URC

Born To Be Destitute: Capital Transfer and Intergenerational Transfer of Poverty

Augus Surachman
Professor Hartoyo*
Bogor Agricultural University, Indonesia

Keywords: human capital, intergenerational transfer, material capital, poverty, marriage, education, investment behavior

Abstract

This research was conducted to analyze the intergenerational transfer of poverty in two-generation families and to examine the mechanism of the transfer by utilizing intergenerational capital transfer model, especially human capital and material capital. This research revealed that parental investment behavior on children was the determining factor in the second-generation family’s welfare. The research estimated the chance of second-generation family with father coming from poor family was 38 times higher to be poor than second-generation family with father coming from not poor origin family. Status mobility from poor to not poor could be due to education (for man) and marital factor (for woman).

Introduction

Poverty is arguably the hardest social economic problem to be solved in this century (Wagle, 2008). About 320-433 million people in the world are suffering chronic poverty (CPRC, 2008), a long-term deprivation even for their lifetime and sometimes that condition is transferred to the next generation (Moore 2005). Research has shown that the possibility of children becoming poor in the future was 35 percent higher when the children were born and raised in chronic poor families (Pakpahan, Suryadarma, & Suryahadi, 2009).

However, our knowledge about the process of that intergenerational poverty transfer is still limited. Moore (2005) constructed an intergenerational transfer of poverty model that shows the cause as the lack or the absence of capital transfer, especially human capital and material capital. Transfer of human capital, especially performed by family through parental investment in children is defined as every effort, activity, and family resource allocation to increase the quality of life for the child (Hartoyo, 1998). Bequest is the main media of material capital through generations, besides dowry and wealth accumulation after marriage (Moore, 2001).

This research was aimed at analyzing the intergenerational transfer of poverty phenomenon in two generations of families through the observation of capital transfer, especially human capital and material capital. Thus the findings will contribute to the enrichment of knowledge related to the process of intergenerational transfer of poverty in family relations.

Methods

This article presents part of the results from a research project entitled “Intergenerational Transfer of Poverty: Influence of Value of Children and Parental Investment Behavior on Child (Case in Pasawahan Village, Cicurug Subdistrict, District of Sukabumi). The design of the research was a combination cross-sectional and retrospective study. The population of the research was families that had children less than five years old in Pasawahan Village, Cisurug Subdistrict, District of Sukabumi, West Java Province, Indonesia. About 60 families were selected as sample families, and stratified random sampling technique was utilized with family welfare status as the stratification criterion. Family welfare status was registered from BKKBN’s family prosperous phase data (pre-prosperous and first degree prosperous families were classified as poor families, families from the rest of the phases were classified as not poor families), thus the samples were 30 poor families and 30 not poor families. Respondents of this research were father and mother from the sample families that were interviewed to collect information related to sample families and previous generation families of both father and mother.

Welfare status of father’s and mother’s origin family was measured using a technique adapted from Family Life History Method (FLH) developed by Bottema, Masdijidin, & Madiadipura (2009). There were six indicators to measure it, based on their family condition when father and mother were at a young age and were considered as stable. The indicators are income stability (stable=1, unstable=1), house ownership (private ownership=1, rent or other=0), house condition if compared with other houses in the area (better or same=1, worse=0), land possession (possess=1, not=0), cattle possession (posses=1, not=0), and their parent’s literacy ability (able=1, unable=0). Scores from every indicator were then composed to classify the welfare status of father’s and mother’s family origin; poor if the score less than 4 and not poor if the score was more than or equal to 4.

Poverty dynamics between two-generation families of mother and father was used as the approach to analyze intergenerational transfer of poverty. Welfare status of sample families was compared with both father and mother family origin welfare status; then it was categorized into four poverty dynamic categories adapted from Moore (2005): always poor (origin family poor-sample family poor), never poor (origin family not poor-sample family not poor), out from poverty (origin family poor-sample family not poor), and move into poverty (origin family not poor-sample family poor). The sample that experienced always poor and trapped into poverty status was identified as “experiencing intergenerational transfer of poverty.” This research split the sample families into same number of poor and not poor families; thus we had an equal number of 30 fathers and mothers that experienced and did not experience intergenerational transfer of poverty.

