Thomas Piketty's Capital in the 21st Century is about societal inequality, but it also raises important questions about social mobility.
Inequality occurs in immobile societies. If individuals cannot advance based on education, work and natural skills, societal status depends on their parents' wealth, income and networks. An Organisation for Economic Co-operation and Development (OECD) Economic Policy Reform Report finds a significant relationship (r=.56, 88, p<.05) between inequality and wage distribution by measuring the gap between the wages of those with fathers with and without any higher education. The Great Gatsby Curve connects wealth in one generation with the ability to move up the economic ladder in the next generation. As you can see, children from poor families are less likely to improve their economic status in countries where income inequality is higher.
Intergenerational mobility improves peoples' societal position from one generation to the next and decreases inequality. While individual ability and ambition are more just determinants of one's place in society, merit-based allocations are also more productive.
Across countries, intergenerational mobility requires meritocracy and access to education. Graph 2 holds immobile countries (towards the right) as less likely to be meritocratic.
However, OECD economists find that government-funded higher education and merit-based scholarships are not enough to entirely reduce favoritism of privilege. The link between individual and parental earnings ranges from 15% to 50% intergenerational earnings elasticity across OECD countries. Parental backgrounds influence student achievement in secondary education by up to 63 score points in the OECD's Programme for International Student Assessment (PISA) worldwide study, which measures 15-year-old school pupil's mathematics, science, and reading skills. Children of parents without education are three times less likely to enter and 44% less likely to successfully finish higher education. Children from parents with academic backgrounds also benefit from a wage premium of up to 20% compared to those from non-academic households.
Graph 2: The Inequalities Blog
Harvard Professor Robert Putnam argues people might not be able to overcome their parent's socioeconomic status because class creates and molds one's expectations for success and ability. As such, living in a society with little merit-based opportunity reinforces low expectations for escape and education may not make sense if there is no hope for merit-based mobility.
While economists can improve access to economic market opportunities, institutional policy makers can minimize discrimination and global governance entities instigate intergenerational transfers, social scientists should focus on building societal trust in merit-based intergenerational mobility. Meritocracy as the psychological backbone of a fair society, together with trust in upward mobility over time, are key drivers of economic productivity, opening an innovative path to a long-term equitable society.
