The story of Britain’s low income mobility is anchored to the ups and downs of Britain’s economy since the Second World War. In the mid-twentieth century, lifted by a wave of post-war optimism, economists became convinced of the ‘rising tide lifts all boats’ hypothesis: the booming economy would bring increasing prosperity and higher living standards to all sections of society.1
And for a time Britain during the 1950s and 1960s was in many respects living the dream, summed up by one famous speech by Prime Minister Harold Macmillan in 1957. ‘Let us be frank about it: most of our people have never had it so good,’ he told the nation. ‘Go round the country, go to the industrial towns, go to the farms and you will see a state of prosperity such as we have never had in my lifetime – nor indeed in the history of this country.’2
Social mobility prospects in absolute terms were indeed buoyant. Between 1950 and 1973 the country experienced economic growth of 3 per cent per year; between 1950 and 1969 the unemployment rate averaged just 1.6 per cent.3 Everybody’s incomes grew as prosperity was shared, and inequality stayed constant.4 The younger generation entered a labour market abundant with good jobs and decent pay.
Yet at the same time there was little evidence of upward mobility from the lower rungs of the social ladder. ‘We are strictly second class. We don’t understand why we should be on dead-end street,’ sang Ray Davies, lead singer of the Kinks, in a song about the hopelessness of the British lower classes.5 It was a typically astute observation: swinging London was mostly a middle-class affair.
The global crash of the early 1970s poured cold water on any idealistic notions of a world of inexorably improving levels of absolute social mobility. Britain was plunged into economic gloom amid a global recession. The world economy slowed down, and stagflation – the unheard-of phenomenon of simultaneously rising inflation and unemployment – kicked in. The cost of living got higher and getting jobs got harder. This unexpected combination, exacerbated by the big oil price rises of 1973–4, caused Britain and other countries to sink to economic lows not seen for decades.
In hindsight the golden post-war era had been little more than a honeymoon period before harsh realities returned. The 1970s decade is remembered for strikes, football hooligans, power cuts, the three-day week and the ‘winter of discontent’. Inflation rose to double figures, at its peak reaching over 25 per cent; the unemployment rate rose to levels not witnessed since the 1930s. Alternative musicians of the day, just as in the 1960s, voiced the younger generation’s disenchantment with Britain’s rigid society, now against a backdrop of the deteriorating economic conditions enveloping the country. ‘And there is no future in England’s dreaming’ declared the Sex Pistols in 1977. ‘God Save the Queen’ was a song attacking the establishment’s mistreatment of the working classes.6
Fanciful notions of rising tides raising all boats had all but crashed on the rocks. At the same time, the 1970s did not see any discernible changes in inequality of incomes, nor in relative social mobility levels. The rungs of society’s ladder were no wider, but movement between them was no greater.
Growing Divides
By the 1980s an alternative theory gained acceptance: ‘trickle-down economics’. This, economists and politicians argued, would mean increasing resources attracted by small, wealthy elites would ‘trickle down’ to benefit everyone. Growing gaps between the rich and poor were acceptable, and even encouraged through lower taxes for high earners, as they would spur more investment and hiring, igniting the economy into action.
The 1980s, 1990s and 2000s were Britain’s decades of rising inequality. The deep recession of the early 1980s hit the economy hard and parts of the country, especially those that had previously benefitted from the manufacturing industry, never recovered. Inequality increased rapidly during the decade, and throughout the earnings distribution. The result was the ‘fanning out’ of the earnings distribution, shown in Figure 2.1 for selected percentiles of weekly wages through the 1980s.
The 1990s and 2000s saw the wealthiest in society pulling further and further away from everyone else. Increases in inequality during this period occurred in the ‘upper tail’ of highest earners, with less change for the bottom half of the earnings distribution.8 Figure 2.2 shows that real wages grew similarly for those at the 10th, 25th and 50th percentiles of the distribution but increased much more rapidly for those at the 75th and the 90th percentiles.
