Australians are much more socially mobile than Americans - but there are worrying signs.
Barbara Ehrenreich's book, Nickel and Dimed, is a searing account of life on a low wage in the United States. It's also very funny, which helped guarantee the book a wide readership and months in the bestseller lists in the United States.
Ehrenreich went undercover to experience first-hand the working lives of cleaners, waiting staff and shop assistants, some of them working two or three jobs and all of them under the constant threat of crippling medical bills. But one hostile reviewer accused her of making an error so basic it undermined her entire case. By ignoring that most poorly paid Americans are only temporarily on the bottom rung of the job market, he said, the book created a false picture of low-wage earners trapped in poverty, illness and overwork. "Everywhere," he wrote, "the US economy provides ample opportunity to move up quickly".
The image of American employees spending a few months flipping hamburgers while saving to launch their own company is beguiling. But the data suggests this sort of mobility is more the exception than the rule in the US. Among 12 Western countries analysed in a new OECD report, four (France, the US, Italy and Britain) stood out as places where family background played the greatest role in influencing adult income. If you're born into a poor family in these countries, your chances of breaking into a higher-income group are much lower than in any of the other countries in the study.
Britain came out worst, with about 50 per cent of a person's income explained by his or her parents' income. The US wasn't far behind, at about 48 per cent. At the other end of the range were Denmark, Australia, Norway and Finland, where parents' income accounted for less than 20per cent of their children's' eventual income. On the OECD figures, a country like Denmark or Australia, rather than the US, qualifies as the land of opportunity.
What explains this great difference? In Australia's case, immigration seems to play such a key role that it cancels out factors that we don't do so well on (like income inequality and early childhood education). Immigrants, especially if they're chosen for their language skills and employability, tend to be more upwardly mobile than the broader population - so Australia's overall performance reflects our relatively high intake.
But if immigration is a plus, what explains the poor performance of the US, which also takes in many immigrants? The report's statistics strongly suggest that other factors; particularly inequalities in the education system and income distribution wipe out the advantages of the US's potentially mobile immigrants. This shows up clearly in one of the report's charts, which compares how well immigrant school students perform in a range of countries. In Australia, children born elsewhere ("non-native" students) perform only a few per cent below their home-grown peers; in the US, the gap is more than 30 per cent.
As the OECD report puts it, paying for education in the US brings greater benefits than paying for education in most countries, including Australia. That's another way of saying the longer-term benefits of education in the US are strongly linked to the amounts families spend on their children's schooling. In Australia, we're fortunate that the gap between the benefits of private and public education is still not a large contributor to the persistence of inequalities across generations.
That could change. The federal Coalition makes no secret of the fact it wants to encourage parents to spend more on education. If its policies are successful, the public education system will increasingly come to resemble a safety net rather than the quality mainstream option. The signs are already there: between 1995 and 2004, the proportion of education spending contributed by government in Australia fell from 79per cent to 73 per cent, the lowest level of any Organisation of Economic Cooperation and Development country except Japan and the US.
The other reason paying for education brings better results in the US relates to entrenched income inequality. Among the 12 countries highlighted in the report, the US has the most unequal distribution of income - much worse than Denmark or Sweden and significantly worse than Australia. According to the report, in countries with highly unequal incomes, the evidence suggests that "education gives access to jobs which are more highly paid (relative to other jobs) than is the case in countries with a narrower distribution of income". The report cautions that the causes of low intergenerational mobility are hard to pin down. But it highlights two factors that clearly have an influence: wealth and education. Wealth, which tends to become more concentrated the greater the income inequality, will become an increasing problem in Australia if we continue to emulate the US in industrial relations policies and other areas. At the moment, though, we're a long way short of the inequality that exists in the US.
Education is a more immediate problem. Although our students perform very well by international standards, the Federal Government has progressively reduced its investment, particularly in government schools. Overall education spending is below the OECD average, and the share of education costs paid by households is higher. In early childhood education, Australia spends 0.1 per cent of gross domestic product compared with the OECD average of 0.5 per cent. As a result, only 42 per cent of Australian three to four-year-olds are enrolled, compared with an OECD-wide average of 69 per cent. If this continues, we risk locking in inequality in the same way the US has.
Ironically, the myth of the US as a land of opportunity might have made the problem worse. As the American researcher Isabel Sawhill wrote, "When those who are relatively poor believe that they or their children will rise in status over time, they are less likely to complain about the status quo and more likely to accept the prevailing system".
It's important to make sure this complacency doesn't take hold in Australia. As the election campaign unfolds, we should assess the parties' policies against the dangers of a drift towards the entrenched inequality evident in the US.