publication May 9, 2018

Fair Progress? Economic Mobility across Generations Around the World

Ahmad holds his son Mouath in their makeshift home in the Ketermaya refugee camp; Photo © Dominic Chavez

If you are born into a low-income family, what are the chances that you will rise higher regardless of your background? The ability to move up the income ladder, both in one’s lifetime and with respect to one’s parents, matters for fighting poverty, reducing inequality, and even for boosting growth. Yet, mobility has stalled in recent years in large parts of the world, with the prospects of too many people across the world still too closely tied to their parents’ social status rather than their own potential, according to the findings of a new World Bank report launched today. Mobility is also much lower, on the average, in developing economies than in high-income economies. The developing world accounts for 46 of the bottom 50 economies in terms of mobility in education from the bottom to the top.

The report—Fair Progress? Economic Mobility across Generations Around the World—shows that Africa and South Asia, the regions with most of the world’s poorest people, have the average lowest mobility. In some low-income or fragile African countries, only 12 percent of today’s young adults—those born in the 1980s—have more education than their parents. On the other hand, East Asia, Latin America and Middle East and North Africa have seen their average mobility improve. While mobility tends to improve as economies get richer, the report suggests that there is nothing inevitable about this process. Rather, as economies develop, mobility is likely to increase if opportunities become more equal, which typically requires higher public investments and better policies.

“Based on access to unprecedented amounts of data, the report paints a detailed picture of socio-economic mobility across generations for most of the world's population,” said Ambar Narayan, a lead economist with the Poverty and Equity Global Practice of the World Bank and one of the authors of the report. “While the current picture is sobering, there is some cause for optimism, which also suggests that policy actions matter a great deal for improving mobility.”

“Greater economic mobility leads to faster economic growth and poverty reduction” said Roy Van der Weide, an economist with the Development Economics Research Group at the World Bank and one of the authors of the report. “It can also boost social cohesion and stability, with people living in more mobile societies likely to be more optimistic about their future.”

The report looks back over a half a century at whether children’s lives are better or worse than their parents’ in different parts of the world, and suggests local, national and global actions that can help break the cycle of poverty and inequality, paving the way for the next generation to realize their potential. It examines this issue by using its new Global Database for Intergenerational Mobility (GDIM), which covers 96 percent of the world’s population including much of the developing world. The report estimates two aspects of economic mobility: 1. Absolute, which measures the share of people who exceed their parents’ standard of living or educational attainment; 2. Relative, which measures the extent to which a person’s position in the economic scale is independent from his or her parents’ position.

Additional findings:

  • The likelihood of moving up the economic ladder among future generations of adults is low among poor families, particularly in the poorest parts of the world. In low- and low-middle-income countries, the likelihood of school enrollment among children is significantly lower among poorer households with low parental education.
  • But historical trends and recent improvements in enrollments also provide some cause for optimism. In Africa and South Asia, rising enrollments in the last two decades may be increasing the share of those with higher education than their parents among future generations of adults—those born in the 1990s or later.
  • Girls are outperforming boys in rates of tertiary education and absolute mobility in high income countries, and the trend is in the similar direction in the developing world. In the not too distant future, girls’ progress in education mobility will outpace boys globally. However, challenges remain as women still lag in terms of wages and employment in most labor markets.
  • Relative mobility in income also tends to be lower in the developing regions than in the high-income economies. All but one of the 25 economies in the bottom third are low or middle-income countries. In several developing economies, income mobility is low compared to educational mobility. Lack of jobs appears to be a key reason why there are large gaps between high educational mobility and low income mobility in many developing countries.
  • Adopting the right policies requires evidence, and good policies require adequate financing and wise spending. To measure mobility more accurately requires better human capital data for successive generations, linking parents to children. Greater mobility is associated with higher public spending. It is not just the amount of spending that matters, but also the quality of the spending, such as whether higher education spending leads to better inputs for schooling.
  • Policies and investments should act to reduce the gaps between the haves and have-nots in early childhood development and access to quality schooling. Countries with lower stunting rates for 5-year-old children tend to have higher educational mobility. Mobility is also higher in countries where more children are in school and receiving quality education during their primary years.
  • Having the right regulations and policies, including fiscal policies, can help increase income mobility and reduce the likelihood of poverty traps. Easing labor market access for disadvantaged and young people, improving competition among employers, and increasing the protection of workers against discrimination by race and gender can help equalize opportunities in the labor markets. Building a fair and progressive tax system can generate resources to finance progressive investments and help reduce the extent of income and wealth inequality, which is a key driver of low mobility in most societies.
  • Policies at the local level are important when it comes to equalizing opportunities. Where a person is born within a country matters for social mobility and opportunity. Local level policies right down to the level of communities and neighborhoods are crucial for breaking the cycle.