Inequalities in Early Test Scores

Table 4 provides details of the income-related gaps in standardized literacy test scores in each country and also the significance of the differences between the gaps in the United States and those in the three other countries. Figure 1 gives a graphical presentation of the estimates in Table 4.

Table 4 Gaps in mean early literacy test scores (reference category = Q3): Within countries and in comparison with the United States Full size table

Fig. 1 Within-country gaps in mean early literacy test scores (reference category = Q3). Error bars are 95 % confidence intervals. Q1 to Q5 refer to income groups defined by the quintile boundaries of the U.S. distribution from lowest to highest; that is, Q1 is the group with income less than $27,000, and Q5 is the group with income greater than $96,000. The chart plots the gap in mean standardized test scores between the specified group and the middle Q3 group (families with incomes of $44,000–$65,000 equivalized, in 2011 U.S. dollars). Estimates are calculated from the underlying microdata separately for each country. See Tables 1 and 2 for details of the source samples. Full size image

Looking to the estimates at the bottom right of Table 4 (or the sum of the bars on the far left and the far right in Fig. 1), the overall Q5–Q1 gap in test scores is larger in the United States than in all the other three countries, although not significantly so in the case of the United Kingdom. The literacy scores of children in homes with incomes less than $27,000 per year are markedly more similar to those of children with incomes over $96,000 per year in Australia and Canada than in the United States, by an order of more than one-half of a standard deviation (SD).

The most striking differences between the United States and the other countries are seen in the gaps at the higher end of the income distribution. The bottom panel of Table 4 shows that the gap in test scores between the highest and middle-income groups (the Q5–Q3 gap) is significantly smaller than in the United States by 0.21 SD in the United Kingdom, by 0.26 SD in Canada, and by 0.37 SD in Australia (differences that amount to, respectively, 34 %, 43 %, and 61 % of the 0.61 SD U.S. Q5–Q3 gap). These results indicate that higher-income groups in the United States are able to translate their financial resources into greater cognitive advantages relative to the middle-income group than in any of the other three countries. Or, put another way, children in the United States seem to be more adversely affected by being in the $44,000 to $65,000 income group, rather than a higher-income group, than do children in other countries. This also holds for the Q4–Q3 comparison (significantly so in the case of the comparison with the United Kingdom and Australia), so it cannot be driven solely by higher levels of income among the top income group in the United States.

Gaps in test scores between middle- and lower-income children tend to be more similar across countries. For example, there are no significant cross-country differences in the Q2–Q3 gaps: the gaps between the middle group and those just below it in the $27,000–$44,000 income group are in the range of one-third to one-fifth of a standard deviation in all four countries and are not statistically distinguishable. Only Canada has a significantly smaller Q1–Q3 gap in test scores than in the United States—between children in the lowest income group (<$27,000) and the middle. This difference, however, is very large, at less than one-half the size in Canada as in the United States.

These results are important because they show that the larger gaps in test scores between income groups in the United States, when defined by relative incomes documented in previous work, cannot simply be attributed to the more unequal income distribution in the United States. Compared with the gaps presented in Bradbury et al. (2015b:46), which used an identical sample and data but divided the non-U.S. countries into within-country income quintile groups, the switch to absolute income boundaries does tend to widen the non-U.S. test score gaps, as we would expect. For example, the UK Q5–Q1 gap in test scores becomes insignificantly different from the U.S. Q5–Q1 gap in test scores when the income boundaries are harmonized, and the Canadian Q5–Q3 gap in test scores increases from 0.30 to 0.35 SD when the threshold for being considered high income is raised to $96,000. However, it is clear from Fig. 1 that a given dollar difference in family income predicts a noticeably larger gap in child test scores in the United States than in a number of peer countries, particularly at the higher end of the income distribution.

Income Inequalities in Other Family Resources

How is it that some countries appear able to limit the consequences of income inequality for early childhood development? The results in the previous section suggest that nonmonetary resources may be more evenly distributed across income groups in the non-U.S. countries and that these equalizing factors should be most pronounced when comparing middle- and higher-income groups.

