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Social Mobility: It’s the economy, stupid.


“It’s the economy, stupid,” was the defining slogan of the Clinton presidential campaign in 1992. It was not an idea arising from Clinton himself, but from his very effective campaign leader, James Carville.  The economy was stressed as the key factor in determining the intentions of voters. This is a timeless mantra that is simple to understand.  But Carville is not an economist. As an ex-marine, lawyer and school teacher he was distilling the case for government down to a simple, and perhaps singular, concern of the voters. The economy is the overriding concern of most voters simply because most do not have much of the stuff that comprises the ‘economy’; i.e. money.
But is it simply this variable that determines every social outcome?

What is Social Mobility?

The idea of ‘Social Mobility’ is an increasing concern for voters in the UK, and thus for political leaders. But defining what is meant by ‘Social Mobility’ turns out to be a tougher proposition than expected.  Just as the idea of the ‘economy’ seems to most people to be a simple matter of income versus costs, everyone thinks that they know what ‘social mobility’ is. However, the different notions about it are heavily influenced by the perspective of those defining it.  Some well off people might see it as a threat to the status-quo that favours them and their families. Others with less wealth see it as the opportunity to better themselves.  Those with nothing to lose might see it as a revolutionary banner to rally behind. Also, the scope of the concept of social mobility will have changed with time. The consensus of government in post-war Britain was one of opportunity and a need for education. Most people bought into this with enthusiasm. In a time of high unemployment, and less opportunity, it came to mean something different to many more people who had nothing to lose.  In response to the riots of 1981, Norman Tebbit harked back to a different time with: My dad didn't riot. He got on his bike and looked for work". His literal idea of social mobility has diverged somewhat over time to a point where it is now of increasing political significance.

The Sociologists Tale.

Amongst the ‘experts’ there also seem to be different camps with regard to how ‘Social Mobility’ is perceived.  The idea of social classes seems to have diffused from its rigid boundaries as the structure of the economy has changed; with the new social structures reflecting a drift from manufacturing industry to service industries.  Yet the somewhat archaic and parochial classification of upper, middle and lower classes seems to persist in the UK. This is despite government and social scientists alike defining social mobility as moving between the different socioeconomic classes (SEC) 1-7. These are based simply upon occupation and employment of people that is relatively easy to assign to individuals in a periodic census. Then there is SEC 8, the ‘never worked and long-term unemployed’ that are often overlooked in many social mobility studies. The Office for National Statistics provides a very clear guide about the various SEC classes, their history and methodology [1].

On the face of it, social scientists and government can readily define social mobility as people moving between the SEC groups over at least two generations. This may be swift enough to happen in the life-time of an individual, but it is more often a change that happens across generations of families. However, this is not as straight forward as one might expect.  In his book of 2017 ‘The New Social Mobility: How politicians got it wrong’ [2] Payne bravely sets out the complexity of the situation in an accessible treatise suitable for most ‘non-experts’ to follow. It is complex in its arguments but not unsurmountable; even for politicians.

But what did politicians get wrong? The book is comprehensive in setting out that politicians (and indeed many other groups from academics to the press) have essentially failed to understand how social mobility works. But in a lighter explanation, “Musical Chairs and the Social Mobility Industry” [3], the same author compares access to the best jobs as the availability of ‘chairs’ in a game of ‘musical chairs’. The premise is that there are only a limited number of ‘chairs’ available and that: We cannot all be middle class”. The assumption is that the limited number of chairs means that some will lose their ‘chair’ and others will gain a ‘chair’. Thus politicians get it wrong because their “calls for ‘more mobility’ actually mean more upward mobility”. 

The extent and quality of the data available determines how we view the situation across the UK. The UK Office for National Statistics Labour Force survey data [4] provides a valuable ‘snapshot of the occupations of people across the UK between April and June of each year through a voluntary household survey (since 1992 there have been more regular quarterly reports provided). The sample size is just over 30,000 people. However, it doesn’t indicate directly how people got there in comparison to their earlier occupations and it can only indicate the position in relation to their parents if they declare their parent’s occupation.

The situation is complicated by a range of factors, not least of which is the extent and quality of the data. One of the best of such analyses was reported in 2015 by Bukodi et al [5]. Using as many sources of data in the UK as they could get hold of, they looked at the mobility between various occupations in comparison to the occupations of parents for groups or ‘cohorts’ born in 1946, 1958, 1970 and between 1980 and 1984. The results showed that the total rate of mobility remained steady at between 77% and 80 % throughout. However, the catch is that this is made up of a combination of upward and downward mobility into occupations different from those of their fathers. The overall conclusion is that “the upward mobility component is tending to fall and the downward mobility component to rise”. The role of gender is addressed in detail and this is certainly worthy of a fuller and separate consideration of the equality implications elsewhere.

