Conclusions: Implications for a New Economic Agenda
There is nothing inevitable about inequality and social immobility. They are the products of decades of focus on maximization of profit and the pursuit of economic growth without a commensurate focus on equity and inclusion. Reversing the current trends is a daunting challenge that requires political will, concerted efforts and time. The large differences revealed by the Global Social Mobility Index suggest that it is possible to make societies more socially mobile and more resilient, without compromising on economic performance.59
Increasing social mobility implies levelling the playing field for individuals throughout life, from birth to adulthood. This short section is not meant to provide a comprehensive overview of all relevant policies. The priorities and the optimal policy mix will necessarily vary across countries. However, the need for a comprehensive approach to social mobility is unquestionable. While some areas may be prioritized, no area can be neglected, regardless of a country’s stage of development.
Improving Health Outcomes
Empirical evidence suggests that spending more on health leads to higher level of social mobility across society.60 The earlier in life some policies are pursued, the less interventions may be needed through other policies which may prove more costly and less effective later in life. Public investment in health has the potential to improve social mobility over the life course and across generations—for example, by cushioning income losses or necessary labour market changes when health issues arise. What matters is to not only spend more, but to also ensure spending is effective and targeted. For instance, a strategy based on greater investment in children targeting those from lower socio-economic backgrounds holds the promise of breaking the cycle of intergenerational disadvantages. To this end, an obvious policy response is universal health insurance coverage, allowing access to high-quality health care (there is no true universality without quality).61 This should be complemented with special policies, as well as cost-effective prevention campaigns and early detection programmes targeted at specific population groups and areas.62 For example, preventing various forms of malnourishment, namely undernourishment (mainly in developing countries) and obesity (mainly in advanced economies) is critical given the adverse impacts, including stunting and cognitive disabilities for the former, and poorer physical and mental health for the latter.63
Improving Education Access and Quality, and Embracing Lifelong Learning
Like health, education is a powerful ‘equalizer’ of chances. Given the substantial returns that come from prioritizing education, countries should consider increasing their spending on education focusing on programmes targeted on disadvantaged children and the youth. Overall, it has been shown that larger spending on education is associated with more social mobility.64
Supporting the early development of cognitive, social and emotional skills has long-lasting positive effects on educational attainment, employment and income. Evidence shows that intervening early on in children’s lives is one of the most effective ways to prevent inequalities from accumulating or becoming entrenched later in life.65
Universal enrolment is a necessary but not sufficient condition; quality is of the essence.66 Policies could target high-quality learning opportunities from early childhood for children from less privileged socio-economic backgrounds. This implies targeting schools in disadvantaged areas that typically suffer from a lack of investment and highly competent staff. School budgets might consider prioritizing spending as well as investing in high-quality human resources, using various incentives to attract qualified personnel to underserved areas.
Vocational and tertiary education policies could focus on fostering youth skills and competencies, including through well-designed apprenticeship programmes. More attention could also be given to ensuring effective access and swift completion of tertiary education by the worst-off individuals.
When it comes to lifelong learning, government, business and workers would need to agree on new ways to promote and finance skills development throughout workers’ careers.67 It’s important that talent development—the continual process of learning and upskilling—becomes an integral part of employment relationships, with new actors, financing and delivery models brought to bear. Ensuring workers have the opportunity and the right to upskill throughout their careers will be essential to meet future skills demands and to prevent workers falling out of the labour market. Moving beyond siloed policy-making—whereby public responsibility for learning and training policy sits predominantly with education ministries—together with public investments in education technology, can help deliver talent development that is lifelong and blended with careers.
Beyond compulsory education, education systems must also provide continuous learning and skill development opportunities for adults and remove barriers to adult education by targeting financial assistance to those most in need.68
Enhancing Social Protection
Traditionally, policy has been focused overwhelmingly on legislating to protect and promote full-time permanent jobs. In high-income economies this focus persists even as non-standard work increases without recourse to similar benefits and protections. Low- and middle-income economies have focused on promoting formal work, formalizing employment in line with development objectives. Today, however, there needs to be a change of policy mindset that focuses on protecting people rather than jobs.
A policy programme that looks holistically at the protections and support that individuals need throughout their working lives, regardless of their status, is likely to be more effective in the current context. As globalization and digitalization continue to reshape work, policy-makers are challenged to facilitate more flexible work relationships and job transitions without sacrificing rights. Such a move away from policies promoting job security in isolation towards dynamic work security is necessary to support the resilience of workers and labour markets.69 Previous attempts to liberalize labour markets to increase opportunities for freelance work have often kept the legal status of standard jobs largely unchanged. This can create an incentive for employers to offer more ‘atypical’ work, and has widened the gap in rights and social support offered between those in full-time standard employment and those in non-standard employment. Similarly, policy targeted at specific categories of jobs—for example, legislation to restrict the operation of digital labour platforms or to create a new status of worker—may also prove to be time-limited as work continues to transform.
