Social Mobility and Income Inequality

For some, inequality, or at least some inequality, is to be expected from a system that rewards the hardworking, the brightest, and the best. People earn more because they have more skills. This is one of the dogmas that underpins capitalism and is enshrined within ideals like the ‘American Dream’.

Capitalism as a Meritocracy

The idea is that capitalism reflects a meritocracy wherein those who have the most talent and determination achieve the biggest rewards. At the heart of the American Dream is that any American can become President.

Wealthy Presidents

All of the recent main presidential candidates have been millionaires with many having a net-worth over $100 million. Even the seemingly modest Bill Clinton was reasonably well-off compared to most Americans at the time. Eight of the past 44 presidents have been Harvard-educated and well over half have been lawyers. So, while it is a possibility for all US-born Americans, it is hardly realistic.

Money and Social Mobility

The key issue is that a lack of financial resources, especially in a person’s childhood, has an impact across the life course. A lack of money limits what we call social mobility.

Social mobility is basically the movement of an individual (or family) through different groups or categories in society – generally considered as moving from a poorer economic situation to wealthier situation.

There is a very strong relationship between high levels of income inequality and low levels of social mobility. Children of highly paid individuals are more likely to be highly paid and children of low paid individuals are more likely to be low earners. In fact, the relationship between inequality and social mobility is stronger than that between poverty and social mobility.

Inequality v Mobility

Ultimately, if inequality is the price to pay for meritocratic capitalism, social mobility should be the reward. A study of opinions in the US noted that while The United States currently exhibits more economic inequality than any peer nation, surveys of US adults support the idea that inequality is acceptable if it is balanced by mobility. Many are untroubled if doctors make 10- or 20-times what janitors make, as long as janitors’ sons have opportunities to become doctors.

However, what we have witnessed, alongside rising inequality, is stagnating or slowing social mobility. Indeed, according to one study, “One’s social class of origin – the class one is born into – has become “stickier” since 1850. That is, sons’ occupations are increasingly predictable from fathers’ occupations. The headline finding is that sons born after 1940 – the Baby Boomers, Gen Xers, and Millennials of today – are significantly less likely to surpass their fathers in occupational attainment. Fewer janitors’ sons are becoming doctors today”.

Social Immobility

For the OECD what we are witnessing is a ‘broken social elevator’. In fact, not only do they highlight a slowing of social mobility, but an increasing trend towards a risk of ‘sliding down’ the social ladder. Particularly worrying is that education, often thought of as the ‘silver bullet’ is increasingly a mechanism for privileged to maintain their social status. The children of those who have attended university are more likely, in turn, to attend university and this is strongly linked to lifetime earnings.

The following sources might prove useful:

A Broken Social Elevator?

Rising inequality is not balanced by intergenerational mobility

Social Mobility and Education