Economic Mobility in Developing Countries has Stalled for the Last 30 Years

If you are born into a low-income family, what are the chances that you will rise higher regardless of your background? The ability to move up the income ladder, both in one’s lifetime and with respect to one’s parents, matters for fighting poverty, reducing inequality, and even for boosting growth.

Yet, mobility has stalled in recent years in large parts of the world, with the prospects of too many people across the world still too closely tied to their parents’ social status rather than their own potential, according to the findings of a new World Bank Report dubbed ‘Fair Progress? Economic Mobility across Generations Around the World’. 

According to the report, generations of poor people in developing countries are trapped in a cycle of poverty determined by their circumstance at birth and unable to ascend the economic ladder due to inequality of opportunity.

The report shows that Africa and South Asia, the regions with most of the world’s poorest people, have the average lowest mobility. In some low-income or fragile African countries, only 12 percent of today’s young adults have more education than their parents.

On the other hand, East Asia, Latin America and the Middle East and North Africa have seen their average mobility improve.

While mobility tends to improve as economies get richer, the report suggests that there is nothing inevitable about this process. Rather, as economies develop, mobility is likely to increase if opportunities become more equal, which typically requires higher public investments and better policies.

The report, which tracks economic mobility between parents and their children through the prism of education, a critical asset that influences an individual’s lifetime earnings notes that mobility has stalled for the last 30 years.

It is noted that gender gaps are closing with girls in high-income countries now out-performing boys in tertiary education and catching up in the developing world. In the not too distant future, the share of girls with more education than their parents will exceed the equivalent share for boys globally.

The ability to move up the economic ladder, irrespective of the socioeconomic background of one’s parents, contributes to reducing poverty and inequality and may help boost economic growth by giving everyone a chance to use their talents, the report notes. People living in more mobile societies are more optimistic about their children’s future, which is likely to lead to a more aspirational and cohesive society.

The report paints a uniquely detailed picture of socio-economic mobility and inequality of opportunity around the world. It also sheds light on the patterns and drivers of income mobility and their relationship with educational mobility by examining available data from 75 countries.

The data show that, on average, upward mobility from the bottom has declined and the numbers of people remaining trapped at the bottom have increased in developing economies.

For individuals born in poorer households, the opportunity to climb up the ladder is narrowing in many economies in which average living standards are already much lower compared with high-income economies.