Facilitating effective transitions into and within changing labour markets will be a major determinant of an economy’s and society’s success. One recent estimate suggests that 75 million people worldwide will need to switch occupations by 2030 in selected developed and emerging markets.70 In addition, there is an ongoing need to integrate workers following periods of inactivity such as long-term care responsibilities, protracted unemployment or migration.
Enabling positive transitions should become a significant short-term mission of labour policy, essential for inclusion and for meeting changing demands for talent. Meeting this challenge will require labour policy that takes account of the broader mission and adopts a cross-domain, collaborative approach, bringing in initiatives from other areas of policy, including education, social protection and public services.
Reforming Taxation and the Mix of Public Spending
Many policies designed to address social mobility require both additional public resources through taxation and a different mix of public spending on the key elements that help address inequalities of opportunities.
The top marginal personal income tax rate has tended to decline in both developed and developing countries over the past few decades. Corporate income taxes, too, have also fallen since 1990 in both developed and developing countries. From the perspective of fiscal effort, many countries have the scope to increase redistribution by increasing tax revenues. A recent study on whether personal income tax rates are optimal for maximizing revenues found that tax rates were significantly below optimal levels in all the countries examined, implying that they could raise tax rates and still increase revenue.71
In addition to income taxes, policies that affect wealth accumulation are also an important tool for enhancing social mobility. Wealth influences intergenerational mobility, as parents often use their wealth to support their children by investing in their education or by transmitting part of their wealth to their children. However, wealth is much more unequally distributed than income, and wealth deprivation often goes hand in hand with income poverty. Wealth inequality is therefore likely to entrench social immobility. Wealth taxes are another potential lever to both increase revenue and lower inequality. The advantage of taxing wealth is that the most privileged can own a lot of wealth while reporting little taxable income. Wealth taxation has an important role to play in addressing the rise of wealth concentration and could help to restore tax progressivity among the top of the distribution.
In addition to progressivity of taxes, progressivity of expenditure is an important lever to promote social mobility. Fiscal policy can maximize the impact of redistribution through careful design of how resources are allocated to different groups, geographical areas and types of spending. Fiscal policy should therefore tilt towards greater spending on disadvantaged groups and communities and areas, through more direct and in-kind transfers and targeted programmes.
Finally, when it comes to corporate taxes, solutions need to consider the complexity of international tax architecture, the increasing importance of intangible assets and the digital economy that allows for greater profit-shifting opportunities by multinationals. In this context, it has proven harder to enforce high tax rates on corporate income as demonstrated by decreasingly effective tax rates and a higher share of corporate profits generated in tax havens. Against this backdrop, greater international coordination is essential.
The Role of Businesses
Businesses of all sizes, as societal stakeholders, face risks from systemic challenges, including inequality, social unrest and climate change. As employers, purchasers, investors and providers of goods and services, businesses have a critical role in promoting social mobility.
There is not only a moral imperative but also an economic rationale for companies to contribute to creating opportunities for all and ultimately more equitable societies. More inclusive businesses can rely on a more educated, engaged and diverse workforce that drives innovation; are more representative of and better able to understand their customers; and can foster a corporate culture of acceptance and respect from customers and stakeholders. Overall, it has been shown that companies putting purpose over profits perform better in the long run.
As employers, businesses can contribute to facilitating youth access to working life—for example, by enrolling more young people into vocational and education training (VET) schemes. This would typically imply hiring apprentices and providing them with on-the-job training and, often, a minimal wage. It is widely acknowledged that VET programmes represent effective routes into professional life and a real alternative to the graduate track.
Businesses should promote a culture of meritocracy based on performance, aptitude, potential and interest, and prevent any form of discrimination when hiring, developing and promoting talent. Blind interviews, training for hiring and recruitment managers, and CV anonymisation—typically by omitting name, age and location of the candidates—can support this effort. For graduates, businesses should expand their pool of candidates to beyond a country’s top universities and outside traditional networks.
While labour institutions typically set the minimal standards for wages, businesses have extensive leeway in setting wages and benefits beyond those. In addition, the minimum wage, does not always correspond to the living wage and can be significantly lower. Paying fair wages that allow employees to meet their basic needs is an effective way to combat vulnerable employment and contributes to upward social mobility. In addition, eliminating the gender pay gap enhances women’s economic empowerment and increases social mobility. Even where equal pay is a legal obligation, enforcement is too often lax or the notion of ‘equality’ applied loosely. Whether or not there is a legal obligation to do so, businesses should spontaneously, systematically and strictly apply gender pay equality.
Across industries, employees from disadvantaged backgrounds are disproportionately represented in occupations vulnerable to technological innovation (automation and AI) and globalization. By providing adequate on-the-job training, employers can ensure that employees in roles set to become redundant are retained. In addition, reskilling and upskilling are likely to make employees more productive and their income should therefore increase commensurately, which is positive for social mobility. To encourage and reward companies’ efforts, governments should consider providing incentives such as tax credits for investment in significant and meaningful training programmes. These credits could compensate (at least partly) for training costs and time off. Finally, companies ‘practicing’ social mobility should incentivize and support the same from their suppliers along the value chain—and encourage their peers to follow their lead.