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Rotman Insights Hub | University of Toronto - Rotman School of Management

Social Mobility

Social Mobility


“That’s really the mark of successful society.”

“There are lots of really good reasons why we want to help the poor do better.”

"If the trade-off is the, sort of wellbeing of the weakest most vulnerable people, it may not be worth it.’

IG: Welcome to Shiftdisturbers, the MPI podcast where we highlight the people, research, and ideas that change the way that we think about the world. I’m your host Ian Gormely, writer and content producer here at the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management. What do you do when your country goes on without you?

On today’s episode we take a look at the concept of social mobility, or moving up the socioeconomic ladder. Politicians, particularly in the most recent election cycle, like to talk about the American Dream; the idea that if you keep your head down and work hard you can be lifted out of poverty or into the upper echelons of the so called middle class. That sort of rhetoric is common here in Canada, too. And as we saw through the course of the U.S. election culminating in Donald Trump’s stunning win, when voters believe that that path is blocked they start looking for a better map. Its prominent role in Trump’s assent got us wondering about social mobility more broadly. What is it? Why is it so important to modern society, and is there anything that can be done to actually influence it?

Thankfully, we have a few friends who can help us answer these questions and more. I should note that while the subjects covered the following interview definitely interest with many of the issues at the heart of the U.S. election, the interviews themselves were done in the early summer. So our guests weren’t able to comment on issues more specific to the election.

So what is social mobility? Dr. Lauren Jones says that, loosely it’s children doing better in life than their parents. MPI’s first Junior Fellow and a Policy Analyst studying the role that government plays in the wellbeing of children and families, Lauren says that social mobility has emerged as a common measure of a society’s overall success.

LJ: The ability for a kid to sort of do better than his or her parents did, you could think of that either as sort of financially; so having a better income, or educationally moving up the distribution of educational attainment. Or even in terms of a health outcome. Trying to understand whether it’s possible for a child to do better than their parent did. There’s a lot of variability in how able a kid can be. And there are many contributing factors to determining whether it’s possible. That’s really the mark of a successful society, right.

So, if you think of the opposite world where kids never do better than their parents or kids always do exactly the same as how their parents did, that’s not really a world that I think many of us would want to live in. Because it means that the lottery of birth, the parents that you randomly get stuck with or lucky to get at the moment of your birth are going to completely determine your course in life. Using this as a measure for prosperity, the idea that individuals are sort of able to achieve something that isn’t determined from the chance of their birth, is a really important feature of society.

IG: Mark Statalay [ph] is an economist working on questions of inequality and poverty, as well as MPI Fellow. He says that beyond the basic moral obligation of helping those who are less well off than the rest of us, there’s an economic argument to be made for policy makers to help out the less advantaged people in society, as well.

MS: So I focus on the bottom, maybe it’s the both 10&percnt or the bottom 20&percnt and what we can do to reduce inequality by making their lives better. Why should we worry about it? We should worry about it because these guys are at the bottom of society in terms of their income, in terms of their quality of life.

And I think it defines us a society, how we treat and how we help people at the bottom do better; rise hopefully out of the bottom 10&percnt or 20&percnt and into the middle class, and maybe beyond. Everybody who is…every child who doesn’t successfully finish school is going to have less than optimal labour market experiences, which means they will not be as productive as they could be. They will not reach their full potential. If it comes down to it they won’t pay as much tax as they otherwise would have. They will probably use more of the social welfare structure than they otherwise would. So, I mean if you want to just to do the cost and benefits there’s lots of really good reasons why we want to help the poor do better.

IG: Both Mark and Lauren talk about families climbing up the ladder, and what that usually means is people moving out of poverty and into the proverbial middle class. The middle class are a somewhat nebulous group. If you ask almost anybody they will say they’re firmly middle class. Politicians, nevertheless name checks the middle class at any given opportunity. And as a New York Times magazine article noted in April, “American politicians genuflect toward the middle class so reflexively that failing to do so seems almost heretical.

Mark and Lauren looked at the size of the middle class in both the U.S. and Canada, and found that the size of Canada’s middle income earners has remained relatively constant while the U.S. middle class continues to shrink. Yet economic inequality persists in both countries. So why is this group so important?

MS: So, inequality captures all of the differences between the bottom and the top or how big are the differences between the bottom and the top. You can have a big middle class and still have people who are really poor and people who are really rich and have inequality, right. So but I think it is comforting that there are lots of people who are in the middle and not falling out of the middle. I’d like to see them move up, as well. But it’s not as bad let’s say as having the middle hollow out and all those people stagnate or not do as well as they used to, and then also have some people pull away at the top.

Having a big middle class means you have a chunk of society that has similar goals, similar aspirations, and similar view of what’s important, right. So when you come down to choosing democratically what you should do as a nation, or as a province, or as a city, you have a bulk of society that has similar goals and aspirations, one of the worries about having lots of inequality where you have a small group of people who have really pulled away at the top is that their view of what’s important might be very different. Maybe it’s not important for them any longer to have really good public schools and a public healthcare system because they’re not going to use a lot of those services, right. Now, they may still care about it but you kind of get more people caring for it when you’re all in a more similar boat.

IG: Canadian and U.S. problems, though different in many nuanced ways, are broadly speaking very similar which is why Trump’s popularity as a candidate perplexed so many Canadians. After all, just a year ago we elected a progressive Prime Minister who ran on a platform of inclusivity. But as Mark noted earlier, Canada has not experienced an erosion of the middle class to the degree that the United States has. And our social safety net which is made up of a loose collection of government sponsored programs deployed to help make it harder for people to fall down the socioeconomic ladder has fundamental differences to that of our neighbour down south.

