Social Mobility: fact and fiction

In the March 3, 2014 issue of The New Yorker, business columnist James Surowiecki devotes his column to the myth of social mobility (“The Mobility Myth”, page 28). He points out that, “Since at least the days of Horatio Alger, a cornerstone of American thinking has been the hope of social mobility – the idea that, as Lawrence Samuel put it … anyone can, ‘through dedication and with a can-do spirit, climb the ladder of success.’”

I understand that Horatio Alger background, having grown up in middle class American suburbia in the 1960s, the child of parents who were born to Eastern European immigrants. In many undefinable ways, I carry that ingrained (and increasingly misplaced) American optimism with me still. (The first self-help book I can remember reading was Norman Vincent Peale’s The Power of Positive Thinking, still in print some 62 years after first publication).

Surowiecki refers to the 1962 book by Michael Harrington, entitled The Other America: Poverty in the United States (a book that I picked up in college in the USA and have around carried with me to subsequent residences in two countries). Unfortunately, Harrington’s famous statement (pp. 14-15 of my edition) is still true:

The real explanation of why the poor are where they are is that they made the mistake of being born to the wrong parents, in the wrong section of the country, in the wrong industry, or in the wrong racial or ethnic group. Once that mistake has been made, they could have been paragons of will and morality, but most of them would never have had a chance to get out of the other America.

Surowiecki goes on to point out that:

The middle class isn’t all that mobile, either: only twenty per cent of people born into the middle quintile ever make it into the top one. And although we think of U.S. society as archetypally open, mobility here is lower than in most European countries.

Nevertheless, “this wasn’t always the case”, back in the late 19th and early 20th centuries, but the myth continues. As a result, “Americans are less concerned than Europeans about inequality and more confident that society is meritocratic. The problem is that, over time, the American dream has become increasingly untethered from American reality.”

In an article in American Prospect (29 May 2013, “The Wealthy Kids are All Right”), Chuck Collins refers to the luck of the wealthy as the “born on third base factor”. This refers to the game of baseball: when you make it to third base, you have an awfully good chance of scoring a “run” and making it “home”. So starting out on “third base” is a very privileged spot.

Collins’ article is one of the best guides of what to do if you want to give your university (college) age children the best start in life. He continues:

The idea that people’s futures might be economically determined deeply offends U.S. sensibilities. We want to believe that individual moxie matters, that a person’s creativity, effort, and intelligence will lead to economic success. Stories of exceptional strivers, heroically overcoming a stacked deck of obstacles, divert our attention from the data. But the large mega-trends are now indisputable. If you fail to pick wealthy parents and want to experience the American dream today, move to Canada.

Or to Australia. Yes, Australia.

That’s the good news for us who live here. As The Economist (“Rich Rewards”, 12 June 2013) puts it:

This is no joke: the people of Australia and Canada have twice the social mobility of their counterparts in America and Britain despite having Gini coefficients in the same ballpark. No one quite knows why, but possible factors include America’s thinner safety net and deeper poverty.

The key study here is one funded by the Sutton Trust on social mobility in the USA, Canada, Australia the United Kingdom. Miles Corak, a professor of labour economics at the University of Ottawa, has three key conclusions:

1. The extent that a son’s earnings are related to his father’s is a good proxy (my word) for social mobility. “The tie between father and son earnings is almost twice as strong in the United Kingdom and the United States than it is in Canada and Australia, two countries to which they can reasonably be compared.”

2. “This variation occurs in a particular way: mobility is higher where inequality is lower.” And finally,

3. “In an era of growing inequality, the more unequal societies—like the United Kingdom and the United States—will likely not experience more mobility without concerted and effective public policy addressed not just to inequality but also to how families function, how the education system develops the human capital of relatively disadvantaged children, and how families interact with a labour market that is increasingly more polarized.”

Here in Australia, one of the most articulate proponents of dealing with rising inequality is parliamentarian Andrew Leigh.  His recent (27 March 2014) speech to the National Press Club provides a good summary of Australian issues.

May 21, 2014:  An Australian postscript – The Evatt Foundation, in a carefully argued article, details the three most important reasons for Australia’s better-than-the-USA equality of wealth:

1. Australia’s “horizontal fiscal equalisation” (and the pre-requisite “vertical fiscal imbalance”), which takes some explanation.  Effectively, it means:

That Washington only collects about 20 per cent more tax than it spends, whereas Canberra collects about 50 per cent more. These funds are then distributed back to the states and territories in a way designed to ensure all jurisdictions have the capacity to provide the same average level of services. In school funding, for example, every Australian state and territory government has the capacity to provide the same average level of service, whereas in the US, rich states such as New York and New Jersey spend three times the money per pupil as poor states such as Utah and Idaho. Such gross inequity cannot happen in Australia.

2. Universal access to health care services and reasonably priced medicines (through Australia’s Medicare system) is the “major reason why Australia has a lower infant mortality rate and longer life expectancy than the US”.

3. A substantially higher minimum wage in Australia has prevented the development of the “working poor” on the same scale.

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