Friendships are the key to tackling financial inequality report reveals

Poorer children with wealthy friends more likely to have higher income later in life

Friendships are the key to tackling financial inequality report reveals
Steve Randall

Having friendships that cut across class lines can mean better financial outcomes for poorer children.

That’s the finding of a new study from Stanford University which looked at how friendships impact economic mobility and can help alleviate financial inequality.

Researchers found that poor children who have wealthier friends have incomes 20% higher later in life, on average, than other poor kids.

“People obtain job opportunities, information and behavioural norms from their networks, and thus their outcomes are heavily dependent upon those of their friends and acquaintances,” said Matthew Jackson, a professor of economics at Stanford University and one of the lead authors of the report.

By looking at US Census data and Facebook accounts of more than 72 million people, Professor Jackson and others found that results were consistent across the United States.

“Areas with higher [economic connectedness] have large positive causal effects on children’s prospects for upward mobility,” the analysis concluded.

With data showing that 37 million Americans live in poverty while the top 10% of wealthy people hold around 70% of the country’s wealth, the authors hope that their findings will help to address inequality.

Segregated population

Pairing poor children with those better off is not a simple solution though, with segregation of poor and rich communities getting worse in the US.

“Social capital is associated with other forms of capital—say, human and financial,” explained Francisco H. G. Ferreira, a professor of inequality studies at the London School of Economics and the director of the International Inequalities Institute.  “The poorest places in the United States tend to have less of all of these, including the opportunity for cross-class friendships.”

The study is published in