How much of an individual's success depends on their own hard work and how much on what their parents do for a living? A country where children from poor families are likely to be poor as adults and elite positions in society are closed to most people, is said to have low social mobility - the opportunity to move up the social ladder is not equal. Economists study the causes and consequences of low social mobility.
Inequality within countries is a cause for concern - the gap between the rich and poor isn't just about money, richer people also do better in terms of health and education. And inequality isn't static - social mobility is the term used to describe how inequality persists (or not) through the generations. In a society with high social mobility, it is easier for individuals to move through the social classes or income groups than one where social mobility is lower.
There are different ways to measure social mobility, comparing how rich someone is compared to their parents (intergenerational income mobility) is one way. When children from poor families are likely to be poor as adults and elite positions in society are closed to most people - this indicates an insufficient equality of opportunity. Studies of such "intergenerational persistence" or lack of intergenerational mobility are concerned with measuring the strength of the relationship between parents' socio-economic status and that of their children as adults.
How socially mobile is the UK?
Stephen Machin, the current director of CEP, was among the first to consider the strength of the relationship between children's and parental earnings in the UK. In 1997, Machin along with Lorraine Dearden and Howard Reed followed up influential work in the United States by estimating the extent to which sons' and daughters' earnings at age 33 are associated with father's earnings for a cohort born in 1958. Using methods to minimise the impact of measurement error, they estimated the intergenerational elasticity at 0.4 to 0.6 for sons, and slightly higher (0.45 to 0.7) for daughters (where 0 is no association at all and 1 indicates that proportionate income advantages are transmitted in full between generations) revealing that mobility is limited in the UK.
There are many reasons why parents' and children's outcomes are related and deciding which of these are "unfair" requires value judgements. Genes, culture and values pass from parents to children, and it is potentially difficult (but not impossible) to do anything about this. As children get older, parents can spend money and use their connections to make it easier for their children to find jobs - and some parents have more money and connections than others. Many see this as an obvious example of "unfairness", but it is difficult to legislate against parents helping their children. Instead, policymakers sometimes advocate policies to compensate poorer children for the disadvantages they face. These include more financial support in schools, changes to higher education access and funding, and careers advice.
Commentators' and policymakers' interest in intergenerational mobility comes from a concern for equality of opportunity and often contains the assumption that the persistence of income between generations is "too high". But how high is too high? Researchers have attempted to cast light on this question by making comparisons between countries, over time and across localities.
With the release of reliable earnings data from the 1970 British Cohort Study (BCS) in 2000, a comparison of intergenerational mobility over time in the UK became possible by comparing the 1970 cohort with their counterparts born in 1958. Research on these two cohorts measured the association between the income of parents (when their children were aged 16) and the earnings of their children when they were in their early thirties. The association was found to be stronger for the later cohort who reached adulthood in the 1980s than for the first cohort who grew up in the 1960s and early 1970s, meaning that Britain had become less socially mobile over this time.
CEP researchers sought to understand what had caused this change. Jo Blanden, Paul Gregg and Lindsey Macmillan considered the relationship between parental income and children's earnings as a two-stage process. First, parental income relates to children's characteristics, that is, children with better-off parents have more education; and second, these characteristics are rewarded in the labour market, that is, those with a better education earn more. Using the rich data in the British birth cohorts, the study found that the great majority of the increase in intergenerational persistence could be accounted for by the strengthening of the relationship between parental income and children's performance throughout the education system. Later work by Blanden and Macmillan found very rapid educational expansion - with increasing numbers of people staying on after the then school leaving age of 16, and many more going to university (10 per cent in the late 1970s compared to 35 per cent in 2010), was unequally distributed according to parents' incomes. People from richer backgrounds benefitted more in what Lee Elliot Major and Machin have referred to as an "education arms race".