Mobility per se is therefore not the issue. What exercises politicians is that the mobility is mostly confined to the mid-range occupations in the SEC groups. The lower SEC7 ‘routine worker’ group is less likely to be socially mobile. If they are, then this would necessarily be expected to be upwards; as there is not very far for them to fall.  Children from the SEC8 group have only one way to go and will need considerable help to get there. Equally, and in general terms, the SEC1 ‘professionals and managerial group’ also have only one way to go in terms of mobility.  They mostly tend to stay where they are. Those with advantages hang onto what they have and those disadvantaged find it hard to move upwards.

However, for those on an upwardly social mobility pathway, there seems to be a nasty sting in the tail. In a detailed analysis of data from the 2015 online BBC Great British Class Survey of 61,400 people [6] it emerged that, when upwardly mobile people manage to get into much higher grade occupations, they often fail to acquire as much wealth. Some of this might be explained by having less, or indeed nothing, to inherit. However, the conclusion is that they simply get paid less than their peers. This varies with profession and might be explained by how much the more successful businesses pay their staff and from which SEC group they tend to hire from.  But the suspicion is that those from lower SEC groups are treated differently by some employers.  The idea that social and cultural capital, such as common interests and ‘fitting in’, skews the prospect of promotion is postulated. Considering ‘class origin’ alone showed that this factor strongly predicted income. Those whose parents were not in professional or managerial jobs had earned between £8,178 and £10,760 pa less than similar peers.

Adding the type of school to the model has an alarming effect that is worth quoting:

“Next we add two types of elite schooling: having attended a private/fee-paying school, and having attended Oxford or Cambridge, or one of the other Russell Group universities. Both of these strongly and substantively predict income; respondents who attended private schools have on average £9,570 more income than those who are otherwise similar but did not; those who attended Oxbridge have £9,507 more than those who attended non-Russell Group institutions. Further, it appears that some of the advantage in earnings for those from senior manager/traditional professional families operates through elite education: the coefficients for coming from lower-status occupation households are each reduced by around £1,500 -£3,000 when education is added to the model.”

The implications of this potential bias in professional and management positions should set the alarm bells ringing in government. The distinct possibility that such bias is overshadowing and exacerbating the wide gender pay gaps, evident in many professions, might be more carefully considered.

Payne [3] concluded that, for those not upwardly socially mobile: “The solution to their plight is neither fairer competition to get seated, nor more chairs, desirable though that is. It requires a different approach altogether which addresses how we treat the ‘losers’ in the social mobility game”. This makes the assumption that the number of higher paid jobs will not expand. However, this approach lacks the sense of ambition that we expect our politicians to have on our behalf. Also, that seeking a fairer system of educational opportunity is not a valid aspiration. This should be a fundamental expectation in any democratic society that seeks to improve the conditions for its citizens. However, in seeking to foster a high-skill and high-tech economy, we still have a long way to go in the UK. We should instead be confident that educated people themselves will generate this expansion through their own invention and innovation if we encourage it. We should nurture and cherish our education since everything, including our environment, will depend upon it. In turn the opportunities should be both social and gender neutral so that a diverse set of views and values can thrive equally. This in itself may take up a fair proportion of the educational effort.

The Economists Tale.

The other approach taken to view Social Mobility is to look instead at rises and falls in intergenerational earnings. This asks the basic question: Do children go onto earn more than their parents? This might be expected to move ‘hand-in-hand’ with better job prospects made available to the children through education. Certainly there is much made of the idea of children being the first in their family to attend university. This, and higher earnings, is a tangible measure of a society becoming more equal. Compared to dealing with the matrix of competing factors in considering social mobility as jobs, it seems that looking at earnings is a simpler approach. In its crudest form there is only one variable that is measured in one currency that can be easily calculated in other currencies.  However, the idea of it being simple ceases when looked at more closely. This can be exacerbated by the terminology of economics and the more difficult mathematical concepts deployed.  When teaching an advanced course in microbial genetics for some years, I often reminded the students that, even though the concepts were hard to understand, I was not to blame for the terminological obstacles that I did not invent.  I was merely there to explain how to navigate around them to get to a better level of understanding about how nature works. I suspect economics teaching has a similar ring to it. Times Higher Education recently highlighted how the terminology of economics hinders effective communication on social media through the liberal use of ‘technical terms’ [7]. This is reinforced in a provocative critique of the ‘Superiority of Economists’ in 2015 [8] that observed: “economists see themselves at or near the top of the disciplinary hierarchy”.  The conclusion that most economists “believe in the ideal of an expert-advised democracy, in which their competence would be utilized and on display in high-profile, non-elective positions in government and other institutions” seems to be borne out in practice; despite widely held suspicions about ‘experts’.

