Equality of opportunity - is it a fact or an illusion?

Opinion polls consistently indicate that Australians want to see merit, education and enterprise well rewarded and strongly believe in individual responsibility - which is why they are prepared to tolerate a good deal of income and wealth inequality and are cool towards passive redistribution.

At the same time, Australians enthusiastically support “equality of opportunity” as a national goal. This goal has two components: absence of discrimination (formal or informal) in hiring, promotions and pay on the basis of race, ethnicity, gender or age; and the idea that every person prepared to work hard should be able to achieve their full innate potential, regardless of parental wealth, status and power.

Interestingly, a majority of Australians believe their society already performs well on the equal opportunity criterion - that they live in a “fluid” society marked by high levels of social mobility (easy movement of individuals to a higher class or social status than those of their social origin). Is this perception in keeping with reality? We cannot yet answer this question confidently. Some longitudinal studies (HILDA and Negotiating the Life Course (NLC) and Longitudinal Study of Australian Children) currently under way are producing some useful measures of short-term mobility (over three to five years), and these show a moderate degree of short-range income mobility, but lifetime results will not be available for some time.

In the meantime, we can draw some tentative conclusions by looking at the overseas evidence on intergenerational social mobility - which is quite rich and extensive. While some of the evidence is contradictory, one can detect broad support for the following propositions:

1. There is a good deal of intra-generational income mobility - both up and down the ladder. In most countries studied, between 30 and 40 per cent of adults rise to higher income and occupational ranks during their lifetime. For the most part, the upward movement is short range (up just one or two grades) but a few make it to the top. Much of the observed annual “poverty” is only transitional, reflecting passing events, such as separation and divorce, joblessness and studying.
    
2. In most countries intra-generational mobility has increased significantly over the last few decades, reflecting not only economic liberalisation but also the expansion of education, active redistribution policies and anti-discrimination policies.
    
3. The story is less encouraging when one looks at inter-generational mobility (the ability to break away from parental environmental effects), which is a key determinant of equality of starting opportunity. In nearly all countries studied, the occupational and education status of adults is strongly and positively correlated with that of their parents - i.e. children from low socio-economic backgrounds have much less chance of achieving management or professional positions over their lifetime than those with well-off parents. To some extent this is inevitable, as people inherit genes (innate ability), values and knowledge from their parents - but it also reflects unequal access to education, retraining, health, employment and housing. Economically successful parents are able to spend more on goods and services (such as education and health) which enhance their children’s labour market prospects, and have superior location and social networks.
    
4. Intergenerational income mobility is no higher, and on some measures may even be lower, in the US than in social democratic countries like Sweden, Norway and the Netherlands. It appears that income mobility gets at least as much of a boost from active redistributive polices and wide access to employment-enhancing services as it does from flexible labour markets and low taxes.
    
5. Moreover intergenerational mobility is tending to increase in many European and Scandinavian countries - but it is stable or actually declining in the US (and UK). A key reason is that Scandinavian and European governments have generally been more successful in reducing education inequality. They have also given poor families better access to medical care.

What does the overseas experience (and the limited local data) tell us about occupational and income mobility in Australia? One can be confident that many low-income earners rise in ranking over their lifetime - indicating a fairly mobile society. As to inter-generational income mobility, however, one can only speculate. Australia has a much more egalitarian history than the US - but our social values have been steadily converging and this “Americanisation” is likely to continue as a result of recent and prospective industrial relations reforms and growing inequalities of access to education, health, housing and employment. It is possible therefore that Australia will be following the US down the road of diminishing (or at best stable) equality of opportunity. Even those Australians who refuse to worry about relative poverty and inequality may find this prospect discomforting.