Parental investment toward father and mother was observed through parental investment behavior toward father and mother at an early age and also formal education that was attained. Parental investment behavior toward father and mother was defined as their (father and mother) perception related to parental allocation of time and money that was manifested by parental behavior to support their human capital improvement. There were 20 self-constructed questions (α-cronbach=0.849) asked of father and mother regarding their parent investment behavior, 10 questions related to time allocation behavior, and 10 questions related to money allocation behavior. Samples of the questions of this variable are: “Did your father/mother bathe you every morning?”  “Did your father/mother take you to the doctor or other health facility when you were sick?” Every question consisted of three alternative answers: “always” (score=3), “sometimes” (score=2), and “never” (score=1). Parental investment toward father and mother was composited as the parental investment behavior score and was then grouped into three categories: low (<60% maximum score), moderate (60-80% maximum score), and high (>80% maximum score). Besides descriptive analysis, the data were also analyzed inferentially utilizing independent sample t-test, logistic regression, and multilinear regression analysis.

Results

Family Characteristics

The average of father and mother age of sample family was the young adult category (18-40 years). The average of the father’s age (M=35.7 years; sd=6.6 years) was higher than the average of the mother’s age (M=32 years; sd=5.7 years) and both statistically different (p<0.01). Almost half of fathers (46.7%) worked as factory laborers, and a majority of mothers (86.7%) didn’t work in the public sphere. Despite the location of the research that was characterized as “rural area,” only one fourth of fathers worked in the agricultural sector. The majority of parents of fathers and mothers worked in the agricultural sector. Another difference between sample families and the family of origin was found in the number of children. The average of children that sample families had (M=2,4 children; sd=1.3 children) was almost half of the average of children of the families of origin of father and mother.

Table 1 Sample and Origin Family Characteristics

Characteristic
Information
Origin Family  
Number of children (average)

  Father origin family

  Mother origin family


5.2 (sd=2)

4.8 (sd=1,9)
Parent job

  Father’s parent

  Mother’s parent


76.7% in agricultural sector

61.7% in agricultural sector
Sample Family  
Number of children (average) 2.4 (sd=1,3)
Father age (year) 35.7 (sd=6,6)
Mother age (year) 32 (sd=5,7)
Father job 46.7% factory laborer
Income average/month (Rp)

Poor family

Not poor family

1.650.500 (sd=1.149.253,9)

849.333,3 (sd=237.209,8)

2.451.666,7 (sd=1.141.421)
Income average/capita/month (Rp)

Poor family

Not poor family

400.244 (sd=297.606,5)

218.305,6 (sd=91.071,27)

582.182,5 (sd=321.579,4)

Both income average per month and income average per capita per month of all sample families (poor and not poor) were above West Java Province poverty line in 2010 (Rp201.138,00) and above $1 income per day per capita standard from World Bank (assumption $1=Rp9000,00). However, if we use another World Bank standard of $2 income per day per capita, only average income per capita per month of not poor sample family was above.

Poverty Dynamics and Poverty Transfer

The observation toward origin of family welfare status showed that more than half of them were not poor, respectively 55 percent for father origin family and 51.7 percent for mother origin family. Welfare status of both generation families was compared to reveal the poverty dynamic status of father and mother. About 41.7 percent of fathers were categorized as always poor, while 46.7 percent of fathers were grouped into never poor category. The remaining 3.3 percent of fathers experienced out from poverty, and another other 8.3 percent claimed a move out from poverty. On the mother’s side, the poverty dynamic status was dominated by the always poor (41.7%) and never poor (43.3%). About 15 percent of mothers experienced status mobility (up and down), respectively 8.3 percent move into poverty and 6.7 percent out from poverty.

