Plunging Social Mobility in U.K. Was a Brexit Factor, Study Says
Plunging Social Mobility in U.K. Was a Brexit Factor, Study Says
Britain has become much less socially mobile in recent decades, especially in areas that voted for Brexit in 2016, according to a new report by the Centre for Economic Performance at the London School of Economics.
The study links inter-generational immobility -- the growing difficulty of moving out of the economic or social class you’re born into -- to political splits facing the nation. It found a “very strong spatial correlation between low social mobility and voting to leave the European Union,” and said that “radical reforms” are needed to fix the problem.
A key reason for declining social mobility is wage stagnation. By the age of 30, only about one-third of those born in 1985 had equaled or exceeded their fathers’ earnings in real terms at the same age, the report said. A decade earlier, the equivalent figure was 60%.
Looking at a group of developed countries, the study found that income mobility has been most limited in Britain and the U.S. -- which also have the highest levels of inequality.
It found a close correlation between those two data points, and labeled it the “Great Gatsby Curve,” after Scott Fitzgerald’s novel about rich Americans in the 1920s Gilded Age.
The report recommends “closing the tax loopholes that allow the wealthy to entrench their privilege,” and higher inheritance taxes.
It also draws attention to the role of private schools, saying their graduates earn a substantial income premium and have for decades have taken about half the “leading” jobs across a range of professions, even though they only make up 7% of the school-age population. That could be addressed through lotteries to pick “students at random as long as they have achieved a basic threshold of academic grades,” it says.
The report also says authorities should redouble efforts to get big employers to relocate outside the “global metropolis” of London and rejuvenate other regions.
A recent Federal Reserve study examined similar issues in the U.S. “Areas with higher mobility do a better job in unlocking their residents ’ innate talents, which in turn is associated with improved performance by locally headquartered firms,” it said.
--With assistance from Wei Lu.
To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net
To contact the editors responsible for this story: Sarah McGregor at smcgregor5@bloomberg.net, Ben Holland, Brian Swint
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