Table 5 describes how other important influences on early school readiness vary across countries for the Q3 middle-income reference group. These provide the baseline levels used in the calculation of the gaps across income groups shown subsequently in Figs. 2 and 3.

Table 5 Characteristics of families with incomes of $44,000–$65,000 (Q3) in the four countries Full size table

Fig. 2 Within-country gaps in family characteristics (reference category = Q3). Each panel plots the gaps in a different variable. Error bars are 95 % confidence intervals. Q1 to Q5 refer to income groups defined by the quintile boundaries of the U.S. distribution from lowest to highest; that is, Q1 is the group with income less than $27,000 and Q5 is the group with income greater than $96,000. Gaps are the differences between the mean or proportion in the group and the middle (Q3) group (families with incomes of $44,000–$65,000). Estimates are calculated from the underlying microdata separately for each country. See Tables 1 and 2 for details of the source samples. Full size image

Fig. 3 Within-country gaps in additional family characteristics (reference category = Q3). Canadian numbers for teenage motherhood suppressed due to small cell sizes. Each panel plots the gaps in a different variable. Error bars are 95 % confidence intervals. Q1 to Q5 refer to income groups defined by the quintile boundaries of the U.S. distribution from lowest to highest; that is, Q1 is the group with income less than $27,000, and Q5 is the group with income greater than $96.000. Gaps are the differences between the mean or proportion in the group and the middle Q3 group. Estimates are calculated from the underlying microdata separately for each country. See Tables 1 and 2 for details of the source samples. Full size image

Table 5 reveals that despite variation in the characteristics and conditions of middle-income families, there is no country in which this section of the population stands out as advantaged or disadvantaged compared with its counterparts in other countries.

In terms of demographic characteristics, mothers with all levels of education are represented in the Q3 ($44,000–$65,000) income group in each of the four countries. The proportion with low education is noticeably lower in Canada than elsewhere, and the proportion with a college degree is noticeably higher in Australia. Compared with their counterparts in other countries, fewer middle-income children in the United States resided with both biological parents at age 5, and more were born to teen mothers. The proportion of middle-income children living with an immigrant parent varies from 12 % in the United Kingdom to 31 % in Australia, with the North American groups falling in the middle of this range.

Turning to maternal employment patterns and exposure to preschool in the Q3 (middle-income) families, there is a clear difference between the North American countries on one hand and the United Kingdom and Australia on the other. Household income in these families is more dependent on maternal earnings in the United States and Canada because mothers are more likely to work there and particularly because employed mothers work considerably longer hours than in the United Kingdom and Australia (although working part-time does appear more common in Canada than the United States). Contrary to what this pattern might lead us to expect, (at least some) attendance at center-based childcare in the year prior to formal schooling was almost universal among the middle-income group in the United Kingdom and Australia, two countries with universal preschool systems; in the mid-late 1990s, however, only around 60 % of children attended some center-based care in the United States and Canada, countries with higher maternal employment levels but largely private systems of childcare.

The numbers documented in Table 5 show some variation across countries in the circumstances experienced by children with the same moderate level of pretax financial resources. For our purposes, however, what is of most interest is the extent to which the characteristics of children with lower and higher family incomes differ from their middle-income peers, and whether these differences mirror the differences in gaps in school readiness.

Figure 2 plots the gaps across income groups in selected family characteristics across the four countries, with additional characteristics examined in Fig. 3. For each country, the gaps represent the difference between the mean or proportion for a given family factor in the lower- or higher-income groups and the value in the middle-income ($44,000–$65,000) group. Larger gaps reflect a stronger association between levels of income and the family characteristic across countries. We would expect the characteristics shown in the top panels of Fig. 2 (relating to family structure and early education) to be positively associated with children’s test scores, and hence positive gaps in these panels reflect more advantageous circumstances. The characteristics in the bottom panels (relating to parental nativity and maternal employment hours) are theoretically negatively related to school readiness, all else equal, and so the reverse is the case here: positive gaps indicate less advantageous circumstances. Details of all the underlying estimates and significance tests of differences are provided in the online appendix.

