Social Mobility and Equality of Opportunity

Social Mobility and Equality of Opportunity
If outcome inequality is inevitable, perhaps equality of opportunity is more important? Social mobility—the ability to improve one's status regardless of origin—is often viewed as a key indicator of a society's fairness.

Types of Social Mobility

Mobility is measured in different ways:

• Intergenerational mobility: the connection between the status of parents and children. If the children of the rich become rich and the children of the poor become poor, mobility is low.
• Intragenerational mobility: the change in status within a lifetime. Career advancement or decline.
• Absolute mobility: the proportion of people living better than their parents. Depends on overall economic growth.
• Relative mobility: the relationship between the positions of parents and children in the distribution. Can one climb the ladder, regardless of how high the ladder is?

Measurement indicators:

• Income elasticity (IGE): what percentage of the income difference between parents translates into a difference in children's income. 0 = full mobility, 1 = complete reproduction.
• Rank-rank slope: the relationship between positions in the distribution.
• Transition matrices: the probability of moving between quintiles.

International Differences

Mobility varies radically across countries:

• High mobility: Scandinavian countries (IGE ~ 0.2). Denmark is a "model" case: origin poorly predicts income.
• Average mobility: Germany, Canada, Australia (IGE ~ 0.3).
• Low mobility: USA, United Kingdom (IGE ~ 0.5). Contrary to the myth of the "American dream", the USA is a country of low mobility.
• Very low mobility: Developing countries with high inequality (Brazil, Peru — IGE ~ 0.6–0.7).

"The Great Gatsby Curve": Alan Krueger showed that countries with high inequality have low mobility. Inequality today predicts low mobility tomorrow.

Reasons for Differences in Mobility

Why is mobility higher in some countries?

• Education:
  • High-quality early childhood education smooths out initial differences
  • Free higher education expands access
• School funding: In the USA, schools depend on local taxes—wealthy areas, good schools
• Social policy:
  • Support for families with children reduces the impact of origin
  • Healthcare—parental illness should not determine a child’s fate
  • Housing policy—segregation reduces mobility
• Labor market:
  • High minimum wage ensures a "floor"
  • Unions compress the wage distribution
  • Active labor market policies help with transitions
• Social capital and networks:
  • Children of the rich have access to networks, information, mentors
  • Segregation—the poor and rich live in different worlds—reduces mobility

Mobility Within the USA

Raj Chetty and colleagues demonstrated huge differences in mobility within the USA:

Geography of mobility: Mobility is high in some regions (Pacific Northwest, certain cities) and very low in others (South, Rust Belt).

Factors of high mobility:

• Low segregation—the poor and rich live nearby
• Low income inequality
• Good schools
• High social capital—community participation
• Stable families

Place matters. Moving to a high-mobility area in childhood improves outcomes. Neighborhood effects are real and significant.

Inequality of Opportunity

Philosophers distinguish between inequality for which people are "responsible" and "circumstances":

• Responsibility vs. circumstances. Inequality due to different efforts and choices is permissible. Inequality due to circumstances of birth (family, genes, country) is unjust.
• Equality of opportunity: everyone starts from the same starting line, the result depends on effort.

Problems with the concept:

• Where is the boundary between effort and circumstances? Diligence is also partly a result of upbringing.
• Genes—a circumstance? Then differences in talent are unfair.
• How to compensate for unequal starting conditions in practice?

Political consequences. Focusing on equality of opportunity is politically attractive—it is compatible with a market economy and individual responsibility. But it requires serious investment in education, healthcare, and early childhood.

Policy to Increase Mobility

What can be done to increase mobility?

• Early childhood. Investments in early childhood development yield the greatest return. Programs like Head Start, high-quality kindergartens.
• Education. Equalizing school funding, accessible higher education, support programs for students from poor families.
• Desegregation. Housing policy creating mixed neighborhoods. Relocation assistance programs (Moving to Opportunity).
• Family support. Child allowances, paid parental leave, affordable childcare allow parents to invest in children.
• Labor market. Minimum wage, active employment policy, retraining programs create opportunities for upward mobility among adults.

Mobility is not just an economic indicator. It is a measure of how much a society gives everyone a chance, regardless of the family they were born into.