Income inequality has increased and social mobility stalled across the world’s richest countries since the 1990s, trapping families on low incomes at the bottom of the earnings ladder, according to an in-depth report by the Organisation for Economic Co-operation and Development.
The Paris-based body, which counts 34 countries as members, said barriers to social mobility were harming economic progress by shutting out vital workers and undermining political stability as people became cynical about their prospects.
In the UK the report found it could take at least five generations, or 150 years, for the child of a poor family to reach the average national income, currently about £27,000 for those in full-time employment, compared with two generations in Denmark and three in Sweden.
France and Germany are more equal societies than the UK on some measures, boasting a lower proportion of people on low incomes.
However the OECD found that the poorest Britons are more likely to escape poverty than those on low incomes in France and Germany, where it takes six generations to reach the average national income.
France and Germany, which have a social mobility ranking above the OECD average, buck the trend in the report – A Broken Social Elevator? How to Promote Social Mobility – for those countries with the highest inequality to also have the lowest social mobility.
To further illustrate the lack of social mobility across the 24 countries assessed by the OECD, one in three children with a low-earning father will stay trapped on low earnings, while most of the other two-thirds will only move one rung up the income scale during their lifetime.
“Too many people feel they are being left behind and their children have too few chances to get ahead,” said Gabriela Ramos, OECD chief of staff. “We need to ensure that everyone has the opportunity to succeed, especially the most disadvantaged, and that growth becomes truly inclusive.”
For several decades the OECD has called on governments to measure inequality on a broader scale than just income and wealth. It has accused governments of failing to address widening health gaps, a divergence in skills and educational opportunities and the failure to bridge the divide between school and employment for those who leave education with few qualifications.
The report recognised that in absolute terms, almost everyone in OECD countries had seen an improvement in living standards and life chances than previous generations, with greater access to higher levels of education, healthcare and better paid employment.
But while income mobility was a reality for many people born between 1955 and 1975 from low-educated parents, it has stagnated for those born after the mid-1970s.
In the UK, 46% of children whose fathers have high earnings grow up to have high earnings themselves. Only 18% of sons born to low income fathers make it to the top earning group.
The child of a parent with low educational attainment has only a21% chance of gaining a degree-level qualification at college or university, compared to 71% of those with parents who themselves have a college degree.
The OECD said governments needed to do more to increase investment in education, particularly at an early age, while “access to good quality, affordable housing, as well as transport, and improved urban planning also help reduce regional divides and concentrations of disadvantaged households in cities”.
Nine years ago in the wake of the financial crash the organisation joined other international agencies in urging governments to cut spending and reduce debts, but in recent years has called on them to use their borrowing power to put in place measures that reduce inequality and improve social mobility.
Alan Milburn resigned last December as the government’s social mobility tsar after he accused the prime minister of failing in her pledge to build a “fairer Britain”.
Milburn, a former Labour cabinet minister, said: “Whole communities and parts of Britain are being left behind economically and hollowed out socially. The growing sense that we have become an ‘us and them’ society is deeply corrosive of our cohesion as a nation.”
