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Who gets the best jobs? The economics evidence

February 2, 2011 2 comments

Lindsey Macmillan

 

Social mobility is back on the agenda with the first meeting of social mobility czar Alan Milburn’s advisory panel taking place next week to assess how well the current coalition Government is doing with its aim of improving social mobility.  So far it might be too early to tell but we do know there is a lot to do.

Tonight’s BBC programme ‘Who gets the best jobs?’ illustrates the growing evidence in the UK that social mobility is worse now than it was a generation ago. Well-cited evidence from economists showed that individuals born to poorer families in 1970 were more likely to end up poor as adults than if they had been born to the same circumstances 15 years previously (Blanden, Gregg, Goodman, Machin, 2004).  Following on from this, research into the potential drivers of mobility found that educational attainment was one of the key factors in accounting for persistence in incomes across generations. For the later cohort born in 1970, the fact that where they came from was a better predictor of their educational attainment than before was a key factor in their lack of mobility (Blanden, Gregg and Macmillan, 2007).

This is not to say however that the change is driven by ability. Ability and education are clearly two different things. It has been argued in the past that some degree of persistence in how well you do compared to where you come from is to be expected given genetic transmissions of ability. The trouble with this argument is that you wouldn’t expect the underlying trend in genetic transmissions to change much across time. If all of the persistence across generations was driven by well-off, more able parents’ having more able children, why would things be getting worse?

Evidence from a report looking into the family background characteristics of those entering top professions illustrates this point. The evidence suggests those who go on to become lawyers and doctors were from substantially richer families than those who went on to become engineers or nurses compared to the average at age 16 in both British cohort studies. Consistent with the mobility evidence, this trend appears to have worsened for many of the top professions over time. For those born in 1970 compared to those born in 1958, the gaps in family income between top professions and the sample average had increased. Evidence on the ability levels of these individuals however suggests that whilst those who became doctors and lawyers were of higher ability than the average, this trend has decreased across time. This would suggest that there is a widening social gap in entry to the top professions. Some of the top professions are increasingly being filled by individuals who look less different to the average in terms of ability and more different to the average in terms of family income (Macmillan, 2009).

One of the main problems with mobility evidence is the length of time it takes to measure trends. All of the evidence mentioned above focuses on individuals now in their 40s and 50s. What do we know about mobility for younger people? A couple of new pieces of work have analysed the link between family background and educational attainment for younger individuals to get a picture of what we might expect from future trends in mobility. The evidence is mixed. On the one-hand, there is some evidence for children born around 1990 that the association between family incomes, Key Stage 2 attainment and GCSE attainment is weakening. This could be a promising sign. There is also the suggestion that post-16 participation has become less associated with where you come from (Gregg and Macmillan, 2009). On the other-hand, there is less evidence of this trend continuing into higher education and no change in the relationship between background and early attainment (age 3 to 5) for children born around 2000 (Blanden and Machin, 2009).

So what can be done?  Identifying policy levers in this setting is often problematic. However, some research in the US from the Perry pre-school program indicates that improving ‘soft skills’ in childhood had positive effects in terms of greater employability, less contact with the police and higher completed education (principally the work of Nobel Laureate James Heckman and others). There is also evidence that lower family income in childhood causes lower educational attainment and lower educational attainment causes lower incomes in adulthood (Dahl and Lochner (2008), Oreopoulus et. al. (2006)).  With this view that education is still a key policy lever in changing patterns of mobility, policies aimed at widening participation in higher education for those from the poorest backgrounds could be important to reversing the current trend of where you come from predicting your educational attainment and hence later-life income. Unfortunately the most recent policy announcements with the scrapping of EMA and trebling of tuition fees are unlikely to encourage such changes in behaviour.

 

Blanden J, Goodman A, Gregg P and Machin S. (2004) Changes in intergenerational mobility in Britain. In M. Corak ed. Generational Income Mobility in North America and Europe, Cambridge University Press, Cambridge.

Blanden J, Gregg P and Macmillan L. (2007) Accounting for intergenerational income persistence: Noncognitive skills, ability and education, The Economic Journal, 117, C43-C60.

Blanden J and Machin S. (2008) Up and down the Generational Income Ladder in Britain; Past Changes in Future Prospects. National Institute Economic Review No. 205.

Dahl G and Lochner L. (2008) The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit NBER Working Paper No. 14599.

Gregg, P. and Macmillan, L. (2009) Family income and education in the next generation: exploring income gradients in education for current cohorts of youth. Journal of Longitudinal and Life Course Studies, Vol. 1 (3), 259-280

Macmillan, L. (2009) Social mobility and the professions. CMPO report. http://www.bris.ac.uk/cmpo/publications/other/socialmobility.pdf

Oreopoulos P and Page M. (2006) The Intergenerational Effects of Compulsory Schooling. Journal of Labor Economics, 24(4), 729-760.

 

 

EMA and good evidence-based policy making

December 15, 2010 Leave a comment

Paul Gregg and Lindsey Macmillan

 

Young people leaving school at age 16 with few or no qualifications face a bleak future. As with high school drop outs in the US, employment rates are low for most of their working lives, as are earnings when they work. So a programme that encourages people from low income families to stay on in school at age 16 would seem to be sensible policy making.

The Educational Maintenance Allowance is a benefit that 16 and 17 year olds from low income families can receive only if they continue in full-time education. To receive it, students are required to regularly attend college or the weekly payment is stopped and there are bonuses for course achievement encouraging completion. Unusually in the UK, EMA was fully trialled with a good study design to give clear answers to how much it changed behaviour. The study carried out by the IFS suggested that among those eligible, those staying on in school increased by 6 to 7 percentage points.

However, from January the government is going to abolish EMA for new starters which will have its main effect next September for new school leavers. The government argues that that 90% of EMA is deadweight and this justifies its abolition based on qualitative evidence that this 90% would have continued in education regardless of the payment. However, just because it changes the behaviour of just 1 in 10 of those eligible, this doesn’t mean it is not cost effective if the benefits to this group are large enough.

The IFS research shows that in areas where EMA was trialled, students as a whole were around 2 percentage points more likely to reach the thresholds for Levels 2 and 3 of the National Qualifications Framework and they also had A Level grades around 4 points higher on average. This was probably because of the attendance requirement and achievement incentives.  The benefits went wider than those who just attended school as a result of EMA. The value of these qualifications in terms of future earnings was greater than the cost of the programme. The IFS argue that even if this increase in participation is relatively small, the longer-term benefits to those affected by the policy in terms of future productivity more than out-weigh the cost of the scheme. Yet this doesn’t include the impact on reduced unemployment, greater well being and even the potential impact on the next generation of having better educated higher earning parents. An interesting piece of research by Leon Fienstein and Ricardo Sabetes  showed that in EMA areas crime generally fell and youth convictions for burglary fell significantly.

So all the evidence is that EMA was a well design policy that improved life chances and had wider ranging benefits. But the greatest paradox is that the government has kept payments for children attending college which go to nearly all children (Child Benefit) whilst slashing the targeted support for the poorest to attend school. Yet all the evidence is clear that it is those from the poorer families for whom the incentive effects are greatest and the longer term value to society is greater.   If the Government wants to save money in this area then reducing Child Benefit for post-16s would achieve the savings without the wider adverse consequences for the life chances of Britain’s poorest children.  As the one of the governments buzz words of the time is responsibility, it is counter-intuitive to dismantle a policy that encourages responsibility for these young adults, who face the biggest opportunity cost of further education, by making a direct payment, conditional on full attendance at school. It is heartening to see so many young people demonstrating against the abolition of EMA and it is important for academics to stand up for good evidence based policy making.