How to Improve Social Mobility

People are very worried about rising income inequality in many countries and across the world. There is a growing perception that social mobility across generations has declined and that only the very rich get richer. There is a concern in the developed countries that raising everyone to better standards is less possible. The costs tend to increase as more healthcare and more education is provided to all citizens. There is a 63 page OECD study from 2018 on Social Mobility. Based upon the comparison of OECD countries, the countries that are ranked as doing the best on social mobility are Denmark and Sweden. The Recommendations from the OECD report are listed below. This is a complex issue and this OECD has biases and issues. This article is just the beginning of searching for better answers on this topic. Policies should aim at ensuring equal opportunities for moving up the ladder, even and especially for those at the low end, while preventing the top end from pre-empting advancement. 1. education measures to support social mobility and to avoid unequal opportunities in the long run include access to high-quality early education and care, as well as formal education for all, while preventing school drop-out. 2. Public investment in health has the potential to support social mobility over the life course and across generations, for example by cushioning income losses or necessary labor market changes when health issues arise. A strategy based on greater investment in children targeting those from lower socio-economic backgrounds holds the promise of breaking the cycle of intergenerational disadvantages. In particular, access to sickness insurance for all households is a prerequisite. 3. Family policies. Policies that promote a good work and family balance, early education and care policies and services, can help level the playing fields for all children by compensating disadvantages at home and avoiding the transmission of disadvantages to children. They can also support parents in their participation to the labor market and mitigate the detrimental impacts of financial hardship on children’s future outcomes. 4. Policies affecting wealth accumulation and savings behavior are an important tool for enhancing social mobility. Avenues to rebalance opportunities would be to limit wealth, inheritance and gifts tax avoidance, design progressive tax systems with adequate rates and reduce exemptions. 5. Fostering social mobility also requires policies to reduce regional divides and spatial segregation in cities. This necessitates a range of well-coordinated local development and urban planning policies including measures for transport and housing, such as inclusionary zoning policies.

Issue: “Sticky floors” prevent people from moving up

  • Children with a disadvantaged background struggle a lot to move up the ladder, and this is true for many different important aspects of life. Poor families can have children with inferior health.
  • While two-thirds of people with low-earnings parents succeed to move to a higher status, for almost half among them, upward earnings mobility is limited to the neighboring earnings group. As a result, in an “average OECD country” it would take around four to five generations for children from the bottom earnings decile to attain the level of mean earnings.
  • Upward mobility for people with lower educated parents tended to increase for individuals born between 1955 and 1975, but then stagnated for those born after 1975 – sticky floors persist.

Issue : Opportunity hoarding leads to “sticky ceilings”

  • Those at the top of the distribution are effective in ensuring that advantages are passed on to their children.
  • Individuals with higher educated parents tend to have better educational outcomes in terms of literacy and numeracy than those whose parents have low educational achievement. For instance, numeracy scores are almost 20% higher for those with parents with higher socio-economic status, representing more than three years of equivalent additional schooling.
  • Children end up in similar occupations to their affluent parents. Half of children whose parents are in the managerial class become managers themselves, but only less than a quarter of children of manual workers have a chance to become managers.

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