Poverty Dynamics and Marriage

Marriage could be a possible alternative for someone to socially move up or down. In order to analyze the effect of marriage on social movement, origin of family welfare status of father and mother were compared with today’s sample family welfare status. The result showed all sample families were poor when they were formed by father and mother who came from poor family origins. On the other hand, when fathers from not poor families married mothers from poor families, half of that type of sample family was poor today. Conversely, when a poor father married a not poor mother, the majority of that type of sample family was poor today. This result indicated that the father’s origin of family welfare status was playing a bigger role in the determination of sample family welfare status today.

Table 2     Percentage of sample family welfare status based on father and mother origin family welfare status (n=60 families)

Origin Family of

Sample Family

Father

Mother

Poor (%)

Not Poor (%)

Poor

Poor

100

0

Not Poor

Poor

50

50

Poor

Not Poor

67

33

Not Poor

Not Poor

4

96

This phenomenon could be explained by the fact that the father was the major money earner for the majority of sample families. The father origin family welfare status determined the ability of his parent to invest on his human capital aspect that determines father quality in the future. Then father quality plays a big role in determining the income that he and his family will earn that directly affects family welfare status.

Intergenerational Transfer Capital

Parental Investment on Father and Mother

Parental investment in children becomes the main way to transfer human capital to the next generation. Parental Investment on father and mother were approached by observation on parental investment behavior in father and mother on their early child and formal education that was attained by them.

Parental Investment behavior on father and mother. Generally, parental investment behavior scores in mothers (M=43.6; sd=4.4) were higher than parental investment in fathers (M=40.9; sd=5) and both statistically different (p<0.01). If it was analyzed based on welfare status of sample family, father and mother that are not poor today were invested more by their parents than today’s poor father and mother. This indicated the between parental investment and welfare status.

Father and mother formal education. Father attained longer formal education (M=9.7 years; sd=3.8 years) when compared with mother (M=8.4 years; sd=2.7 years) and both are statistically different (p<0.01). Father and mother from not poor family stayed at school longer than father and mother from poor family. Years of education of father from poor and not poor family were statistically different (p<0.01) and also in mother group (p<0.01).

Bequest

Bequest is the main way for parents to transfer material capital to the offspring. For this study, the rate of fathers that received bequests (56.7%) was higher than mothers (26.7%). Fathers of not poor sample families that received bequests was higher than fathers of poor sample families. Although in the mother groups, the number of poor and not poor mothers that received bequests was equal. About 76.5 percent fathers and 50 percent mothers that received bequest were experiencing never poor of dynamic poverty status. Another interesting fact is that no sample family that experienced the move out from poverty status also received bequests from parents.

Table 3     Distribution of father and mother based on parental investment behavior score and sample family welfare status (n=60 families)

Parental investment behavior category

Poor

Not Poor

Total

n

%

n

%

n

%

Toward Father

 

 

 

 

 

 

Low

8

26,7

1

3,3

9

15

Moderate

21

70

25

83,3

46

76,7

High

1

3,3

4

13,3

5

8,3

Total

30

100

30

100

60

100

Average

38,1

43,7

40,9

Sd

4,5

3,9

5

Toward Mother

 

 

 

 

 

 

Low

1

3,3

1

3,3

2

3,3

Moderate

28

93,3

22

73,3

50

83,3

High

1

3,3

7

23,3

8

13,3

Total

30

100

30

100

60

100

Average

41,6

45,6

43,6

Sd

3,1

4,6

4,4

Factors that Affected Sample Family Welfare Status

Two regression models were built to analyze factors affecting sample family welfare status. The first model was analyzed using logistic regression with family welfare status as the dependent variable (0=poor, 1=not poor). There were seven expected independent variables in the first model: father’s origin family welfare status, father’s years of education, score of parental investment in father, score of parental investment in mother, bequest received status of father, bequest received status of mother, and father age. Model was statistically significant (chi square=791; p<0.000df=7), and Neglekerke R Square of the model was 0.862 – indicated strong relation between prediction and grouped sample. The predicted success rate of the model was 91.7 percent (90% to be poor and 93.3% to be not poor).