Real wages in the 1980s.7
And there were different trends for individual workers’ earnings, compared with family incomes. Both were at higher levels by 2010 than thirty years previously. But while earnings inequality rose throughout the thirty-year period, most of the rise in family income inequality happened in the 1980s. These patterns in part reflected changes in family composition. For example, there were more dual-earner families by the 2000s.9 Nonetheless, inequality in earnings and household income were both a lot higher by 2016. We can compare those on the top-tenth rung of the income ladder and those on the bottom-tenth rung – the 90:10 ratio – for full-time weekly earnings and net household incomes. They were 2.8 and 3.1 respectively in 1980; by 2016 they were 3.4 and 3.9.
As the divide between rich and poor rose, the chances of climbing the income ladder fell. Trickle-down economics had in reality led to ever greater economic divides, as those already rich accrued a greater share of the economic spoils and the poor increasingly lost out. The wealthy were watertight. The next generation inherited the worse of all worlds: high levels of inequality, low levels of social mobility and bleak prospects for economic growth.
Real wages in the 1990s and 2000s.10
Falling Absolute Mobility
In the wake of the global financial crisis of 2007–8, Britain’s economic growth would be best described as sluggish. National productivity stalled and real wages fell. Fewer people were unemployed, but people were taking home lower incomes than they did before, and often working in insecure jobs with scant hope of career progression.
The problem is what economists have referred to as Britain’s productivity puzzle: while there were more jobs in the economy, the country’s overall economic productivity stagnated.11 Figure 2.3 shows that UK productivity in 2017 was 20 per cent below the long-term trend in growth it was on prior to the 2007–8 downturn.
Workers’ wages had declined in real terms. And to an unprecedented extent since comparable wage data has existed.12 Figure 2.4 shows the scale of the falls experienced by workers since 2008: the median worker’s wages decreased by 5 per cent in real terms.13 Men did significantly worse than women, but both experienced real wage falls at the median over the ten years after 2008. They were worse off than their counterparts in the labour market ten years earlier.
Declining real wages signal falling absolute social mobility. The pay packets of today’s generation are worth less as they fail to keep up with the rising cost of living; in contrast their parents, three decades earlier, were enjoying increasing wages compared with the generation before. Many children’s living standards are no better than their parents were.16
UK productivity, 1980-2017.14
Real wage changes, 2008-17.15
This economic era is that of a falling tide in which the smallest, most vulnerable boats are sinking fastest. In decades past people on the wrong side of widening income gaps could console themselves that their wages had at least risen in real terms. Now, to add insult to injury, wages have fallen, meaning most people are now materially worse off than they were fifteen years ago. Economic boom has been replaced by economic gloom.
These economic trends chime with the narrative from a rich academic literature on social-class mobility produced by sociologists over several decades. The evidence points to a post-war boom in absolute mobility levels.17 This was a golden age during which a high proportion of people enjoyed upward mobility, filling the new professional and managerial jobs created by an expanding British economy. Towards the end of the twentieth century rates of upward mobility among men stabilized. For women, modest increases in social mobility continued. Meanwhile, relative rates of intergenerational class mobility remained constant.18
The unsettling experience of downward mobility is becoming increasingly common for more recent generations of both men and women. A study led by Oxford University tracking four successive post-war generations found around three-quarters of men and women alike ended up by their late twenties or thirties in a different social class to the one they were born into. This was as true for those born in 1946 as it was for those born between 1980 and 1984. But as the British economy had slowed down, the direction of mobility had flipped. Falling down, rather than climbing up, the social ladder had become a more common experience.
The report laid bare the extreme class inequalities in the prospects of ending up on the social ladder’s highest rungs. The chances of a child with a higher professional father ending up in a similar position rather than in a working-class position were up to twenty times greater than these same chances for a child with a working-class father. The class divide endures.
