Among children born outside the capital region to parents in the bottom 50% of income and who remained in their hometowns (now ages 36~40), 8 out of 10 were still in the bottom 50% of income. The conventional view has been borne out: children backed by parental economic resources gain opportunities for upward mobility by moving to the capital region, while those who stay in their hometowns experience ‘intergenerational poverty’. This pattern has become even more pronounced among more recent cohorts.

In its report ‘Interregional Migration and Intergenerational Transmission of Economic Power’ released on the 11th, the Bank of Korea stated that “it has been confirmed that the degree of transmission has intensified in recent cohorts”.

To gauge the extent of intergenerational poverty, the Bank estimated the ‘income percentile rank slope’ using Korean Labor Panel data. This metric compares increases in the income percentile of parents and of their children; values closer to 1 indicate stronger intergenerational transmission.

According to the analysis, the income percentile rank slope was 0.11 for children born in the 1970s, but 0.32 for those born in the 1980s. This means the degree to which parental economic status was passed on to children was greater for the 1980s cohort.

In particular, children born outside the capital region who stayed in their hometowns saw their prospects for upward mobility weaken.

Among those who stayed in their hometowns, the share of children of parents in the bottom 50% whose own income also remained in the bottom 50% rose from 58.9% in the past (born 1971~1985) to 80.9% recently (born 1986~1990). In the past, ‘intergenerational poverty’ affected 6 out of 10; now this phenomenon appears in 8 out of 10. Conversely, the share of cases where parents were in the bottom 50% but children made it into the top 25% fell from 13% to 4%.

When children born outside the capital region moved to the capital region, the degree of economic improvement increased, but when they moved within the same region, the effect on upward mobility declined markedly compared with the past. The Bank explained that “this is the combined result of structural conditions, including weakened competitiveness of hub-city universities and a relative shortage of quality jobs across the non-capital regions”.

The Bank pointed out that, as a result, these factors work to the disadvantage of children from low-income families. Children from low-income families are more likely to choose to move to nearby areas rather than the capital region due to housing cost burdens, among other reasons. It is a case of ‘imbalance of opportunity’. In fact, children whose parental assets were in the bottom 25% had a probability of migrating to the capital region that was lower by 43 percentage points than that of children in the top 25%.

The Bank assessed that, because incentives for children born outside the capital region to move to the capital region are so strong, this has led to concentration in the capital region and polarization between regions.

Jeong Min-Su, head of the Bank’s Regional Economy Survey Team, said, “To ease the structure in which intergenerational transmission of economic power deepens in tandem with place of birth and residence, we need not only to strengthen mobility that helps ‘timber that will become a dragon go to the river’ but, more fundamentally, efforts to transform the provinces ‘from a small stream into a big river’.”