Independent variables that were statistically affected on the sample family welfare were father origin family welfare status (p<0.05), father’s years of formal education (p<0.05), and parental investment behavior toward mother (p<0.05). The probability of sample families in which the father came from a poor family was 38 times higher to be poor than sample families in which the father came from not poor family origins. In addition, every year of improvement of the father’s formal education will increase twice the probability of sample family to be not poor. Then every point of improvement of parental investment behavior score toward mother will increase 1.5 times the probability of the sample family to be not poor.

Table 4     Summary of logistic regression to analyze factors affected sample family welfare status (n=60 keluarga)

Independent Variables

Sample Family Welfare Status (0=poor, 1=not poor)

B

Exp (B)

Constant

-43,767

0,000

Father origin family welfare status (0=poor, 1=not poor)

3,639

38,052**

Father formal education (years)

0,728

2,071**

Parental investment behavior toward father (score)

0,070

1,073

Parental investment behavior toward mother (score)

0,419

1,521**

Father bequest received status (0=no, 1=yes)

3,222

25,088

Mother bequest received status (0=no, 1=yes)

1,252

3,499

Father age (years)

0,223

1,249

Chi-square

62,791

Nagelkerke R2

0,862

Note: **= statistically significant at the 95% level

Meanwhile, another model was analyzed using multiple linear regressions with family income as the dependent variable (as the approach to family welfare status). In this analysis, there were two models built, unrestricted and restricted model. The unrestricted model was built by employing all independent variables that theoretically affected dependent variable and ignored correction aspect of linear regression analysis. Regarding the multicolinearity issues, some variables were dropped out from the unrestricted model for resulting restricted model. Then R-square value of both models was compared to analyze the reliability of the model.

There were eight independent variables of the unrestricted model that were statistically significant (p<0.01; F=5.782). The value of R-square of the unrestricted model was 0.476 with no independent variable statistically affected family income. Then three variables were dropped out from the model and the five remaining independent variables were father family of origin, family welfare status, parental investment behavior toward mother, father formal education, and father bequest received status. The restricted model that was also statistically significant (p<0.001; F=12.241), and the R-square value of the model was 0.471. The difference of R-square value between both unrestricted and restricted was very small. In other words, the restricted model was as reliable as unrestricted model on explaining factors affecting family income, although some independent variables were dropped out from the model. Variables that significantly affected sample family income were father’s origin family welfare status (P<0.05) and father’s formal education (p<0.01). Every year of improvement of the father’s formal education will increase the income of sample family income with Rp122.205,071.            

Table 5       Summary of multiple linear regression to analyze factors affected family income (n=60 families)

Independent Variables

Model

Unrestricted

Restricted

B

β

B

β

Constant

-2,060E6

(1,645E6)

 

-1,665E6

(1,170E6)

 

Father origin family welfare status (0=poor, 1=not poor)

688109,993

(416970,744)

0,300

774714,618

(307503,228)

0,338**

Mother origin family welfare status (0=poor, 1=not poor)

69997,437

(297444,070)

0,031

 

 

Parental investment behavior toward father (score)

5690,236

(42706,095)

0,025

 

 

Parental investment behavior toward mother (score)

30236,625

(36533,157)

0,115

19984,965

(29337,312)

0,076

Father formal education (years)

133425,559

(53596,244)

0,441

122205,072

(39359,094)

0,404***

Mother formal education (years)

-43589,364

(68367,484)

-0,103

 

 

Father bequest received status (0=no, 1=yes)

3634,324

(317092,161)

0,001

-38124,194

(284951,679)

-0,015

Mother bequest received status (0=no, 1=yes)

-123212,328

(367178,559)

-0,037

 

 

F

5,782***

12,241***

R-square

0,476

0,471

Adjusted R-square

0,393

0,432

Note:
B = Unstandardize coefficient (standard error is in parenthesis)
Β = Standardize coefficient
*= statistically significant at the 90% level
**= statistically significant at the 95% level
***= statistically significant at the 99% level

Discussion

The reduction of number of children between origin and sample family indicated the success of the family planning program as a government program for about three decades. Research conducted by Herarti (2004) in Sumedang and Subang showed that small family norms with two children as the part of family program in Indonesia had been adopted. However, sample families in this research had not finished their family cycle yet. Thus it is possible for sample families to have another child. Besides number of children, change was also showed in the job sector. The decrease of families that rely on their income stream from agricultural sector was the consequence of the general social structure change in the society.

