Income Inequality: Social Mobility Paves The Road To Fix Poverty

Category: Financial News

Economic and social mobility is the idea that people are not limited or defined by where they start, but can move up in life based on their efforts and accomplishments. In its core essence, social mobility is a very important concept that transcends economic interest.

As a human equality and social justice issue, its concept ensures the value of human life and its potential. It affirms that every individual regardless of race or background has equal chances in life as long as they utilize well all the resources made available to them.

These resources refer to both inherent ones like industriousness and determination, and the ones obtained from society, like capital (wages) and structural (facilities, programs) resources to help people advance in life. The “resources” is the tricky part.

With extreme distortions on so many equality levels and a seeming hopelessness to make a humane turnaround, has it become truly impossible today to start poor and end rich? How do we remove the bumps income inequality created and smoothen the road to social mobility?


Income mobility or  the change in income position over time has become an indicator of the economic well-being of an individual or a family in relation to its starting financial point. With the rise of income inequality across the world, one’s starting income now greatly determines economic and social mobility in the future, as what many studies in the United States show, where income inequality has risen dramatically since the 1970s.

Prior to absolute and comparative incomes getting wider apart, it was commonly believed that one’s social mobility (and quality of life) had more to do with things like drive or ambition in life, skills, intelligence, a support system or network and other inherent individual and social factors believed to perpetuate success in the long run. This was what fueled the so-called American Dream.

Today, however, one’s personal (or family’s) capital, health and education have become the more important factors for social mobility, and they are obviously income-related.

Parental income is now highly predictive of the children’s incomes as adults, as what inter-generational income elasticity data shows (the disparity between incomes among generations, and  reflective of the progress of social mobility within a society.)

Countries with the lowest inter-generational income elasticity (Denmark, Norway, France, Sweden, Finland) have the highest social mobility rate, meaning, their citizens advance faster and better than those in countries like the US, UK, or Singapore.

As income  redistribution levels become stagnant, social mobility in the later years increasingly depends on what income level one started with. With income inequality worsening over time, the average lifetime earnings become less equal, affecting younger generation’s chance on social mobility.

In an analysis by American University economist Tom Hertz, it was found out that education, race, health, and state of residence are found to be the four key channels by which economic status is transmitted from parent to child, affirming income-related factors at play in future social status. Other findings include American children from low-income families have only 1 percent chance of reaching the top 5 percent of the income distribution compared to children of the rich who have a 22 percent chance, while middle class children have just the same chance of ending up in a lower quintile than their parents as they can of moving to a higher quintile.



True enough, one cannot make a sweeping generalization of what affects the path to social mobility. Different societies deal with varying culture, policies, outlooks, and interests. The uniform factor is “opportunity,” but it depends on how it has become prevalent and accessible in a society.

But first, social mobility is not a measure or indicator of opportunity but, rather, it has more direct relation to income inequality and wealth. Opportunity, on the other hand, when taken advantage of, will spur social mobility. It is therefore important to open up opportunities and create “access roads” to these opportunities. These two should always come in pair.

The shift to being “information” economy (like in the U.S., where technical and professional skills become more valuable) has created lesser opportunity for the non-skilled and those with less money to use as “investment,” and this pushes income distribution imbalance. In countries which remains production economies (manufacturing), there is lower level of work displacement, and incomes can be competitive across the board. This may be a simplistic way of looking at the issue, but the importance of “balance” is nevertheless emphasized.

Where income inequality and social mobility conflicts, creating not just “opportunities” (like more jobs and business opportunities) but “access roads” to them (skills enhancement and trainings, education, capital to participate in “demand” opportunities, among others) need to take place.

These access roads are clearly linked to better income distribution. With inevitable cuts on government spendings that affect support subsidies, the solution clearly points to better policies and initiating much needed reforms that will enable middle and low income earners to get more, earn more and save more (or finally start to save) so they can step into the access roads to these  opportunities.


Addressing income inequality and clamoring for real solutions that will bring about immediate changes in the way of living of those in the marginalized corners become more urgent now that stagnating social mobility is becoming more apparent. The demonstrated results of income inequality in the US has prompted many economists around the world to pronounce that the “American dream,” while it romanticized and fuelled many success stories of old America, is no more today.

The good news is that amidst challenges and despite data and numbers, majority of Americans still believe that “people get rewarded for their effort,” as shown in their response to the 1999 Social Inequality Survey, indicating that the hope is alive and well in the hearts of those in the midst of inequality. Majority of people in other nations also feel the same where their own inequality issues are concerned.

The greater challenge and pressure now shifts to those whose circumstances in life placed in their hands the moral responsibility of not failing the hopes and trust of the majority – the source of their position and power.

Jenny Chang

By Jenny Chang

Senior writer at FinancesOnline who writes about a wide range of SaaS and B2B products, including trends and issues on e-commerce, accounting and customer service software. She’s also covered a wide range of topics in business, science, and technology for websites in the U.S., Australia and Singapore, keeping tabs on edge tech like 3D printed health monitoring tattoos and SpaceX’s exploration plans.

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