MS: So we haven’t had quite the same experience as the U.S., right. Our middle class has stayed about constant. We’ve had the top end growth and inequality and we’ve had some changes at the bottom, too. But our middle class isn’t suffering as much as the U.S. middle class is.

[00:07:49]

One of the interesting things that’s happened in both Canada and the U.S. over the last couple of decades is we’ve really reconstructed and reinvented the social safety net, right. We used to have big welfare programs in both countries. The U.S. basically got rid of welfare and switched to benefits that you have to work for. Canada also moved in that direction. We have these big programs, the National Child Benefit in Canada and the Earned Income Tax Credit Program, the EITC in the U.S. that now are the big support systems for low income families. And studying the differences in those programs and how they treat low income mothers, because a lot of the people who get these programs are low income mothers, and has implications for how we deal with poverty and inequality going forward.

Two big differences you see are that in Canada we don’t require you to work to get your benefits. In the U.S. we do. Now we have one benefit in Canada the _____ [00:08:43] that has come in recently that does require that. But most of the benefits you just get from the beginning, whereas in the U.S. you have to work. So those are important differences. Basically, if you don’t work in the U.S. you are really left with very, very little.

The other difference is the generosity of the benefit. Canada has been much more generous in its benefit than the U.S. has. So what you tend to see in the two countries is differences again in work relationships and differences, because of the generosity, in poverty. We have in Canada there’s a bigger safety net to catch you if you fall, and you’re not going to be falling in and out of absolute extreme poverty the way you might in the U.S.

IG: Canadians like to thumb their noses at Americans, particularly when it comes to social programs like healthcare. Lauren understands that American priorities like autonomy from government meddling are founded. But she and Mark have found that the idea that so called government handouts discourage people from finding better paying work is simply not true.

LJ: There are very different perspectives in the two countries on what role the government should play in individuals or families lives. But I do think that Canada offers a good model for how government can be an important and sort of large part of people’s lives without necessarily infringing on freedom. And that’s a big concern in the U.S. context. There’s this myth of the welfare queen who is receiving checks from the government and spending it on whatever kind of, unnecessary goods so to speak.

[00:10:29]

And what we found was really the opposite. It looked like families were spending the money on exactly the type of things you would hope family would spend the money on; so education, food, rent, those kinds of necessities. And I think the question of how families should spend the money in some ways; yes we hope they’re spending it on those types of inputs to child and family wellbeing. But if families are spending the money on going to the movies, let’s say, who are we to say that that’s not a good input into the family, because that could be a great bonding experience for the family. It could be a great stress reducer for the family which is going to improve the circumstances that the children grow up in, as well.

IG: Lauren thinks that moving up the ladder helps people relate to one another across the invisible socioeconomic walls.

LJ: You can imagine the world where you’re born - and this is a very sort of Hunger Games type world, right - you’re born into district whatever and that’s it. You’re there for your whole life. That’s going to have in my opinion two important outcomes for your political perspective. Firstly, it’s really going to create this exclusionary dialogue that exists in the U.S. right now, especially I think in Canada, as well. And it’s also going to really limit your ability to empathize with people in other situations. If you have no way of imagining yourself in a different position than where you are and you don’t know anyone who’s ever moved to a different life than the one that you have, then I think that is really going to sort of impact your ability to empathize with your fellow citizen, regardless of how much money they might have, or what education they may have, or where they live.

I think there are more fundamental philosophical issues that come up when we start considering this trade-off between income distribution and growth. So yes, of course we want growth. Of course we want to live in societies where we’re engaged in this progressive trend in earnings and productivity. But if the trade-off for that is wellbeing of the weakest most vulnerable people in society, it may not be worth it.

IG: So that’s our little primer on social mobility. We don’t intend for this to explain what just happened with the election in the United States. But we do hope that this provides a little bit more context for it, as well as offering some suggestions to policy makers both in Canada and the U.S. as to how you might go about helping a large segment of society who are obviously feeling left behind by recent cultural and economic shifts at home and across the globe.

[00:13:23]

That does it for this episode of Shiftdisturbers. Thank you for listening to Shiftdisturbers. This episode was written and produced by Ian Gormely. That’s me. If you want to know more about what’s going on at the Martin Prosperity Institute head over the martinprosperity.org or follow us on Twitter at MartinProsperiT. Note the lack of a ‘y’ at the end there. And to make sure you never miss an episode of Shiftdisturbers please click the subscribe button. Once again, I’m Ian Gormely. Thank you for listening.

[14.29 minutes]


headshot of Lauren JonesLauren Jones is an Assistant Professor of Consumer Sciences in the department of Human Sciences at The Ohio State University. She joined the faculty in 2015. She conducts quantitative, policy-based research on child and family wellbeing, especially in the areas of health and household economics. Her interests lie in understanding what factors impact the ability of children and families to flourish, and how government policy can help families get ahead.

headshot of Mark StabileMark Stabile is the Stone Chaired Professor of Wealth Inequality and Professor of Economics at INSEAD. He directs the James M. and Cathleen D. Stone Centre for the Study of Wealth Inequality at INSEAD and is the Deputy Academic Director of the Hoffmann Global Institute for Business and Society. From 2007 to 2015 he was the founding Director of the School of Public Policy and Governance at the University of Toronto and Professor of Economics and Public Policy at the Rotman School.