This research also indicated the existence of intergenerational transfer of poverty in two-generation families. Sample family grouping based on welfare status, into poor or not poor, gave insight related to poverty transfer mechanism utilizing intergenerational capital transfer approach. Further, regression analysis revealed that formal education (especially for father) as part of parental investment in child plays a big role on sample family welfare status. This result supports the previous study result from Siregar and Wahyuniarti (2008) and also Chaudry et al. (2010) about negative effect of formal education on poverty level.

There is need to highlight the phenomenon related to marriage and sample family welfare status. The majority of sample families were formed by couples from the same social economic status, so we can explore father’s and mother’s origin family welfare status. Most poor sample families consisted of father and mother that originally came from poor families. Conversely, most not poor sample families were filled by father and mother that came from not poor families. In other words, there was a tendency of similar social status marriage in sample families. In Sociology, this phenomenon is known as homogeny (Collins & Coltrane, 1996).

Only a small number of fathers and mothers experienced welfare changes in this study (move into poverty or out from poverty). Regarding the sociological term, they experienced what was called as social mobility. A sample in this group could further divide into two groups: the first group consisted of sample families that experienced downward mobility (move into poverty); another group filled by sample families that experienced upward mobility (out from poverty). In the case of the sample that experienced upward mobility, it was not related to material transfer through bequest because originally they came from poor family origins. For fathers who experienced upward mobility status, the regression analysis proved that higher formal education level played a big role. In contrast, for mothers, education seems not to be the main factor that boosted them to move upward. If we explore further, mothers that came out from poverty status were married to husbands with higher social status.

Actually, the same phenomenon was also found in the case of fathers. But for a father to be married to a wife with higher social status, higher formal education level appears to be the absolute requirement, although it was not in the mother’s case. In other words, we can conclude that a mother or woman has a tendency to be socially more mobile than father or man through marriage. Chen et al. (2009) explained this phenomenon as the result of what is referred to as the Cinderella effect. A woman’s position to be admired in the marriage market was less determined by social economic characteristics such as wealth or income. Some research revealed that the factor most commonly considered by a man in choosing a woman on the marriage market was physical appearance of the woman. Conversely, the woman gives more consideration to income and education level of the man. Collins and Coltrane (1996) explained that men act based on their spontaneous feelings of love when selecting partner. While for women, marriage will be very important for their social economic status, thus the majority of women do what is called “emotional work.” Women “direct” and “shape” their feelings to choose the man that is considered as “Mr. Right.”

Beyond that, parent-child interaction effects on welfare status was the most important factor to be highlighted. Regression analysis revealed that sample family welfare status was affected by parental investment in children, whether through parental investment behavior in their early age or formal education. That result is consistent with Leibowitz’s (1988) findings, where income of someone in the future was determined by education level and early age experience. Thus we can conclude that parental investment in children was a determinant of welfare in the future.

As mentioned earlier, the concept of investment in human capital seems like a two-sided sword for the poor group. It is clearly the solution for them to move out from poverty, but on the other hand it also seems like a problem for them because of the limitation of resources in order to accomplish it. According to Schiller (2008), the role of the external environment, especially the government, is very important to answer the problem. Poverty eradication programs should help poor families to invest more toward their offspring, especially on education.

Poverty eradication programs in Indonesia today, such as Program Keluarga Harapan (PKH) are moving in this direction, helping poor families to invest more in their offspring. However, there is still less attention toward the possibility of what Schiller (2008) called flawed character that is reflected from the culture of poverty. According to Moore (2001), the culture of poverty has also affected the existence of intergenerational transfer of poverty. Research conducted by Simanjuntak (2010) about money allocation by a family as the target of Program Keluarga Harapan from 2008 until 2009 showed that allocations of aid funds for investment in children were less and the highest portion was for material asset purchase. In the future, there must be a policy breakthrough to answer that issue, such as integrating family finance management guidance with that program.

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