Working for your mom or dad’s employer pays off. Young upstarts who have a parental connection initially make 24% more money in their first job when compared to peers without the same advantage.
The surprising part: Nepotism isn’t all Hollywood deals and Wall Street gigs.
The pay differential can largely be explained by kids who might’ve otherwise worked in unskilled labor if not for their parents hooking them up with high-paying, blue-collar jobs, according to Matthew Staiger, a research scientist for Opportunity Insights at Harvard University.
“The set of children who end up working for their parents’ firms are people who tend to have pretty limited outside options,” Staiger said of his research, which was recently highlighted in a US Census Bureau article. “These are people who might not have gone to college and, absent help from their parents, would end up working at something like a fast food restaurant.”
But thanks to their connections, the workers were steered toward higher-paying, blue-collar industries, like construction and manufacturing. For example, government data shows fast food and counter workers earn a mean annual wage of $30,110, while construction laborers earn a mean of $49,280, and production workers earn $41,400. Managers in those fields can makefar more — over $100,000.
“There are lots of blue-collar jobs out there that are quite high paying,” Staiger said. “The people who are really benefiting from these are children of parents who have relatively high incomes but are working at something like a manufacturing plant.”
Indeed, Staiger found that people with higher-earning parents are more likely to work for their mom or dad’s boss and experience larger earnings gains. Overall, kids working with their parents see an annual earnings boost of $6,683 in their first year on the job, with that premium sliding to $5,566 in the third year of employment, or 20% more.
For his research, Staiger utilized data from the 2000 decennial census and the Census Bureau’s Longitudinal Employer-Household Dynamics program, which “tells you, for almost everyone in the US, how much they earn each quarter and where they work.” He examined a sample of approximately 32 million people who lived with a parent and graduated from high school between 2000 and 2013.
Staiger found that it’s not uncommon for children to go on to work for their parents’ employers — almost a third of young workers do so by the time they reach 30, and 5% do so for their very first job. People who don’t go to college are much more prone to work for their parents’ firms, Staiger said, with people without a degree being twice as likely to work for their mom or dad’s employer when compared to even their college-educated siblings.
The connections disproportionately benefit higher-income families, though, perhaps because parents in more lucrative leadership positions in blue-collar fields can provide better access to jobs.
Still, the families benefiting have been pinched by other market conditions, Staiger noted. High-paying manufacturing jobs aren’t as prevalent in the US as they used to be, for instance, and the sector overall has shed millions of jobs since peaking in 1979 at 19.6 million workers.
“On the one hand, you can think of these parental connections as being unfair,” Staiger said. “On the other hand, it’s kind of like a little win for a group of people who have been hammered by various labor market shocks over the last several decades.”
Emma Ockerman is a reporter covering the economy and labor for Yahoo Finance. You can reach her at emma.ockerman@yahooinc.com.
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