We turn first to the characteristics of families in the two higher-income groups: those with incomes between $65,000 and $96,000 (Q4), and those with incomes in excess of $96,000 (Q5), represented by the right-hand sets of bars in each panel in Fig. 2. As shown in Fig. 1, gaps in school readiness in both these groups relative to the middle-income group are considerably larger in the United States than in all the other three countries.

Figure 2 shows that higher-income children in the United States have greater advantages (relative to their middle-income peers) than those in other countries in all the selected dimensions. Higher-income children in the United States are the most concentrated in intact families (i.e., with both biological parents coresident at age 5) compared with their middle-income peers (shown by the larger positive gaps in panel a). In addition, higher-income children in the United States experience by far the greatest positive difference in preschool attendance relative to middle-income children (see the significantly positive U.S. gaps in panel b). Higher-income children in the United Kingdom and Australia are not significantly more likely than middle-income children to attend center-based care in the year prior to school entry, a consequence of virtually universal coverage in those countries. Income-related disparities in preschool attendance did exist among higher-income groups in Canada at this time, but these are imprecisely estimated and markedly smaller than in the United States. At the same time, higher-income U.S. children are less likely to have an immigrant parent than middle-income children, the only country in which this is the case (see the negative gaps in panel c). Supplemental analyses (Fig. 3) also show that the difference in teen parenthood rates between the middle- and the top-income groups is sharpest in the United States.

With regard to maternal employment patterns, the United States is the only country in which higher incomes come at virtually no cost in terms of greater maternal work hours. Panel d of Fig. 2 shows that the Q4 and Q5 gaps in maternal employment hours are not significantly different from 0 in the United States, in contrast to positive gaps in the other three countries. Outside the United States, the benefits of higher incomes may be tempered by the fact that mothers in these households work more than those in middle-income households, so that children potentially experience less time with their mothers in the home. Mothers in the United States with the highest (family) income are unique in that they appear to devote less time to employment than their middle-income counterparts, reinforcing rather than offsetting the inequalities in both income and participation in center-based care. Supplemental analyses show that uniquely, U.S. mothers in Q5 differ little from Q3 mothers in both employment participation and hours of work conditional on participation, with the point estimates suggesting a negative differential in both (Fig. 3). In the other three countries, both participation rates and hours conditional on employment are systematically higher in the higher-income groups than in the middle group, a mechanism that potentially offsets the benefits of higher income. Interestingly, the cross-country differences in inequalities at the top end of the income distribution shown in Fig. 2 are not underpinned by strong differences in the distribution of maternal education. Supplementary analysis provided in Fig. 3 shows an extremely similar association between maternal education (whether captured by attainment of a college degree or failure to progress beyond high school) and income group in all four countries.

In summary, these patterns highlight that in a number of respects, the middle-income group in the United States is more disadvantaged relative to children in well-off families than elsewhere. In the other countries, the middle group is less differentiated from the top in terms of demographic characteristics (such as family structure, maternal age, and parental nativity) and in terms of access of early childhood education. In addition, middle-income mothers in the United States must devote more time to employment in order to avoid slipping below an income of $44,000 per year.

These same figures also show how families in the middle-income groups compare with those lower down the income distribution. Recall from Table 4 that the test score gaps between lower- and middle-income groups (i.e., Q1–Q3 and Q2–Q3) in the United States were not significantly different from those in the United Kingdom or Australia, but that children in the lowest group (with incomes of less than $27,000) were faring significantly better in Canada. At this end of the distribution, the position of U.S. children is considerably more complex. In some respects, lower-income children in the United States are less differentiated from their middle-income counterparts than elsewhere. The Q1–Q3 disparities in family structure and preschool attendance are actually smaller in the United States than in any other country (as shown by the smaller negative, or even positive, U.S. gaps in panels a and b of Fig. 2). Disparities in maternal education and rates of teen parenthood between Q1 and Q3 (shown in Fig. 3) are similar in the United States to those in the other countries and in some respects are smaller than those in the United Kingdom. The relatively disadvantaged character of the U.S. middle-income group means that in some respects, their children enjoy only marginally higher nonmonetary resources than the poor, whereas families with moderate incomes in the other countries are more positively differentiated.

