The new OECD report found that as income inequality has increased since the 1990s, social mobility has stalled, meaning that fewer people at the bottom of the income scale have moved up while the richest have largely kept their fortunes. This has severe social, economic and political consequences.
The study also found that given current levels of inequality and intergenerational earnings mobility, it could take at least five generations or 150 years for the child of a poor family to reach the average income, on average across OECD countries.
This income inequality ranges from just two to three generations in Nordic countries to nine generations or more in some emerging economies like South Africa. One in three children with a low earning father/mother will also have low earnings, while for most of the other two-thirds upward mobility is limited to the neighbouring earnings group.
“Too many people feel they are being left behind and their children have too few chances to get ahead,” said Gabriela Ramos, OECD Chief of Staff and Sherpa to the G20, who also oversees the OECD’s Inclusive Growth Initiative. “We need to ensure that everyone has the opportunity to succeed, especially the most disadvantaged and that growth becomes truly inclusive.”
Across generations, earnings mobility prospects tend to be weaker in countries where income inequality is high, and stronger in countries where inequality is low. The Nordic countries combine low inequality with high mobility whereas Latin American countries and some emerging economies have high inequality but low mobility.
Earlier this year, The World Bank released a report that showed South Africa had become the most unequal society in the world. According to the report, one in four South Africans are considered to be middle class. About 40% of South Africans lived below the lower bound poverty line in 2015, up from 36.4% in 2011.
In the OECD study, South Africa and Brazil are on par with the same number of generations it would take to reach an average income beaten only by Colombia (11 generations).
Income mobility was a reality for many people born between 1955 and 1975 from low-educated parents but it has stagnated for those born after 1975.
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