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Making it to the top 1 per cent, with a little help from dad

The most popular way to find a job is through family and friends. That holds true for all of us, but it is immensely more likely for the kids of the very rich. Look at the graph below from a research paper that Patrizio Piraino and I published in the Journal of Labor Economics (available here if you really want all the details).

The bottom line is that about 40 per cent of us have at some point worked for exactly the same firm that at some point also employed our fathers. But if dad's earnings put him in the top 25 per cent these chances are above average, they start taking off if dad was in the top 5 per cent, and reach the stratosphere for top earners. Almost 7 out of 10 sons of top earning dads had a job with his employer.

All parents want to help their children in whatever way they can. But top earners can do it more than others, and with more consequence: virtually guaranteeing, if not a lifetime of high earnings, at least a great start in life.

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Connections matter. And for the top earners this might even be nepotism. This is not a bad thing if parents pass on real skills to their children, skills that might even be specific to particular occupations, industries, or even firms. If this is the case then it makes economic sense to follow in your father's footsteps.

On the other hand, "Bad" nepotism promotes people above their abilities by virtue of connections, and it erodes rather than enhances economic productivity.



Miles Corak is a professor with the Graduate School of Public and International Affairs at the University of Ottawa, where he teaches economics in a way relevant for public policy. The unabridged version of this post is available at www.milescorak.com

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