Social Immobility

Gregory Clark, The Son Also Rises (Princeton University Press, 2014)

When I first came to Britain ten years ago, one of the things that struck me about British society was the extent to which social class is physically manifested. As the classic sketch with John Cleese, Ronnie Barker and Ronnie Corbett suggests, you literally do look up to the upper classes. Princes William and Harry are both 6’3″, and that’s not unusual: go to any an upper- or “upper middle”- (i.e., rich but not titled) class gathering, and you will be hard-pressed to find anyone of below average height. Similarly, for someone of average height, it is striking to walk around some of the more deprived neighbourhoods in the UK and find that the average height is noticeably shorter. Lamarckian inheritance notwithstanding, the correlation between height and class in Britain suggests that there could be a significant genetic component to social class, as distasteful and unfashionable as such a suggestion may be.

Although genetic inheritance of social class could just be the by-product of a hereditary aristocracy, there is growing concern about social mobility in other countries, including the US. One of the themes of Barack Obama’s recent State of the Union address was a concern that America’s “ladders of opportunity” may be failing: that Americans in this generation may be less likely than previous generations to improve their social standing relative to their parents. This worry about declining social mobility is not restricted to Democrats—Paul Ryan and Marco Rubio have also recently given speeches about how to improve social mobility—and reflects declining public confidence in the US that there are sufficient opportunities for people to get ahead (only 52% of Americans think that such opportunities are sufficient, down from 81% in 1998).

Such increasing concern is somewhat surprising since most surveys show that social mobility has been constant in the developed world over at least the past 50 years. In the US and UK, social mobility studies have consistently shown that the correlation of earnings between generations is 0.4-0.5: i.e., that between 40 and 50% of a person’s earnings can be predicted by the earnings of their parents. These studies also show social mobility is much higher in the Nordic countries, with intergenerational correlations between 0.15 and 0.27:

Intergenerational_mobility_graph-1

But are earnings the best measure of social mobility? Gregory Clark thinks not, and argues in The Son Also Rises that intergenerational mobility is both much lower and more consistent across countries and time periods than we think (Clark has a penchant for Hemmingway puns: his previous book, on the welfare state, is titled A Farewell to Alms).

What studies of intergenerational income miss is that income is not the sole determinate of social status. A plumber may earn considerably more than an English professor, but the latter generally has higher social status. The effect of this disconnect between status and earnings is that social mobility understates the extent to which social status is correlated across generations. For example, if a doctor (G1) has a child who is an English professor (G2) and a grandchild who is a lawyer (G3), there will be a significant decrease in income between G1 and G2, and a significant increase again between G2 and G3. These changes will show up in studies of intergenerational income as social mobility: there is little correlation between the incomes of G1 and G2, or G2 and G3. But anyone looking at this situation as a whole will recognise that the underlying social status of the generations—what Clark calls their social competence—has changed very little. While it might, in general, be surprising to find a difference in income of $150,000 between one generation and the next, it is not at all surprising that an English professor might have a child who becomes a lawyer.

Clark’s solution to measuring this underlying social competence is looking at rare surnames: if you can identify rare surnames that are significantly over-represented in certain high-status or low-status occupations, then you can track the level of over- or under-representation across generations. Surnames have the added advantage of averaging out differences in earnings or profession within individual families. So, in the example above, if we look at the English professor’s wider family we are likely to find a similar level of average income in G2 as in G1 or G3, despite the fact that in G2 the professor is pulling the average down (i.e., in G1 and G3 there are also likely to be members of the family with lower relative incomes, despite a consistent underlying social competence).

What Clark discovered is that social mobility, as measured using surnames, is much lower than other studies have suggested, with correlations between 0.7 and 0.8 across generations. In some particular cases, mobility is astonishingly low: in the UK, Norman surnames still have markedly higher social status, as measured through earnings, education and representation in professions, nearly 1000 years after the Norman conquest. What is surprising is that Clark’s study suggests that a correlation of 0.7-0.8 holds true across virtually every political system, culture and time period: measured with surnames, mobility is just as low in the Nordics as in the US. It is even the same in China, despite the upheaval of the cultural revolution, and medieval Britain (if anything, mobility was slightly higher in medieval Britain than in the UK today).