‘Politicians are saying that a new generation of young people don’t have the same opportunities for social advancement as their parents, and these results seem to bear that out,’ concluded the researchers. ‘The emerging situation is one for which there is little historical precedent and that carries potentially far-reaching political and wider social implications.’19
Lost Ladders of Opportunity
As the sociologists suggest, the young generation growing up in early 21st-century Britain have been hit hardest. Their real wages have fallen by more than other groups. The median real wage for those aged under twenty-five in 2017 is equivalent to that recorded in 1997. Young people’s earning levels have been frozen for two decades.
The wage freeze for the young meanwhile has restricted their ability to get on the housing ladder compared with previous generations. In 1994–5 42 per cent of those under twenty-five were private renters; by 2013–14 this had climbed to 67 per cent.20 They really are on dead-end street. They are spending more of their diminishing income for a roof over their heads. The golden age of the 1950s and 1960s has turned into the bleak age of the early twenty-first century.
Britain’s booming gig economy has created an employment underclass (or precariat) lacking security, progression or rights: young, poorly educated, and on short-term and temporary contracts (or gigs). Work practices at the Ubers, Sports Directs and Deliveroos of the world are reminiscent of the work conditions in Victorian times.21 The increased use of ‘zero-hours contracts’ – for which employers are not obliged to provide any minimum working hours – harks back to the days of queuing for jobs on the docks a hundred years ago. In 2017, an estimated 1.3 million people were ‘employed’ in the gig economy.22
Declining union membership is another signal of the reduced bargaining power of workers. In 2015 only 13 per cent of workers aged 16–30 were trade union members, compared with 36 per cent for workers aged 50 and over. In 1990, 30 per cent of workers aged less than 30 were trade union members.
In stark contrast to workplace training in countries like Germany and Switzerland, Britain’s apprenticeship system is broken: too many apprenticeships are sub-standard, offering no progression, and are undervalued by employers.23 A credible alternative vocational stream to challenge the high-status academic path has yet to materialize.
Many low-skilled jobs have been lost in Britain to lower-paid workers overseas. Globalization impacted many routine jobs, but automation threatens paraprofessional jobs as well: accountants, insurance underwriters, bank tellers, financial analysts, as well as construction workers and farmers. Some warn the rapid rise of robots and artificial intelligence will create ‘an elite high-skilled group dominating the higher echelon of society and a lower-skilled, low-income group with limited prospects of upward mobility and facing a broken social ladder’.24
Those from poorer backgrounds are more likely to be cast adrift in this fast-changing workplace. They have fewer opportunities to reskill or retrain. They are less likely to acquire life skills valued by employers such as confidence, creativity and communication. They have fewer contacts and connections. A confluence of currents is washing away their prospects. The younger generation has never had it so bad.
The Price of Immobility
It is difficult not to avoid a sinking feeling about Britain’s social mobility prospects. The country is missing out on our biggest talent pool, instead fishing in the same small pond generation after generation. The argument for greater social mobility for Britain has become an economic as well as social one – mirroring the debate in the United States. Studies estimate that modest increases in Britain’s social mobility would lead to an annual increase in the country’s GDP of between 2 and 4 per cent.25 To put these figures into context, a 4 per cent loss in GDP would be suffered in a major recession. In more mobile societies jobs are filled by those with the highest level of potential to perform well in that role, rather than someone who may be less well suited but better connected. Enhanced social mobility could solve Britain’s productivity puzzle.
A second way of assessing the economic benefits from improving social mobility exploits the link between mobility and income inequality we charted in the Great Gatsby Curve. If social mobility levels in Britain were improved to those in Canada, for example, its Gini coefficient would be four percentage points lower.26 This would raise GDP per head by 4.4 per cent since we also know one percentage point reduction in the Gini coefficient increases GDP per capita in the short run by 1.1 per cent.27 The benefits from reduced inequality show bigger effects in the long run. Improving social mobility makes for good economic policy. As Nobel Laureate Joseph Stiglitz says, ‘another world is possible’: one where living standards and well-being are higher as a result of greater mobility and lower inequality.28 We will find in the next chapter that this applies not only nationally but at a local and regional level as well.