Family chance, employment transitions, and the welfare state: Household income dynamics in the United States and Germany

Since the demise of modernization theory, social scientists have sought exp lanations for persisting differences in the stratification of industrialize d societies, primarily by studying how educational and labor market institu tions shape the life chances of individuals. This approach undervalues two key features of any stratification system: family dynamics and the welfare state. Employment changes, changes in household composition, and changes in the employment situation of a spouse or partner can all trigger large shif ts in income and material well-being. The impact of these events is mediate d by public tax and transfer mechanisms and by private actions taken by hou sehold members. This comparative analysis of household income dynamics in t he United States and Germany shows that variations in welfare state policy produce distinct societal patterns of income mobility, and furthermore, sho ws that the relative importance of labor market events, family change, and welfare state policies for income dynamics depends on gender. The strong in terrelationship between individual incentives and the structure of opportun ity produces an asymmetry in the long-term impact of events. The negative e ffects of events that reduce income generally decay over time, while the ef fects of positive events generally persist.