The concept of economic mobility is relatively simple to grasp. Over the course of a lifetime, can people move up the rungs of the income ladder? Are children doing better than their parents when it comes to standards of living? How do we help people access opportunities that we know can make the climb easier? The questions come easily to us, but the solutions, not as much. The challenge is even tougher when we are talking not of one city, state or country, but for multiple countries around the globe. To be precise, a new report from the World Bank tracks 148 countries, with 96 percent of the world’s population, to answer the age-old question of how much economic opportunity and upward economic mobility a country really offers its citizens. This is a tremendous effort. To put it in context, we are still absorbing the results of the first comprehensive study on U.S. economic mobility that was released in 2017. Now, we can compare not only how the U.S. fares on mobility, but how developing countries in Asia and Africa are doing relative to the U.S.. The results are striking.
Rather than using the more traditional metric of income, this study uses educational attainment as the basis for defining upward mobility. Absolute upward mobility refers to the ability of children to “out-learn” (my term) their parents. For example, if the parents only completed secondary school, but the children completed tertiary schooling, that would reflect absolute upward mobility. Relative mobility refers to the ability of children to do better than their peers compared to how the parents did relative to their own peers. In other words, if the parents were in the bottom quartile of educational attainment within their cohort, but the children were in the middle or upper quartile, that would reflect relative upward mobility.
Using data from a new Global Database of Intergenerational Mobility (GDIM) and comparing developing countries to high-income countries, the gap in absolute mobility appears to have narrowed. Using the 1980s cohort for both sets of countries, the Global database shows that 57 percent of children in high-income countries “out-learned” their parents. The corresponding number for the developing countries was 47 percent. This gap is nearly 10 percentage points lower than it was for the 1940s cohort for each group of countries. So absolute mobility appears to be converging.
But the problem is the reason for the convergence. The gap is narrowing not because developing economies are doing better today than they did before, but, in fact, because high-income economies are doing much worse than they were doing earlier. In addition, progress in mobility has stagnated at a much lower level of educational attainment for developing economies than for the average high income economy. Developing economies today have levels of educational attainment that are similar to where high income countries were 40 years ago. Even within developing economies, there is a great deal of variance. For the 1980s birth cohort, the study finds that only 12 percent of adults had more education than their parents in Sub-Saharan Africa, relative to more than 80 percent of adults of that same generation in the East Asia region.
Comparing the education metric to the income metric is important as well. Is education really a good proxy for income when we measure mobility? How well correlated are those two variables? After all, as the study notes, while gender gaps in educational mobility have reversed since the 1960s with girls acquiring higher levels of education than boys, this has not necessarily translated into higher income mobility for women. From an intergenerational perspective, it makes sense that education and income would trend in the same direction. Research shows that people with higher education levels typically have higher levels of income. Moreover, parents with financial resources are better able to invest in their children’s education, leading to persistence in incomes and education levels across generations. Even aside from investments in education, intergenerational mobility can be higher for those growing up in higher income households because of parental traits, access to good nutrition, childcare, and more stability in household settings. That is a big reason why intergenerational economic mobility is persistent. And there is a greater likelihood that children born into a certain quartile of the income distribution are more likely to stay there.
So what does the picture look like for the US? We know from work done by Raj Chetty and others using income to measure mobility, that absolute upward economic mobility has been declining since the 1940s. For children born in the 1940s, more than 90 percent were earning more than their parents. Today, that number has dropped to 50 percent. The figure below documents that decline.
Doing a similar analysis using the new World Bank data for educational mobility for the U.S., there is an unfortunate similarity. The chart below shows the average probability that a child in a particular birth cohort will attain higher education credentials than their parents. In the 1940s, the average probability was close to 70 percent. For the 1980s cohort, that number has dropped to below 45 percent.
In addition, the probability that kids with parents from the bottom half of the education ranks will “out-learn” their parents and reach the top education quartile is shown below. This probability, known as the poverty-to-privilege rate, has been declining over time as well.
The map of global economic mobility shows pockets of hope and pockets of concern. Thirteen of the fifteen least mobile countries globally are in Sub-Saharan Africa and South Asia, while some of the most mobile economies are in Western Europe, Canada, Australia and Japan. But the divisions are not clear cut. The threat to economic mobility exists even in developed, high-income countries such as the United States. The U.S. is one of only four high income economies amongst 50 economies with the lowest rates of relative upward mobility. While the problems in each country are unique, many solutions are universal. The report highlights much needed investments in early childhood through subsidized childcare and paid leave, nutrition programs, good quality public education programs and schools, improved occupational networks and labor market interventions such as employer tax credits to employ younger workers. But it also points to a new, and often overlooked, factor: the role played by aspirations, both of the parents and the children themselves, and the link between aspirations and mobility. In Mexico, for instance, among youth between the ages of 12-22, those who had higher aspirations for mobility were far more likely to stay in school and exhibit better behavior more generally, particularly in relation to health. Similar findings were reported in a diverse group of countries, such as India, Vietnam, United Kingdom, Pakistan and in the Dominican Republic as well. Perhaps not surprisingly, believing in the dream of upward mobility is critical to achieving it.
Policymakers have a simple mandate to making progress on this issue. Take real, practical actions to make that dream come true for people worldwide.