The advantage of looking at intergenerational income through the lens of economics is that it can be more readily used to make international comparisons and data can be gathered from a greater number of individuals.  It is also tempting to make a case for government funding initiatives on the basis of a more deterministic economic outcome. Indeed, making decisions this way seems less risky and provides a relatively ‘safe haven’ when having to take responsibility.  However, the technical pitfalls in predicting the future using economic models may not be fully understood.

The most common method of assessing changes in intergenerational income is use of the term ‘intergenerational income elasticity’. The analysis by Gregg et al 2013 provides an accessible account of how this comparative measure works [9]. Mobility as intergenerational income elasticity is usually based on the correlation (known as term β) between the log (usually Naperian log or Ln) of earnings of an individual in adulthood and the log of the income of the parent. To facilitate international comparisons this is usually based upon the father’s income. However the combined parent’s income can also be measured in the UK.

Thus:  lnYchild = a + b lnYparent + u.

In very simple terms, a  is the intercept that is what lnYchild would be if lnYparent happened to be zero.  u is the error term; that is the error in predicting the value of lnYchild.  If b is zero this means that there is complete intergenerational mobility and the income of the parents has no influence on the child’s earnings. Conversely, if b is one then the income of the parents fully determines the child’s earnings. Thus, a larger b means a greater advantage for the offspring of the rich compared to the offspring of the poor.

If there is a significant degree of inequality in earnings then this has a great effect. This is measured by the so called ‘Gini coefficient’.  This is a number that shows how a country’s wealth distribution deviates from totally equal distribution of productivity. It can be expressed on a scale of 0 to 1.0 or 0 to 100%. Either way a score of 0 means complete equality and 1.0 (or 100%) means complete inequality.

The relationship between intergenerational income and inequality then becomes of greater interest. The so called ‘Great Gatsby Curve’ (Figure 1) (named after the bootlegger character in the eponymous novel, who rose to be a wealthy Long Island socialite) is based upon Corak (2013) [10] and Organisation for Economic Co-operation and Development (OECD) data. Indeed the extensive OECD reports are worth visiting as they provide some of the best analysis of comparative data [11].

It is well established that there is a strong interdependent link between the two, with more inequality leading to less income mobility across the generations.  The position of the UK in this aligns well with the USA and sets us apart from most other comparable countries. Corak postulates various reasons for this including support of children through better education, direct investment in children, culture values and expectations and more controversially, genetics and inheritance.  The link to educational opportunities is one very important factor. Gregg (2013) provides ample evidence of the role education plays in determining changes in intergenerational income [9].  No politician can afford to ignore this and the inherent inequalities signalled by the comparative data.

Cost-benefit analysis and the rules of economists.

The heart says there is lack of fairness and something must be done about it.  But the head says “hold on lets work this out”.  The need for a cost-benefit analysis emerges if there is to be investment of government funds on behalf of the sceptical tax payer. Investing in education has been well tested and is a ‘no brainer’ in relation to benefit.  However, much more may have to be done. The refuge of government in any decision to go for an expensive and complex scheme is to look at the economics. 

Economists at the UK Treasury have produced a comprehensive guide called ‘The Green Book’ [12]. This is essential to providing a rational look at any government investment. But it is very conservative and cautious in its outlook.  One economic measure of great significance is the so called ‘discount rate’. This is deployed regularly for any investment. It indicates in simple terms how much is expected to come back from an initial investment. For example, if someone is compensated for loss of earnings through an accident, they might seek a ‘lump sum’ payout. This has to be calculated on the basis of their loss of projected earnings. But the actual payout is discounted by the projected yield the lump sum might make in future investments. The projected deficits of future pension payments are calculated in a similar way. 

For social projects the projected yield from the investment over time is hard to predict. But the idea is to get optimum return from the investment. To assess the benefits of an investment in social projects, such as education, the ‘social discount rate’ (SDR) is used. This is a complex calculation that tries to balance the future economic activity of students and their ability to pay back via taxes.

Evans (2005) provides a useful critique of the approach to the problem of assessing cost-benefit and the SDR [13]. One thing apparent is that very small changes in the value of the SDR can have very large effects on outcome in the models used. Such small changes could determine if a social project goes ahead or not regardless of what the heart tells us. 

