Intergenerational Economic Mobility in Great Britain: Traps and Opportunities

Abstract

Intergenerational mobility in Great Britain is at the low end among developed nations; only for the United States has mobility been measured as lower.

In this thesis, I examine the reasons for low upward mobility in Great Britain. Following the traditional scholarship, I measure intergenerational mobility by the degree of income persistence from one generation to the next. But rather than merely focusing on children’s adult income states, I assess upward mobility by asking if children move to a higher income quintile than their parents. I also make a sharper distinction than earlier studies have made between factors that influence parent and child income; and for factors that influence income, I distinguish between personal and “neighborhood” characteristics. This framework allows for a complete description of the challenges in raising mobility, and helps identify targeted policy interventions.

As others have demonstrated, I find that children of low-income parents tend to inherit low educational status and to be scarred by youth unemployment. These disadvantages limit their ability to move out and up from their parents’ income states.

Parents’ income is influenced, in part, by their professional status. In addition, in a finding that I believe is new, I establish that parents tend to be held down on the income ladder if they live in areas with large portions of “rust-belt” features: these include high manufacturing shares, low rates of college attendance, and limited geographical mobility of residents. Such areas do not have especially high unemployment rates; rather, they appear to have low-paying and insecure jobs.

Unlike parents’ incomes, which are set back by rust-belt features, children’s earning potential suffers most from urban dysfunctions, including high neighborhood unemployment and large portions of broken families.

Put simply, low economic mobility is the consequence of multiple traps: low professional status and rust-belt features hold down parents’ income and thus limit the educational labor market opportunities that they can bequeath to their children. Urban stresses directly limit children’s ability to move upward, likely through the characteristics of broken families, low geographical mobility, and poor youth job opportunities.

The results of my thesis offer a new window into the Brexit vote. I find clear support for the view that economic grievances, particularly in declining manufacturing areas, motivated the “Leave” vote. But more importantly, I offer what I believe is a new perspective on the nature of those grievances: I find a strong link between the “Leave” vote and rust-belt constraints on upward mobility. Furthermore, the no-vote was as much a reflection of economic distress as the “Leave” vote: I find a second strong link between low voter-turnout and urban stresses on upward mobility. In sum, traps on upward mobility have stark political consequences.

Brexit turnout rates indicate that a new generation of low-income youth is turning away from the system, which likely will lead to deeper societal divisions. This makes low upward mobility an imminent problem for policymakers to address. Regenerating declining manufacturing communities will raise parents’ incomes and improve the educational and labor market inheritance that parents bequeath to their children. Reliable avenues to quality education will improve the earning potential of low-income children. But improved earning prospects for these children also requires better labor market opportunities and urban renewal.