15/06/2018 - As income inequality has increased since the 1990s, social mobility has stalled, meaning that fewer people at the bottom have moved up while the richest have largely kept their fortunes. This has severe social, economic and political consequences, according to a new OECD report.
A Broken Social Elevator? How to Promote Social Mobility says that given current levels of inequality and intergenerational earnings mobility, it could take at least five generations or 150 years for the child of a poor family to reach the average income, on average across OECD countries.
This ranges from just two to three generations in the Nordic countries to nine generations or more in some emerging economies. One in three children with a low earning father will also have low earnings, while for most of the other two-thirds upward mobility is limited to the neighbouring earnings group.
“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 and Sherpa to the G20, who also oversees the OECD's Inclusive Growth Initiative. “We need to ensure that everyone has the opportunity to succeed, especially the most disadvantaged, and that growth becomes truly inclusive.”
Across generations, earnings mobility prospects tend to be weaker in countries where income inequality is high, and stronger in countries where inequality is low. The Nordic countries combine low inequality with high mobility whereas Latin American countries and some emerging economies have high inequality but low mobility.
Income mobility was a reality for many people born between 1955 and 1975 from low-educated parents but it has stagnated for those born after 1975.
Over the four year period observed in this report, about 60% of people remained stuck in the lowest 20% income bracket, while 70% remained at the top. At the same time, one-in-seven of all middle class households, and one-in-five of people living closer to lower incomes, fell into the bottom 20%.
