Education is a pathway for all of us to productive lives as citizens and as members of the economy. And it’s a life cycle challenge for all of us to develop our capacities, our skills, our potentials from the earliest days possible where our parents and society crucially can help give that safe environment and the health and the nutrition needed for a good start in life, to the choices that each of us make throughout our lives to continue to accumulate knowledge to gain skills to go through programs of formal education. On the job training. And continuous lifetime learning.
We’ve seen that while education is a pathway, it can also be a filter, and a rather painful one. If higher education is expensive, meaning that only children from affluent families are able to pursue higher degrees and if the returns to higher degrees are themselves quite high, then that filter, the costs of higher education can mean that education becomes a bottleneck for the poor, an amplifier of incomes for the wealthy and yet, another source for widening inequalities. This unfortunately is the situation in the United States today, which once was seen and, and felt by itself to be the great land of opportunity. The land of the highest possible social mobility.
The place where Americans compared themselves with what was taken to be the stogy class based hierarchical, aristocratic societies of Europe. The U.S in its mythos views itself as the land of opportunity but because of the great inequalities now of returns to education, the widening inequalities that our political system has produced, the high costs of education, the mountains of student debt for young people especially from working class and poor families. We now face a low level of social mobility in the United States compared to many, many other high income countries. In general, there is a relationship, that is a rather stunning one and a rather sobering one for countries of high inequality, like the United States. Have a look at this very, very important graph. And let’s consider it in a little bit of detail to understand what it’s showing us. On the horizontal axis, no mystery, that’s the Gini coefficient for this group of high-income countries. And we know that the higher the Gini coefficient, a number between zero and one. The higher is the inequality in the society. The low inequality countries in this graph are Sweden, Finland, Norway, Denmark. At the high end of the genie coefficient our The United States with the greatest inequality among this sample of countries followed by the United Kingdom. So far so clear.Now on the vertical axis, what are we looking at?
Each country is rated by a statistic which measures the relationship of a child’s income to the parent’s income. So this is looking at how closely a parental income translates into the income of the child. So it’s a measure of inter-generational income mobility. If the correlation is quite high at the high end of the vertical axis, that means that parental income and children’s income are highly related. Have a poor parent, you end up poor. Have a wealthy parent you end up having a high income. If the correlation is low on the low side of this vertical axis that means that no matter what the parental income.
The children’s income is fairly much independent of what kind of household background they come from, and, low and behold, looking at the vertical axis, those countries that have a low correlation of child and parental income are the Nordic countries, Finland, Norway, Denmark. And which countries have the highest correlation of parental and children’s income. Well, the same ones we just looked at.
The United States, the United Kingdom, add Italy to this mix. What you see is an upward sloping line, while it doesn’t prove causation, it has a rather sensible narrative, one that’s easy to understand, it says that unequal countries with a wide dispersion of household incomes, in other words, a high Gini coefficient are also countries of relatively low social mobility. If there’re big gaps between rich and poor then the process of education, the levels of educational attainment, the ability to get to good jobs is also highly filtered. It is a track for wealthier and richer kids it’s not a pathway that is, holds much promise for the poorer kids. The United States and the UK are examples of two rather unequal societies, with rather low social mobility. And the three Nordic countries in the lower left hand side of this chart, Finland, Norway, Denmark. And one would add in Sweden close by as a fourth part of the Nordic representation on this chart.
Are cases where the income inequality is quite small and in addition, the correlation of parental and children’s income is also characteristically small. In those rather equal societies where government spends massively to provide for pre-school. To provide for early childhood development. To provide for university education. On the public tab. The social mobility is quite high, the child’s background just doesn’t count for all that much, because there is such a high degree of mobility and such support from government.
A similar kind of relationship is found in the upward sloping graph that you’re looking at. This also puts the Gini coefficient on the horizontal axis just the same way. The vertical axis is a different kind of wage persistence. It’s looking at the gap of earnings of young people depending on the education level of parents. High up on the axis are places of big inequality of income depending on the fathers education level. Places that are lower down are places where there is a small gap. Of children’s income depending on the father’s education level. The message is just the same as in the preceding chart. Places with high income inequality are places where there’s a high correlation across generations which we can interpret as places of low social mobility. And the lesson here is rather striking and rather important. We’re finding essentially that unequal societies are societies that replicate that inequality across generations.
They are societies that become societies of low social mobility and by many ethical systems, societies that are rather unfair because the future prospects of a child are not that child’s own determination. They depend more on to whom the child is born, than on what the child is able to accomplish on their own. And for myself as, as a U.S. citizen, a country that has prided itself on high social mobility, these kinds of findings are quite stunning. One more look at this evidence to finalize the point. In this kind of bar chart, we see a comparison of the United States and Canada. And what we see is a division of these households by decile and looking at the probability of a son falling into a low decile or a high decile depending on their fathers income status. So have a look at children born to poor fathers for example. Which is the graph that you’re looking at right now. And then you see which of these 10% categories, the son falls into, so of the sons in the United States whose father is in the poorest 10% of the population, you can see in the bar all the way to the left, that around 23% of those kids themselves end up in the bottom 10% of the income distribution. Another 18% or so end up in the second lowest decile of the population. And around 7% or so of those kids end up in the top decile.
For Canada, you can see that it’s a little bit more equal. Because Canadian children that are born to poor fathers don’t have the same very high proportion ending up in the poorest part of the income distribution. And they have a much higher chance of ending up in the high income part of the income distribution. This is consistent with the preceding two graphs that we looked at. It’s basically saying that since Canada is a more equal society, children are less likely to follow exactly the track of their parents. Now let’s look at the other end of the income distribution. Consider it, the kids born to high income fathers, what happens to them? Again we can compare the unequal U.S. with the relatively more equal Canadian situation. In the United States if a son was born to a top docile father, rich father, then you can see in about all the way to the right of the graph that around 27% or so of such kids end up. Also in the top decile the probability that a rich father will end up with a rich son is quite high. You see that in the case of Canada the bar just next to it, it’s a much lower rate of intergenerational transmission. A top decile father, one in the top 10% of the income distribution has, gives the son a, around of 20% a probability of ending up in the top as well. Look at the other side of the income distribution. What’s the chance that a son born to a top decile father ends up in the bottom 10% of the income distribution. Naturally, not all that large. But in the United States, around 3%. In Canada, around 8%. This is the flip side of the same point. That in the U.S. under our current conditions where households track, successful households, largely through educational success, university attainment and are having kids who make it to good jobs and good earnings and poor kids not making it.
You see that there is the inter-generational replication of the income distribution, the more equalist the society, generally depending on a strong role of government in ensuring early childhood development in ensuring axis to quality education at all levels. Than that inter-generational mobility is enhanced, the inter-generational correlation within the household is greatly diminished. And for most of us, the meaning of that is that, poor kids have a chance in places where inequality is reduced. And where the government is playing that role of ensuring that every child has the chance of meeting his or her potential.
That after all, is the whole challenge and goal of an inclusive society. It’s one where individuals have responsibilities, but they need the help, especially the kids in poor households. That the help of government can make it possible to achieve that goal.