Income Inequality Has Risen While Social Mobility Has Stagnated, OECD Report Says


June 2018

Income Inequality Has Risen While Social Mobility Has Stagnated, OECD Report Says

Social mobility has so stalled in the UK that a child from a low-income family has just a 1 in 5 chance of becoming a high earner, a report from the Organisation for Economic Co-operation and Development reveals.

The study, “A Broken Social Elevator? How to Promote Social Mobility,” documents a pattern of accelerated income inequality and stagnant social mobility across the world’s 24 richest countries since the 1990s. It contrasts the prospects of younger generations with those of people born between 1955 and 1975, when social mobility was a “reality” and children from the poorest families often exceeded their parents in wealth and education.

Today in the UK it would take five generations for a poor family to reach the average national annual income of £27,000. Those born after 1975 are increasingly “stuck” on the lower rungs of the income ladder. This frozen mobility hampers economies by locking out workers and fuels political instability as people grow cynical about their prospects, the OECD warns.

“Too many people feel they are being left behind and their children have too few chances to get ahead,” said Gabriela Ramos, OECD chief of staff.

The report measures mobility both in income, occupation, and educational attainment, which are closely linked. In the UK, only 18% of sons of low-income fathers grow up to be high earners, compared to 46% of children whose fathers are high earners themselves. Of the children of parents with manual jobs, only a quarter go on to hold managerial roles. And just 21% of children of parents with low educational attainment will obtain a degree-level qualification from a college or university, compared to 71% of children of parents with degrees.

As the chances for social mobility have dwindled, the gains made by those who do exceed their parents’ earnings have fallen too. Across the 24 countries examined in the report, one-third of children with a low earning father will remain stuck on the same economic rung while most of the other two-thirds will only move up one rung. In general, the earnings and mobility prospects of middle-class families have slipped, now aligning more closely with those of the poorest members of society than those of the most wealthy.

The report also confirms that across generations, mobility prospects and inequality are negatively correlated: the so-called “Great Gatsby Curve.” Countries with low inequality, like the Nordic countries, boast high social mobility while those with high inequality, like Latin American countries and other emerging economies, suffer from low mobility.

In Europe, however, Germany and France buck the trend. Both have lower income inequality than the UK but also lower social mobility. It would take families six generations to escape poverty in Germany and France. The study found no countries with both high inequality and high social mobility.

To confront the stagnation of social mobility, the OECD recommends governments increase investment in education and work skills training; tackle insecure, zero hours jobs; and increase the collective bargaining power of workers. It also urges governments to improve urban planning, providing workers with better access to affordable housing and transport.

In the UK in particular, the report highlights the high cost of housing as a significant barrier to social mobility and a large driver of wealth inequality. Too many families are unable to relocate for better jobs or are locked out of the housing market entirely.