Social mobility improvements could add £170 billion to UK economy

17 August 2017 Consultancy.uk

Poor levels of social mobility is hindering the UK’s productivity, with the country comparing relatively badly to its Western European neighbours. Firms are missing out by not capitalising on a wider variety of talent meanwhile, with a new study showing that should British businesses attain even average levels of social mobility, the economy would be boosted by around £170 billion in total, or £2,620 per person each year.

In a bid to identify the economic costs to the UK of social mobility, the Sutton Trust commissioned Oxera to run an analysis. The economic consulting firm considered the UK’s place in the wider diversity placement relative to key economies across Europe, while identifying the effect of a lack of social mobility has on economic outcomes.

While gender diversity has received considerable press in recent years – becoming increasingly targeted as a business necessity as well as a societal good – social mobility issues reflect an additional structural problem socially and economically. Privately schooled graduates take 32% of MP positions, 51% of medic roles, 54% of FTSE-100 chief executive places, 54% of top journalist positions and 70% of High Court judges. Meanwhile, research by the Social Mobility and Child Poverty Commission found that 70% of all jobs in the professional services sector went to those that had attended the most prestigious and selective schools in the country, a group that made up between just 4% - 7% of the population as a whole.

Relationship between social mobility and productivity

One of the major benefits of social mobility is thought to be improved productivity in the workplace, unlocked in part by the latent potential of high-aptitude individuals that gain access to quality education, which in turn create greater economic, cultural and social value, than they would otherwise.

To better understand the relationship between productivity, understood in terms of gross domestic product per capita, and social mobility, the firm mapped them against each other for various countries in Western Europe. Mobility was understood by the firm in terms of “... the gap between the wage of an individual whose father achieved tertiary education and the wage of an individual whose father achieved below upper secondary education. In a country with high social mobility, we would expect this difference to be small.”

Impact of an increase in mobility

The results showed a correlation between a higher mobility index score and GDP per capita. The effect of improving social mobility scores are considerable – improving the UK’s score to the next best performers, the Netherlands, would see the UK’s economy boosted by around 6%, equivalent to £1,650 per person or £108 billion in total. Further improvement, to align with the European average, would see the economy boosted by around 9% or £2,620 per person, or £170 billion in total.

When researchers considered an alternative model for social mobility, which was based on the relationship between an individual’s wage and that of their parents, the result showed similar trends. This would not only benefit individuals with greater financial security through a more equitable distribution of wealth though, it would also benefit the broader economy by granting a larger number of people greater spending power – an issue which looks set to hit post-Brexit Britain without action, particularly in the leisure industry.

Relationship between productivity and mobility alternative

Analysts meanwhile factored in whether aspirations for higher and better positions have changed between generations since the 1980s, as a means of identifying changes in social mobility over the past 30 years. The research took into consideration the social position of the father, as well as the social aspiration of their children at the age of 16. The results highlighted that, while there was a considerable boost in aspirations between the first and second study, while the intervening studies highlighted a decrease and then a relative stagnation.

Improved social mobility would therefore bring considerable benefits to the UK economy, as well as wider fabric of society. However, doing so is a protracted exercise that, without state intervention, requires multiple stakeholders to be engaged. This includes primary, secondary and tertiary education improvement, as well as wider improvements to selection for employment.

Intergenerational mobility

The Big Four, after being accused by the UK government of setting up barriers to entry to working class candidates, have, in recent years, sought to improve matching between those called to the professional services, but whose background placed them at a disadvantage. EY for instance, reduced its academic requirements, while introducing a competency based entry test. Deloitte too has actively sought to reduce barriers. KPMG meanwhile has sought to reduce the length of time required for the whole interview process, as well as reduce attainment barriers. PwC meanwhile, has, among others, expanded the channels through which it hires to include a broader range of skillsets and backgrounds.

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