Abstract

Graduates in the Labour Market: Does Socioeconomic Background have an
Impact? The case of Hungary Zsuzsa Blaskó and Péter Róbert
Paper prepared for the RC28 Spring Meeting in Brno, Czech Republic, May
24-27, 2007 Note that this is a draft paper. Do not quote in any way without the
authors' permission: Zsuzsa Blaskó blasko@gmail.com; Péter Róbert
robert@tarki.hu Abstract In this paper the status attainment process of young Hungarian graduates
is investigated - with a special attention to the impact of social origin,
defined as the education and occupation of the parents. Our estimates show
that graduates from high status families can enjoy substantial advantages
in the labour market, even when type of education, field of study and also
a range of labour market experience factors are held constant. The greatest
wage-premium for coming from a "good" family is measured for men, 4-5 years
after graduation. We argue that the substantial growth in the number of graduates and also
the increasing variety of jobs taken by them contribute to the social
selection process moving further up from the educational ladder to the
labour market. Possible mechanisms driving the direct inheritance of social
advantages are described, but further research is needed to explore them in
detail. Keywords: higher education; social mobility, intergenerational mobility,
school-expansion; graduates; graduate labour market; Hungary; post-
socialist country Introduction and theoretical background. Direct and indirect parental
effects Intergenerational transmission of social and economic advantages has for
long been in the focus of different disciplines in the social sciences. In
particular, scholars in sociology and also in economics have widely
researched the persistence of social and economic inequalities and the ways
advantages can be inherited from generation to generation. Although taking
off from different theoretical and methodological standpoints, the overlap
in the focus of the two disciplines is increasing. (Morgan 2006) Growing
inequalities in the labour market as well as a non-increasing trend of
social mobility in the industrialised societies are making the issue of
social inheritance particularly timely. Scholars in both fields are
actively calling for more attention and new insights into the problem (see
eg. Goldthorpe and Jackson 2006; Bowles and Gintis 2002). Investigating the underlying mechanisms behind the pure correlation of
social origin and social destination, attempts were made to decompose the
relationship into its components. The idea of differentiating between
direct and indirect effects of the origin appears both in Sociology and
Economics. (Treiman 1970; Blau and Duncan 1967; Bowles and Gintis 2002)
Firstly, parents' social standing has a major impact on educational
attainment and influences the offspring's later opportunities in life via
the educational channel. Children from families of a higher social standing
get more and better education and therefore they get better jobs, more
salary, more social prestige. This is called the indirect effect on the
social background. At the same time, impact of social origin may operate
independently from schooling and result in significant differences in the
social destination of individuals also with similar educational attainment
but different social backgrounds. This is the direct effect of social
origin. A simple representation of this distinction is shown in Figure 1.
Notions of "Social origin" and "Social destination" can be replaced by
"Parental income" and "Income" - or indeed, by any other appropriate
indicators. Figure 1. The Process of Status Attainment. Social Origin Social destination Schooling
In sociology, with both functionalist and conflict theory arguing that
education is becoming the major determinant of social success, together
with empirical evidences seeming to support this hypothesis, the idea of
direct transmission of social status has received relatively little
attention. Remarkable recent exceptions to this are studies by Goldthorpe
and Breen, where these authors systematically challenge the propositions of
functionalist theory as well as the basic ideas of meritocracy (e.g.
Goldthorpe 1985, Breen-Goldthorpe 1999; 2001; Goldthorpe-Jackson 2006).
They also present their own empirical results suggesting that the
importance of direct parental effects is not at all declining - at least
not in the contemporary Britain. Looking at the status attainment process of the 1958 cohort of the
National Child Development Study (NCDS), Breen and Goldthorpe (1999) find
that parents' social class remains to have a significant effect on the
social class of the respondents even when education, abilities and also
effort - all the possible constitutes of merit - are controlled for. In
another study (2001) they compare the 1958 cohort from NCDS and the 1970
cohort from the British Cohort Study. Association between class origin and
class destination here is found to be largely the same in the two cohorts,
with education having a remarkably smaller influence on individuals'
relative mobility chances in the younger cohort. This means that by the
1990's, more room was left for the direct channels of social inheritance
than in the 1980s. In an earlier study Breen (1998) is looking at second-
level school leavers from the Republic of Ireland. Decomposing total impact
of social origin into its direct and indirect components he finds that
social origin's influence on the odds of avoiding unemployment is only
partially mediated through education. A recent paper by Evans and his colleagues (Evans and others 2005)
suggests that direct effects of social origin exist not only in the Anglo-
Saxon societies. Comparing the process of status attainment in 31 countries
all over the world they find that in 20 cases, parental background plays a
role in shaping occupational status even when respondent's education is
controlled for. Parental background in this case is measured by parents'
education, father's occupation and the number of books in the parental
home. Interestingly they find that the direct effect of scholarly culture
(as measured by the number of books) tends to be larger in post-communist
countries (including Hungary) than elsewhere.
In economics, role of parental background appears in the "returns to
education" literature for two primary reasons. Firstly, estimates derived
from the classical "Mincerian wage estimation" (Mincer 1974) show that
education and labour market experience do a relatively poor job in
explaining the variance of earnings - they generally account only for about
25-35% of the total variance (Card 1998). A great proportion of income-
variation between individuals with similar education and also other
measurable factors (typically age, gender, on the job training) remains
unexplained (Rosen 1977). Such observations then called the attention to
the possible role of parental background in contributing to income-
differences between the similarly educated. Secondly, it has been shown that when important determinants of wages are
excluded from wage-equations, the parameters for schooling are likely to be
biased. Depending on the nature of the interrelationship between unobserved
variables and schooling, omitted variables might lead to either under- or
overestimation of these measures. (see Card 1998 for a comprehensive
discussion, and Galasi 2003 for a Hungarian application). Among the (often)
unobserved variables school quality, as well as ability are considered to
be of major importance - both heavily interrelated with parental
background. Consequently, family background measures are often applied and
interpreted as proxies for school quality (eg. Grubb 1993), or ability
(Leibowitz 2001). In the wage-regressions, when a proxy for parental environment is
included, parental background is rather systematically found to be
positively correlated with income, when education - but not ability - is
controlled for. (eg. Grubb 1993; Ashenfelter and Zimmerman 1997[1]) When
however ability or even measures of school quality are added to the models,
findings are less conclusive. Several such studies found that the existence
of a statistically significant, positive direct parental effect varies by
gender and/or cohorts studied. (Altonji and Dunn 1995[2]; Leibowitz 2001)
In some other studies however, inclusion of ability-indexes and/or school-
quality measures seems to entirely wipe out the parental effect (eg. Taber
2001) The case of graduates In our argument so far we have not distinguished between different groups
or strata of the society. Now we shall argue that the case of graduates
requires special attention when the problems of status-attainment are in
focus. Firstly we provide a brief overview on the contemporary graduate
labour market today and then we turn to explaining why characteristics of
this market are likely to promote the various forms of direct social
inheritance. Possible mechanisms driving the direct effect of social origin
will also be discussed. It is common knowledge that the number and proportion of graduates has
gone through a radical increase in the past decades in most European (and
also other) countries (eg. Shavit-Blossfeld 1993). In some cou