In many respects, Clark’s study makes for depressing reading. Among things that don’t work to increase social mobility: welfare, inheritance tax, quotas (as implemented in India for different castes), pre-school education or other investments in education generally. Even dramatic differences in political structure, for example, between communism and capitalist democracy, seem to have little effect on social mobility, which steadily reverts to the mean at a correlation of 0.7-0.8 per generation (so that it takes an elite surname roughly 300 years to lose its special status, and a lower-class name 700 years to become elite).

Clark doesn’t commit to a genetic explanation of social competence, but from adoption studies and the fact that social competence appears reverts to the mean at a consistent rate (as one would expect for a biological phenomenon), he does suggest that it may be biology, more than anything we can do to alter environments, that determines social standing and, in turn, those things related to it, such as income and longevity. A genetic understanding of social mobility also explains why certain groups, such as Copts or Ashkenazi Jews, have maintained their social standing for many centuries: endogamous groups do not revert to the mean.

This is all important because it affects our understanding of what it means to live in a fair society. As the numbers at the top indicate, people in the US and other western countries seem increasingly dissatisfied with the availability of opportunities to increase social standing. This raises two related, but distinct, questions. In the first place, because Clark’s work indicates that social mobility is not, in fact, declining, we must ask why there is an increase in dissatisfaction. The answer to this may be related to the other current socio-economic debate about growing inequality (which, in turn, is related to the divergent ability of individuals to capitalise on advances in computing technologies). The fact that you are never likely to become the CEO of the company you work for is less frustrating when the CEO earns 4 times your wages instead of 400.

But what is the solution to this? Clark suggests that because social competence is largely inherited, and constant across political systems, we can afford to use the tax system for redistribution on a large scale without the risk that entrepreneurs and CEOs will be disincentivised to work. This may be true, but it overlooks the fact that redistributive taxation is an extremely inefficient use of capital, from a perspective of wanting to promote economic growth. If you had taxed Steve Job’s wealth away, he may have worked just as hard but he would not have had the capital (from founding Apple) to start Pixar or NEXT, or, in turn, to return to Apple and lead the creation of devices like the iPhone that have produced enormous economic gains to all levels of society. Clark’s solution is subject to the same criticism levelled by Margaret Thatcher at Labour’s economic policies in her last speech to the House of Commons: wealth may be distributed more evenly, but the by-product of such redistribution is likely to be lower living standards for everyone.

If massive redistribution by taxation is not the answer, what is? This leads to the second and more fundamental question posed by the apparently immutability of social competence: what does a ‘fair’ politics look like in a world where social and economic success is largely determined by birth? Our society has largely been built on the idea of meritocracy: those who work hard, work well and take risks to succeed are justly rewarded. But how do we defend the fairness of meritocracy if such rewards are, effectively, the hereditary elite’s to lose? Is the modern American meritocracy fairer than medieval, aristocratic England (which had slightly higher rates of social mobility, possibly because the aristocracy had a knack for getting their heads chopped off)?

These are difficult questions, and can’t be fully answered here. One obvious policy response, however, is to ensure that capital is employed efficiently, and not allocated to those with greater social competence for that reason alone. The Economist has a feature article this week on rent-seeking: taking a greater share of the economic pie through political influence rather that expanding the size of the pie by engaging in economically productive activities. Illegal examples of rent-seeking include corruption and cartels. But there are also many examples of legal activities whose returns exceed their economic value because of political factors. The Economist identifies ten sectors particularly associated with rent-seeking:

  1. Casinos;
  2. Coal, palm oil and timber;
  3. Defence;
  4. Deposit-taking banking and investment banking;
  5. Infrastructure and pipelines;
  6. Oil, gas, chemicals and other energy;
  7. Ports, airports;
  8. Real estate and construction;
  9. Steel, other metals, mining and commodities; and
  10. Utilities and telecoms services.

These are all areas that are subject to extensive regulation, which provides significant scope for political interference. While regulation is necessary in sectors where there are natural monopolies, red tape often produces an inefficient allocation of resources and rewards. If Clark’s study of social mobility raises questions about the fairness of meritocratic allocations of wealth, its conclusions make it all the more imperative that wealth not be distributed in manifestly unfair ways, through political patronage and other types of rent-seeking.

But perhaps Clark’s conclusions aren’t that revolutionary. After all, it was Jesus who said “to the one who has, more will be given, and from the one who has not, even what he has will be taken away”. What Clark has done is add a caveat: the meek shall inherit the earth — but only after 700 years.

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