Saturday, June 16, 2018

Stuck in poverty

Income inequality has increased and social mobility stalled across the world’s richest countries since the 1990s, trapping families on low incomes at the bottom of the earnings ladder, according to an in-depth report by the Organisation for Economic Co-operation and Development. While income mobility was a reality for many people born between 1955 and 1975 from low-educated parents, it has stagnated for those born after the mid-1970s. "Fewer people at the bottom have moved up while the richest have largely kept their fortunes," the OECD said.

In the UK the report found it could take at least five generations, or 150 years, for the child of a poor family to reach the average national income, currently about £27,000 for those in full-time employment. In the UK, 46% of children whose fathers have high earnings grow up to have high earnings themselves. Only 18% of sons born to low-income fathers make it to the top-earning group. The child of a parent with low educational attainment has only a 21% chance of gaining a degree-level qualification at college or university, compared to 71% of those with parents who themselves have a college degree.

However, the OECD found that the poorest Britons are more likely to escape poverty than those on low incomes in France and Germany, where it takes six generations to reach the average national income. A typical poor child in Germany would need 180 years to reach the average German.

 The average across the entire OECD, a group of 37 industrialized countries, is five generations. Children in low-income families in Denmark would need two generations, while children in the United States would need five generations.

To further illustrate the lack of social mobility across the 24 countries assessed by the OECD, one in three children with a low-earning father will stay trapped on low earnings, while most of the other two-thirds will only move one rung up the income scale during their lifetime. 

“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.  
“The wealthy will stay wealthy and the poor will stay poor . . ." Ms Ramos said people in the UK were more likely than in other countries to worry about losing their job or falling ill, because they lacked the savings or support to tide them over. The OECD said the UK’s high housing costs, which favour homeowners and make it harder for people on lower incomes to move to areas with better job prospects.

British people on lower middle incomes face a bigger risk of sliding down the scale than they did 20 years ago. The OECD said that there was a risk of the middle class “fracturing”, with the UK being one of four countries where the pattern of a widening divide between the lower and upper middle classes was “particularly pronounced”.

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