Social Mobility Concerns : OECD sounds alarm over ‘broken elevator’ for social mobility

Social Mobility Concerns

People living in developed economies are less likely to climb up or slide down the earnings ladder than their parents were—a fixable problem that is weakening confidence in the economic system, the Organisation for Economic Cooperation and Development said Friday

Social Mobility Concerns

People living in developed economies are less likely to climb up or slide down the earnings ladder than their parents were—a fixable problem that is weakening confidence in the economic system, the Organization for Economic Cooperation and Development said Friday.

In a report, the Paris-based research body said the U.S. had greater social mobility than large European economies such as Germany, France and the U.K., but higher levels of income and wealth inequality. On social mobility, it lags some other northern European countries, such as Denmark.

Social Mobility Concerns
A beggar in Berlin, Germany. The U.S. has greater social mobility than Germany, but also higher income and wealth inequality.  (CLEMENS BILAN/EUROPEAN PRESS PHOTO)

One of the claims made in favor of the market economy is that it is socially dynamic, with people rising up or sliding down the income scale as a result of their talents and willingness to work hard, rather than who their parents were.

The OECD suggests this is far from the case in most developed economies, and even less so in developing economies. For the U.S., it calculates that it would take five generations—or roughly 100 years—for the descendants of a person in the bottom 10% of earners to secure an average income, but only two in Denmark, which means a person would see their grandchildren achieve that goal. In Colombia, it would take 11 generations, or about as long as the country has been independent from Spain.

There is evidence that globally, social mobility was greater for people born as recently as 1975, according to the research body.

“Families and communities in many countries seem to be trapped on the bottom rungs of the social ladder, particularly since the early 1980s,” said Gabriela Ramos, the OECD’s chief of staff. “This means that children born into the bottom of the income distribution have less chance to move up and improve their occupational status and earnings than their parents and previous generations.”

In the U.S., the OECD estimates that 42% of men with low-earning fathers end up in the same income bracket themselves—much higher than the OECD average of 31%. Only 8% make it into the top income group.

Alongside Germany, the U.S. stands out for what the OECD calls the “stickiness” of its richest group, as 48% of those whose parents were high earners grow up to be high earners themselves.

In common with many economists, the OECD regards low social mobility as bad for long-run economic growth, since it suggests that many people with good ideas and talents aren’t getting a chance to use them.

“Lack of upward mobility at the bottom of the income [pile]…means that many investment opportunities and potential businesses will never see the light,” it said.

It also warned that the “broken elevator” is fueling a backlash against the market economy and democracy.

“It is not surprising that there is a growing perception in opinion surveys that societies and economies have become less mobile and this is fueling growing dissatisfaction with the economic system and hindering social cohesion and political enchantment,” the OECD said.

The research body said the variation in social mobility across countries proves that it is possible to make improvements and recommended a focus on access to a high-quality education from a young age.

For the U.S., it said federal funds should be used to make up for gaps in educational provision, supported by a system of maternity leave and child care for poorer families. More broadly, it urged governments to better tax inheritances and ensure that poor families aren’t concentrated in disadvantaged neighborhoods with limited access to public services, quality education and employment opportunities.

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Social Mobility Concerns

Social Mobility Concerns

RV-Vijay

Author: RV-Vijay