The aim of the student loans system was to mitigate the risk by replacing the future taxation with repayment of loans. This seems to resemble a graduate tax without calling it a tax. But unfortunately it seems to favour the better off over the less well off. This alone might indicate that the cost-benefit analysis was inadequate. The current government is constantly trying to avoid risk, and to some extent responsibility, by involving private enterprise. Time will tell if this turns out to be a good thing or a tragic gamble that fails. For example, in another way to mitigate the risk, the government introduced in 2017 Social Impact Bonds [14] whereby  investors other than government can put funds into a scheme and get paid back directly if the social project is successful.

Have the politicians got it wrong?

Politicians have to devise a way forward on our behalf.  In a democracy we elect them on the basis of a mandate.  The assumption is that they have done some calculations and carefully considered what they propose; both in terms of cost and economic and social benefit.  Betting our future on the basis of an ideological belief may not be enough.  It might mean irrational adherence to Marx’s ‘Das Capital’ or Smiths’ ‘Wealth of Nations’.  But the world is changing fast and new philosophies are needed. The increasing power of big data-sets, subjected to ever byzantine analysis, is compelling in making policy look better. But it can fail to see the plight of the individual that might be seen only as part of an economic target problem. The erstwhile UK Home secretary summed it up in the wake of the so called ‘Windrush’ debacle when she said that she was: "concerned that the Home Office has become too concerned with policy and strategy, and sometimes lose sight of the individual". It was individuals that brought the problem to light and individuals that say if it was put right. 

There is no point in simply saying the politicians have got it wrong.  The many competing factors that make up government policy decisions puts enormous pressure on them. The problem of social mobility is very complex as this short commentary has tried to illustrate. It might be that no politician can be expected to grasp what they see in official advice. But they must try to be logical. We need to make sure they are informed clearly. They must in turn listen and seek to assess what their actions might do to individuals. It doesn’t take much imagination to do this; but it does take courage when exposed to the public in the full light of day. They must make sure that the right of individuals to expect fair treatment plays an essential part of any cost-benefit analysis.

It may be the economy, stupid. The economic factors might prevail in any intervention to improve the chances of upward social mobility, but it is also the individuals and their right to expect fairness and equal opportunities that should come out on top.

Mike Larkin, retired from Queen's University Belfast after 37 years  teaching Microbiology, Biochemistry and Genetics. 

References.

[1] Office for National Statistics. SOC2010 volume 3: The National Statistics Socio-economic classification (NS-SEC rebased on SOC2010)
https://www.ons.gov.uk/methodology/classificationsandstandards/standardoccupationalclassificationsoc/soc2010/soc2010volume3thenationalstatisticssocioeconomicclassificationnssecrebasedonsoc2010

[2] Geoff Payne 2017. ‘The New Social Mobility: how politicians got it wrong’. Policy Press. ISBN: 978-1447310655, https://policypress.co.uk/the-new-social-mobility


[4] Office for National Statistics Labour Force survey data. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employmentbyoccupationemp04

[5] Bukodi et al. 2015. The mobility problem in Britain: new findings from the analysis of birth cohort data. British Journal of Sociology Volume 66, Issue1 March 2015 Pages 93-117.[6] Friedman et al 2015. Breaking the ‘class’ ceiling? Social mobility into Britain's elite occupations The Sociological Review, Vol. 63, 259–289.

[7] Economists’ communication problems extend to social media. Times Higher Education April 24, 2018 https://www.timeshighereducation.com/news/economists-communication-problems-extend-social-media

[8] Marion Fourcade, Etienne Ollion, and Yann Algan, 2015. The Superiority of Economists. Journal of Economic Perspectives. Volume 29, Number 1, 89–114.

[9] Greg et al 2013. Research Paper Series # CASP1. Understanding income mobility: The role of education for intergenerational income persistence in the US, UK and Sweden. http://www.bath.ac.uk/casp/Documents/working-papers/casp1_understanding_income_mobility.pdf

[10] Miles Corak 2013. Income Inequality, Equality of Opportunity, and Intergenerational Mobility Journal of Economic Perspectives. Volume 27, Number 3, pages 79–102.

[11] OECD UK Reports. http://www.oecd.org/unitedkingdom/ reports
Income inequality data update and policies impacting income distribution: United Kingdom (February 2015) http://www.oecd.org/unitedkingdom/OECD-Income-Inequality-UK.pdf
OECD Library Archive https://www.oecd-ilibrary.org/

[12] The UK Treasury ‘Green Book’
https://www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation-in-central-governent

[13] Evans 2005.The elasticity of marginal utility of consumption: estimates for 20 OECD countries. Fiscal Studies, Vol. 26, No. 2, pages 197-224.

[14] UK Treasury Social Impact Bonds. https://www.gov.uk/guidance/social-impact-bonds


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