“If you’re born poor, you die poor,” a U.K. politician lamented six years ago. Sadly, little has changed.
That’s creating challenges for the most-affected countries. Such societies tend to waste or misallocate human capital; workers are often less motivated and as a result, less productive; and the associated higher levels of inequality are found to be detrimental to economic growth, the research shows.
“In practically all countries for which evidence is available, there is a clear link between what your parents earned and your own earnings prospects,” said Jeremy Lawson, chief economist at Standard Life and a lead author of the report. “Addressing low mobility is challenging. There is no global silver bullet, with each country facing issues in its own unique institutional and policy environment.”
In the U.S., three decades of sluggish real wage gains have prompted researchers to seek answers. They tracked the proportion of those aged 30 who earned more than their parents at that age and found a significant downtrend: just 50 percent of children born in the 1980s earned more than their parents at the same age, compared with nearly 80 percent of 1950s kids.
“Little wonder that President Trump’s campaign messages were so well received in states like Michigan, Ohio and Pennsylvania,” said Lawson.
In Asia, much attention is paid to rising inequality in China; indeed among the world’s largest economies only Brazil tops the nation in terms of income inequality. But China does have mobility. Over the past four decades, rapid and broadly distributed growth has meant fewer households staying in the same income quintile for long periods of time. But that may be changing as the economy matures.