Charlemagne: Snakes and ladders

Europe is economically inflexible but socially mobile. Whence this strange combination?

EUROPEANS have mixed feelings about class. They deplore the idea that people may remain mired in poverty, and they have large welfare programmes to help them move up. They also resent the sight of rich families staying at the top for generations, and so impose high taxes to redistribute wealth and income.

On the other hand, compared with Americans, Europeans cling to a somewhat static view of society. They dislike the extremes of wealth and poverty that accompany America's supposed free-for-all meritocracy. They look askance at "excessive" job mobility, which breeds insecurity. Polls show that, compared with Americans, Europeans are more likely to dislike unfettered market competition and to believe that success is outside their own control. With some exceptions (eg, Dick Whittington), they lack the equivalent of Horatio Alger's myth of rags to riches. In short, in the European view, social stability is desirable, and if a certain amount of inflexibility is needed to underpin it, that is a price worth paying to avoid the restless uncertainties of America's market-driven model.

Yet the curious thing is that European society--at least in the Nordic countries--is far less stable than America's. Two new research papers* confirm that, if one compares the incomes of children with those of their parents, or considers how long people in one income group stay there, Nordic countries emerge as far more mobile than America. Britain shows more class stability than its northern neighbours, but it is still a lot closer to them than it is to America.

The authors rank countries on a scale from one to zero, with one meaning no mobility at all (ie, a child's income is identical to its parents') and zero meaning perfect mobility (ie, a child's income bears no relation to its parents'). The Nordic countries score around 0.2 for sons, Britain scores 0.36, and America 0.54 (meaning that a son's earnings are more closely related to his father's in America). These figures are roughly in line with the conclusions of other studies, though they have the advantage of using standardised data, thereby minimising problems of definition that usually bedevil cross-country comparisons.

The biggest finding of the studies is not, however, about overall social mobility, but about mobility at the bottom. This is the most distinctive feature of Nordic societies, and it is also perhaps the most significant difference with America. Around three-quarters of sons born into the poorest fifth of the population in Nordic countries in the late 1950s had moved out of that category by the time they were in their early 40s. In contrast, only just over half of American men born at the bottom later moved up. This is another respect in which Britain is more like the Nordics than like America: some 70% of its poorest sons escaped from poverty within a generation.

The Nordic countries are distinctive in one further way: the sons born at the bottom (into the poorest fifth) earn roughly the same as those born a rung above them (the second-poorest fifth). In other words, Nordic countries have almost completely snapped the link between the earnings of parents and children at and near the bottom. That is not at all true of America.

Social mobility at middle-income levels is more similar everywhere (it is a bit higher in most European countries, but not by much). That may partly explain why Americans think their society is more mobile than it is (the middle classes tend to set the political agenda, and mobility is genuine enough for them). It may also explain why few Europeans appreciate quite how much movement up and down the income ladder there is, because much of it takes place off the radar screen of the politically influential.

Unwrapping the Scandinavian model

The obvious explanation for greater mobility in the Nordic countries is their tax and welfare systems, which (especially when compared with America's) deliberately try to help the children of the poor to do better than their parents. One might expect social mobility and economic flexibility to go together--in fact, to be two sides of the same coin. But to the extent that redistribution is an explanation, it implies the opposite: that social mobility is a product of high public spending, a bit like the low incidence of poverty or longer life expectancy (on both of which Europe also does better than America). But greater public spending tends also to be associated with less economic flexibility--which is why Nordic countries have sought to limit the more arthritis-inducing features of their tax-and-spend programmes.

Yet redistributive fiscal policies cannot be all there is to it. If they were, Nordic countries would not do as well as they do (their welfare states are not appreciably more generous than Britain's). The other part of the explanation seems to be their superior education systems. Education has long been recognised as the most important single trigger of social mobility--and all four Nordic countries do unusually well in the school-appraisal system developed by the OECD.

That in turn may explain why the bigger continental European countries, notably France, Germany, Italy, are not as mobile as Nordic ones. With relatively poor education systems, they are bound to perform more like Britain. But that still makes them socially (if not economically) more flexible than the land of the free. For Europe, the secrets of greater social mobility are, first, tough redistribution policies that particularly benefit those at the bottom; and, especially in Nordic countries, a more supple and less class-ridden education system, running from top to bottom. America could learn something from that.

* "Non-linearities in Inter-generational Earnings Mobility" (Royal Economics Society, London). "American Exceptionalism in a New Light" (Institute for the Study of Labour, Bonn). Both by Bernt Bratsberg, Knut Roed, Oddbjorn Raaum, Robin Naylor, Markus Jantti, Tor Eriksson, Eva Osterbacka and Anders Bjorklund.

Commentary fature. Europe is economically inflexible but socially mobile (ie. the means to move between social classes). Why is there this strange combination?