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Levelling Up: Social Mobility Tougher than in Last 50 years

social mobility

A new report from the Institute for Fiscal Studies (IFS) shows that social mobility is now tougher than in the last 50 years, with those in the North disproportionately impacted.

Parental income and wealth is of even more importance today in determining someone’s income across their lifetime. This poses serious questions for the Government’s levelling up agenda.

Social mobility

Intergenerational mobility is a subject of a large body of literature in social science. It focuses on the association between parents’ and children’s economic well-being and receives significant attention because it speaks to the question of equality of opportunity which many consider an important goal for society.

Intergenerational mobility is a cross-cutting theme in the IFS Deaton Review, which is touched upon in several of the core chapters, including on education, early childhood, and race and ethnicity. Therefore, our aim is not to provide a comprehensive overview of this topic but rather to spotlight some of the newer directions in intergenerational mobility research within economics driven by changes in some key trends in the recent decades, as well as by the growing availability of administrative data.

Key findings

Previous work has shown that intergenerational income mobility in England was lower for those born in 1970 than those born in 1958. Using administrative data on the most recent birth cohorts for whom earnings data are available, the IFS finds no evidence of recovery from that decline. National estimates of mobility of cohorts born in the late 1980s looks very similar to those of the 1970 cohort and education inequalities continue to be the dominant mediator.

However, the IFS argues that these estimates paint an incomplete picture for two reasons. One being differences in income mobility across areas and ethnic groups and the second being the growing importance of ‘unearned’ income.

As part of the IFS Deaton Review of Inequalities funded by the Nuffield Foundation, the IFS looked at lifetime income distribution (income earned from employment and inheritance) and found striking divides on the basis of ethnicity and location.

For example, young people from Pakistani and Bangladeshi families are less than half as likely as their white peers to receive a substantial financial gift from their parents over a two-year period. Strikingly, children from most ethnic minority groups on FSMs tend to out-perform their white peers in school, this advantage is reversed when it comes to work, the IFS said, as men from Pakistani, black African and black Caribbean backgrounds who grew up on FSMs end up earning less than white men who had FSMs as children.

And these differences were even starker compared with the North and the South and London. The report said: “Men who grew up on free school meals end up earning £8,700 more at age 28 if they grew up in the highest mobility areas around London than if they grew up in the lowest-mobility areas in the North of England.” People with parents living in London also stand to inherit about twice as much on average as those with parents in the North-East or Yorkshire and the Humber.

This mirrors findings in the IPPR North’s State of the North report which found that the UK is “the most regionally divided country and getting worse”, with systematic underinvestment in infrastructure, transport, research and development holding the North of England back.

The IFS therefore argues that “your parents’ earnings are a much stronger predictor of your earnings for those born from the 1970s onwards than they were for previous generations.” This challenges the Government’s discourse surrounding the levelling up agenda.

Explaining the data

David Sturrock, a senior research economist at the IFS and an author of the report, said: “It is bad enough that it seems harder for children from poorer families to move up in the earnings distribution than it was 40 years ago. But this may understate the true challenges we face with respect to social mobility, which are made worse by a long period of overall earnings stagnation alongside the increased importance of wealth and growing wealth gaps between North and South.

“Poorer children from the North and Midlands face the combination of poorer educational outcomes, weaker local economies and relatively low levels of inheritance from their parents.

“While the educational achievements of ethnic minority children from poor backgrounds are a success story, for many of them this is not translating into higher later-life earnings as we might expect, and on average they can rely much less on receiving wealth from their parents than White children.

“It may be harder now than at any point in over half a century to move up if you are born in a position of disadvantage.”

New directions for intergenerational mobility research

The IFS argues that the findings provide strong motivation for important new directions in research on intergenerational mobility in the UK. Firstly, pointing to ‘ascribed characteristics’ such as ethnicity and location, the IFS argues that it is vital to understand these drivers when designing policy to improve social mobility. Secondly, the IFS highlights the importance of ‘unearned income’ in understanding inequalities and the degree of intergenerational persistence.

Final thought

This data poses questions for the Government’s levelling up agenda as the IFS has shown significant inequalities based on ethnicity, location and inheritance. The IFS also notes how dozens of the most deprived areas in England were left out of the second round of the Levelling Up Fund (LUF), while three of the least deprived areas were awarded funding, including a town in the Prime Minister’s North Yorkshire constituency.

Moreover, Chamber’s exclusive insights, powered by VUIT, demonstrate inequalities within specific areas. As shown with the North of England, deprivation varies.

TopLeftDashboard 5

Curia’s Levelling Up Commission

The Levelling Up Commission intends to consider ways to implement the Government’s Levelling Up White Paper and subsequent Bill from the perspective of local and regional government. Too often the Levelling Up agenda is something being done ‘to and for’ local and regional government, the Commission intends to make sure it is done ‘with and by’ them.

Through roundtable meetings with MPs and senior leaders of local and regional government from across the UK, quantitative data analysis and regional sprints, the Commission intends to set out a series of recommendations to consider how regional inequalities can be reduced from the perspective of public services in four key areas:

  • Health and Social Care
  • Housing and Homelessness
  • Education, Skills and Training
  • Crime, Justice and Rehabilitation

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