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11 November 2014updated 17 Jan 2024 7:12am

Stuck or just passing through: how can policy-makers improve social mobility?

Conventional wisdom holds that any delving into how employers utilise their workforce and pay their staff is off-limits, but ensuring pay progression could help improve social mobility in this country.

By Gavin Kelly

One of the recurring fixtures of British political life is a bout of soul-searching about social mobility. Depending on the point of view of the pundit, this tends to involve a nostalgic backward glance to an era when things were supposedly better (cue unevidenced claims about the mobility-boosting virtues of grammar schools) or, less commonly, a nod to when they were even worse (invariably accompanied by the iconic Two Ronnies and John Cleese sketch lampooning class-bound Britain).

The past week was a case in point. The spark was an important report by the eminent Oxford sociologist John Goldthorpe and his colleagues showing there has been little overall change in intergenerational mobility since WWII (though it also shows that due to the expansion of the professional classes over time a larger number of their offspring now face the risk of downward mobility). This contrasts with other work by leading economists which highlights that, using a definition based on income rather than class, mobility across the generations actually fell for those born in 1970 compared to those born in 1958.

Whatever the merits of these different approaches, sweeping societal judgements about movements in social mobility – whether flat-lining or falling – often tend to obscure other finer-grained accounts of the dynamics of society. A powerhouse of a book published tomorrow by the LSE’s Professor Sir John Hills – Good Times, Bad Times should help rectify this. It is unusual in that it connects two key points that rarely get brought together: our society is characterised by great variability in household incomes, with families moving in and out of difficulties over the life-course, at the same time as it’s also defined by the extent to which parental background in this country is such a powerful predictor of a child’s chances in life (more so than in most advanced economies). There is much flux amidst the social stratification.    

It’s an observation that chimes with the findings of a new study out today that focuses on the narrower but in some ways more intuitive and easier to grasp notion of wage-mobility for the low paid (that is, intra-generational earnings mobility). It looks specifically at those who were low-paid ten years ago and tracks them over time to see who escaped poverty-pay, who remained permanently stuck, and who cycled in and out of it. A quarter of those who remained in work escaped to higher pay. Rather than making it a few pence above the low-pay threshold, the typical earnings of these escapees rose sharply to around those of a median worker. Around one in eight were stuck in low pay in every year of the decade. But by far the largest group, around two thirds of the total, cycled in and out of low pay.

Of the many barriers to sustainably escaping low pay (taking account of other relevant factors) the most powerful were working part-time, with a disability, in a SME or in specific areas like sales or hospitality. In some sectors the very idea of “pay progression” felt more mythical than real. “Promotions” were viewed as being wage-less: extra responsibility and stress in return for a nugatory pay-rise. Likewise, training exists for other, better paid workers with little relationship to pay (a judgement fully borne out by the research which found no statistical link between training and wage-gain for the low-paid).

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Our national policy conversation on how to respond to all this is still very limited. A rising wage floor is obviously vital but on its own it’s likely to result in ever more poorly paid workers bunched around it (a trend we are already seeing). And clearly it is vital to get the big policy choices right. Slack in the jobs market is a big barrier: with the price of labour still falling and sixty applicants chasing every low-skill job, employers feel little pressure to make more of their workforce. Our falling unemployment rate will need to come down a fair bit more before this changes.

Punitive marginal tax-rates on the working poor are also a problem. Here the design of Universal Credit is pivotal: in theory it provides an opportunity for progress but as things stand once introduced more people will see their effective tax-rates go up than down.

At root, though, pay progression requires increased labour productivity – as well as an equitable sharing of the resulting gains. Yesterday the CBI shone a bright light on the problem of big, labour-absorbing, low-skill sectors (like retail, transport, administration and leisure) arguing that if over the next decade they matched the levels of productivity in their US counterparts this alone would raise the UK’s GDP by 9 per cent and enable a 2.4 per cent per year boost in real pay.

Most of us will nod along with the very familiar line of argument that a pre-requisite for making this sort of shift would be a major step-up in business investment and, over the longer term, improved school-age educational attainment. But is that all? What role, if any, is there for public policy to encourage, incentivise or pressure employers to think differently about job design, career-steps and access to training?

Conventional wisdom holds that any delving into how employers utilise their workforce and pay their staff is off-limits. And you can understand the nervousness: as a former policy-maker the very idea of Whitehall-inspired HR policies makes me wince. Then again, only a few years ago it would have been seen as an illegitimate intrusion for policy-makers to challenge employers in our leading professions to change their recruitment practices so as to increase access for talented applicants from disadvantaged groups. Now cross-party consensus exists on these efforts.

Perhaps a mixture of evidence about successful approaches to progression, using the leverage of existing forms of tax-payer support (what do the low paid get out of the £5bn of employer tax-relief linked to workplace training?) and a beefed up remit for a body like the Low Pay Commission, could be used to challenge and cajole big employers to set out clearer stepping stones out of low pay.  

Social mobility across the generations is – quite rightly – a flag that all governments want to rally around. Yet making a difference to it, certainly within the lifetime of a single parliament, is generally beyond their reach. Twinned with what can look like contradictory research findings on what’s actually happened to social mobility this can become a recipe for scepticism and fatalism. There are, however, things that can be done. We could start by improving the plight of today’s workers stuck in low pay. When it comes to mobility, let’s not make the best the enemy of the good.

Gavin Kelly is chief executive of Resolution Foundation

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