However, low-income children in the United States do appear relatively worse off in some ways. Low-income U.S. children were disproportionately likely to be born to an immigrant parent (as shown by the largest positive gaps in panel c, Fig. 2). In contrast, the immigrant difference between Q3 and Q1 is the smallest of the four countries in Canada and not significantly different from 0. Similar to the pattern for middle- and higher-income mothers, low-income mothers in the United States enjoy the least relief from paid employment relative to those higher up the income scale. The small magnitude of the negative U.S. gaps in average hours in panel d (Fig. 2) reflect particularly small differences in the employment rates of Q1 and Q3 mothers compared with those in other countries. Lower-income mothers in the United States, therefore, work nearly as much as those in families with incomes of $44,000 to $65,000 and are less likely to experience the social resources associated with being native-born, disadvantages that are more muted in the other countries. Any drawbacks for children associated with these factors may be counterbalanced, however, by rates of single and teen parenthood and of the use of center-based childcare that are relatively similar to those of the middle-income group.

The Role of Taxes

Our measure of income takes into account transfers provided to families, including cash benefits, in-kind benefits, and tax credits. However, because of data limitations, we are not able to adjust incomes for taxes paid. Perhaps the stronger association between income and children’s school readiness in the United States reflects the fact that higher-income families are able to retain a higher proportion of their income than in the other three countries. To address this possibility, we look to an external data source—the Luxembourg Income Study (LIS)—for information on how tax rates for families with children vary across countries and gross income levels. We use these data to calculate the average tax rates in each income group as the mean ratio of a household’s total income tax and social insurance payments to total gross household incomes (including transfer payments)Footnote 3 and use these estimates to explore the impact of the progressivity of the tax system.

Table 6 shows the average tax rates in each income group across countries, with greater progressivity of the tax system indicated by larger gaps in average tax rates between the Q3 reference group and the other income groups. The results suggest that larger gaps in school readiness in the United States between higher-income groups and those in the middle (the Q5–Q3 and Q4–Q3 gaps in school readiness) cannot be attributed to a less-progressive tax structure at the top of the income distribution in the United States. In fact, the proportion of income paid in tax rises more sharply (or equally sharply) as incomes increase above the median in the United States than in the other countries. This finding reflects the fact that the middle-income reference group is taxed relatively lightly in the United States compared with other countries, as shown by the average tax rates in the central Q3 column. Comparatively low U.S. tax rates are less marked higher up the income distribution: the highest income group pays an additional 15 % of income in tax in the United States (a 29 % rate compared with a 14 % rate for the middle group), whereas the rise in Canada, for example, is only 10 percentage points (from a 23 % to a 33 % rate). These patterns do not support the conjecture that the higher-income groups are able to retain more of their gross incomes in the United States relative to the middle group and thus extend their children’s comparative advantage more via this mechanism. In contrast, the tax structure at the bottom of the United States income distribution is the least progressive of all the four countries. Compared with those in Q3, those in the lower-income groups in the United States see the smallest reduction in tax rate of all four countries (implying that the gap in disposable income between Q1 and Q3 is largest in the United States). This could potentially explain why the gaps in the school readiness between the bottom and the middle in the United States are not smaller than elsewhere, despite the smaller disparities in single parenthood and early education participation. It is notable that for the lowest Q1 group, the most progressive tax system is found in Canada, where the tax rate for Q1 families is 17 percentage points lower than for the middle Q3 group.