Context

The World Economic Forum has created a new index to measure social mobility. It came out with its first-ever Global Social Mobility Report.

About

• World Economic Forum (WEF) released 1st edition of a report titled “The Global Social Mobility Report 2020: Equality, Opportunity and a New Economic Imperative”.
• The global social mobility index (GSMI) of 82 countries was launched in this report.
• As per the Index, India ranked at the 76th position with a score of 42.7, while Denmark topped the list.
• Global social mobility index: The GSMI focuses on drivers of relative social mobility instead of outcomes.
  • It looks at policies, practices and institutions.
  • This allows it to enable effective comparisons throughout regions and generations.
  • It uses 10 pillars, which in turn are broken down into five determinants of social mobility – health, education, technology access, work opportunities, working conditions and fair wages and finally, social protection and inclusive institutions.
• World Economic Forum: WEF is based in Cologny-Geneva, Switzerland. It is an NGO, founded in 1971 by Klaus Schwab. It is a membership-based organization of the world’s largest corporations. It hosts annual meeting at the end of January in Davos.
  • Mission: "Committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas".
  • European Management Forum: WEF was first named the European Management Forum, and the name was changed in 1987 when it broadened its vision to include a platform for resolving international conflicts.

Social Mobility

• Absolute social mobility: Social mobility can be understood as the movement in personal circumstances either “upwards” or “downwards” of an individual in relation to those of their parents.
  • In absolute terms, it is the ability of a child to experience a better life than their parents.
• Relative social mobility: On the other hand, relative social mobility is an assessment of the impact of socio-economic background on an individual’s outcomes in life.
  • It can be measured against a number of outcomes ranging from health to educational achievement and income.

Fact findings

• GSMI there are only a handful of nations with the right conditions to foster social mobility.
• Drag on social mobility: Most countries underperform in four areas- fair wages, social protection, working conditions and lifelong learning.
• Rapid growth countries not immune: Inequalities are rising even in countries that have experienced rapid growth.
• Nordic countries top the list: Denmark tops the rankings with a social mobility score of 85.2, closely followed by Finland (83.6), Norway (83.6), Sweden (83.5) and Iceland (7).
• G7 countries: Among the G7 economies, Germany is the most socially mobile, ranking 11th with 78 points followed by France in 12th position. Canada ranks 14th followed by Japan (15th), the United Kingdom (21st), the United States (27th) and Italy (34th).
• Emerging economies: Among the world’s large emerging economies, the Russian Federation is the most socially mobile of the BRICS grouping, ranking 39th with a score of 64 points. Next is China, which ranks 45th, followed by Brazil (60th), India (76th) and South Africa (77th).
• Wage disparities: In the US, the top 1% of income earners in 2018 earned 158% more than in 1979, in comparison to just 24% for the bottom 90%.

India findings

• India ranks 76th out of 82 economies.
• It ranks 41st in lifelong learning and 53rd in working conditions.
• India is among the five countries that stand to gain the most from a better social mobility score (China, the United States, India, Japan and Germany).
• Areas of improvement for India include social protection (76th) and fair wage distribution (79th).

Key findings

• Driver of income equality: Upward social mobility is a key driver of income equality. Increasing social mobility by 10 per cent would benefit social cohesion and boost the world’s economies by nearly 5 per cent by 2030.
• Historical inequalities: Children who are born into less affluent families typically experience greater barriers to success.
  • Problem is not only for the individual, but also society and the economy.
  • Human capital is the driving force of economic growth.
  • As a result, anything that undermines the best allocation of talent and impedes the accumulation of human capital may significantly hamper growth.
• Five key dimensions: Measuring countries across five key dimensions distributed over 10 pillars – health; education (access, quality and equity); technology; work (opportunities, wages, conditions); and protections and institutions (social protection and inclusive institutions) .
• Fourth Industrial Revolution: Globalization and the Fourth Industrial Revolution have generated significant benefits, but have also exacerbated inequalities.
  • Continuing disruption to labour markets, will likely compound differences in social mobility for those countries unprepared to take advantage of new opportunities.
  • Declining income share of labour relative to an increase in the income share of capital has significantly driven economic inequality.
  • Wage disparities have grown exponentially since the 1970s.
• Globalization: Globalisation has increased inequalities within countries by transferring low-skilled jobs in high-productivity sectors in high-income economies to lower-income counterparts. This has effectively penalized workers in specific locations and types of job.
• Technology: Technology has polarized inequalities by reducing demand for low-skilled jobs while rewarding highly skilled jobs disproportionately.
  • “Superstar” firms have exacerbated this polarisation. They have high profits and a low share of labour, and as models of great productivity, have come to increasingly dominate markets.

Recommendations

• There is need for a new standard which could be used to identify priority policy actions and business practices that would improve social mobility.
• Achieving higher levels of social mobility needs to be perceived as an important element of a wider move towards a stakeholder-based model of capitalism.
• “Digital leapfrogging” will not happen unless the issues are systemically addressed. Technology has the potential to equalize barriers to entry to knowledge, but only if the conditions are conducive.
• Governments must play the role of equalizer, levelling the playing field for all citizens, regardless of their socio-economic background. It must develop a new social protection contract which would offer holistic protection to all workers irrespective of their employment status, particularly in a context of technological change and industry transitions.
  • Create new financing model for social mobility.
  • Improving tax progressivity on personal income.
  • Formulate policies that address wealth concentration.
  • Re-balance sources of taxation which support the social mobility agenda.
  • Public spending and policy incentives must put greater emphasis on social spending.
  • More support for education and lifelong learning.
  • Targeted improvements in the availability, quality and distribution of education.
  • Promoting skills development throughout an individual’s working life.
  • New approach to jointly finance efforts between the public and private sector.
• Businesses must place purpose over profits to perform better in the long term. Companies face equal risks from system challenges, including inequality. Paying fair wages and eliminating the gender pay gap will be crucial to boost social mobility.
  • Businesses must take the lead by promoting a culture of meritocracy.
  • Companies must create action plans specific to each industry.