In 2005, findings on the fall in mobility were presented in a CEP paper for the Sutton Trust, alongside evidence that mobility in the UK and US was low compared with the Scandinavian nations. These comparisons fed into broader discussions of how mobility compares across nations by CEP researchers and others. A striking finding in this literature is "The Great Gatsby Curve" that demonstrates that countries with high intergenerational income persistence also tend to have high income inequality.
Great Gatsby Curve
Meaningful comparisons of mobility both across time and space rely on access to comparable datasets. Brian Bell, Jack Blundell and Machin use information on occupation, education and home ownership intergenerationally matched from a sample of the census data that is collected every ten years, to map differences across localities and track changes over time. By following three cohorts of individuals born between 1954 and 1963, 1964 and 1973, and 1974 to 1983 - the researchers revealed substantial differences by place within the UK. For the 1974 to 1983 birth cohort, children born to fathers in the bottom third of occupations in outer west and north-west London were more than twice as likely to reach the top third of occupations than similar children born in Cumbria, a rural area in the north west of England, and these differences tend to persist for different cohorts. In general the upward mobility hotspots for those born in the late 1970s were the same as for those born in the late 1950s. In terms of educational mobility, the huge expansion in higher education led to more first-in-family degree holders, but did not clearly improve educational mobility as children of degree holders were still more likely to attend university than those of non-graduates. The results for mobility of home ownership were very stark - the probability of owning a home, if your parents did not own a home, plummeted over the mid to late 20th century.
The role of home ownership in intergenerational mobility has been expanded in work by Blanden, Andrew Eyles and Machin which started with an observation from the 1958 and 1970 British birth cohorts. Home ownership rates were lower among the 1970 cohort at age 42 in 2012 compared to the 1958 cohort at the same age, and this fall is much more pronounced for those who grew up with parents who did not own their own home. This implies a strengthening relationship between home ownership across generations that is confirmed using a patchwork of data from other sources. As parental home ownership displays a strong relationship with an individual's future wealth, this is indicative of rising intergenerational wealth transmission.
All of the studies discussed so far relate to relative mobility, the difference in the opportunities of people coming from different family backgrounds. Absolute mobility is an alternative conception of mobility that has historically been much more used by sociologists. This concerns whether individuals improve on the position of their parents. In the 2000s, economists did not concern themselves very much with absolute mobility, the economy was growing well, and so earning more than one's parents was expected. This situation changed as earnings growth slowed and reversed around the time of the 2007-08 financial crisis, particularly for young people. Findings included in Manduca et al (2020) that combine data from the 1970 BCS cohort with information on income growth across generations, show that in 2005 around 77 per cent of individuals had higher incomes than their parents at the same age (in real terms) - by 2019, this had dropped to 67 per cent.
The academic work described above has formed the basis of two books by Elliot Major and Machin: Social Mobility and its Enemies and What do we know and what should we do about social mobility? The books move beyond describing what has happened to mobility in the UK by providing a set of policy prescriptions to improve it. These are based on what the authors call the ABCD principles:
- Access: reforming education admissions and entry to work.
- Behaviour: shifting away from a highly individualised winner-takes-all type culture and moving to more collective responsibility.
- Community: not allowing places to be "left behind" by restoring local prospects and pride.
- Decent work: providing good jobs with career progression. Ensuring all children acquire the key skills needed for work and improving vocational education.
Specific policies recommended include wealth taxes, human capital tax credits and policies to equalise access to the best education, both at school and university level.
It is not yet possible to directly assess the implications of the Covid-19 pandemic for intergenerational mobility, but the situation does not look rosy. Long periods of school closures in the UK (as in most other nations) are likely to be particularly damaging for less advantaged children who may not have the resources and support to study successfully at home. In addition, the lack of exams and consequent disruption in the university admissions system seems likely to have favoured those who are already advantaged, CEP researchers are among those working to evaluate this hypothesis. Under these circumstances it is vitally important that we continue to monitor social mobility. As explained above, a complete assessment takes a long time, but it is important to use intermediate metrics, such as the relationship between family background and educational attainment to understand the prospects of future mobility as cohorts come through.