern. Over time, the increasing proportion of people with high education levels has led to a greater inequality, particularly in larger cities, where the matching of like with like has become stronger.

“Our study is important because if couples are choosing partners based on characteristics that are increasingly correlated with income, this will affect the distribution of income. It may also influence the inter-generational transmission of inequality, depending on how resources are passed down on to the next generation,” said Mr Alimi.

Interestingly, the researchers found that the highly educated do not increasingly partner with other highly educated because they favour such partners more than in the past, but simply because there are many more of them in the “marriage market”.

The researchers chose to examine New Zealand as, since 1986, it has experienced rising inequality, increased educational attainment and a relatively low, and falling, wage premium for higher levels of education. The study found, however, that changing patterns of matching contribute only a small proportion of rising inequality.

“On average, for all couples working full-time, real income increased by 38 percent between 1986 and 2013. At the same time, overall inequality between these couples grew by around 49 percent,” said Mr Alimi.

In 1986, only 9 percent of the individuals who were married or in a de facto relationship could be classified as high-educated. By 2013, this proportion was 32 percent. Educational attainment rose much faster for women. In 1986, 51 percent more males than females were high-educated. By 2013 this proportion had reversed: 36 percent more females than males were high-educated.

“These changes in the educational distribution are significant and imply that there will be more couples where both are high-educated simply because there is a huge increase in the number of educated individuals,” said Mr Alimi.

Unsurprisingly, couples where both partners are highly educated had the highest average incomes while couples with two low educated partners had the lowest average incomes in all periods.

“The gap between high-educated and low-educated couples widened over time; between 1986 and 2013, high-educated couples had the highest growth in average incomes at 19 percent compared to 6 percent for low-educated couples. By 2013, the average income in couples with two high-educated partners was more than double that of low-educated partners,” said Mr Alimi.

Not all high-educated couples have become that much better off. Inequality between couples grew 55 percent for couples with two high-educated partners, compared to only 1 percent growth for couples with a mix of one high-educated and a low-educated partner.

“Our results have implications for policies meant to address inequality. If people falling in love is a driver of significant differences in inequality across areas, then we might want to revise our expectations of the capability of government policies to address inequality,” said Mr Alimi.

The researchers suggest that policies that help people improve their income by moving between different locations for work or enhancing their education and skills may be useful in addressing inequality. Additionally, ensuring that children have equal education opportunities irrespective of the income of their parents may dampen the intergenerational transmission of household inequality.

The full working paper “Who partners up? Educational assortative matching and the distribution of income in New Zealand.” by Omoniyi Alimi, David C Maré, and Jacques Poot is now available on the Motu website.

Summary haiku:
Falling in love with
one as educated boosts
inequality.
-ends-

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