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Mobility and Meritocracy

A B Atkinson, Nuffield College, Oxford

LABOR June 2007

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1. Meritocracy as a political objective

2. Mobility seen as key to meritocracy

3. Concern (in UK) that becoming less mobile and meritocratic

Why?

How?

True?

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Amartya Sen:

“The idea of meritocracy may have many virtues, but clarity is not one of them”.

• Instrumental: “the incentive view of merit is underdefined, since it is dependent on the preferred view of a good society”

• Intrinsic: “quality of such actions, judged in a result-independent way”.

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How relate to standard welfare economics?

Trade-off between equity and efficiency embodied in Social Welfare Function based on individual welfares.

Mirrlees model: Assume wage rate = marginal product = ability

Net earnings E = Aℓ – T(Aℓ) where A denotes ability and ℓ = effort/hours (leave effort on one side ℓ = 1).

SWF W ≡ ∑i V(Ai-Ti)

Where does meritocracy come in?

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Roland Bénabou:

Two-dimensional measure of meritocracy:

• Assignment based on talent rather than background

• Extent to which reward is based on talent

Taken for granted in Mirrlees model

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Assignment Model (Mayer, RE Stat 1960)

• Self-employed produce A

• Entrepreneur employs (λ-1) people, generating profit λA-w-c

• Workers receive wage depending on match

w = w0+(1-θ)λA

• Workers decide on basis of E{w}

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If all A ≥ A* are entrepreneurs, and distribution has a Pareto tail, then E{A} = hA* (h > 1) determines Ao such that all with A ≤ Ao are workers.

Ability

Workers E{w}

Entrepreneurs

Self-employed

Reward

Assignment

A*Ao

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Et = α At + βEt-1 + εt

What to do with mobility?

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Mobility between and within generations

AF EF eF

AS ES eS

r(ES , EF) or r(eS, eF) or r(Es, eF) ?

Depends on mechanisms

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Relation with economic model (demand side)

Assignment model without self employment and λ=2

(set median A = 1)

With random assignment, output = 2;

With perfect meritocracy, output = 2h > 2.;

With β inheriting position, output = 2h - 2β[h(1-γ)-1]

where γ is the degree of heritability of ability

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NCDS (born 1958): total income of parents in 1974 and earnings of sons in 1991

BCS (born 1970): total income of parents in 1986 and earnings of sons in 2000

“We see sharp falls in cross-generational mobility of economic status between the cohorts” (Blanden, Goodman, Gregg and Machin).

Inter-generational mobility in the UK

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York 1950-1975-8 and NCDS 1974 and 1991/9

• special sample (York)

• small sample size (287)

• not a cohort

Compare elasticity for men (age adjusted earnings)

York (Atkinson et al) 0.418 (0.097)

NCDS (Jäntti et al) 0.359 (0.03)

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UK 1974-1990sSon

Father 1 2 3 4 5 Total1 29.7 21.7 21.3 15.2 12.1 1002 25.4 22.8 19 18.3 14.5 1003 22.2 22.5 19.2 18.8 17.3 1004 13.7 18.6 21.7 24.4 21.6 1005 9 14.4 18.8 23.3 34.5 100

Total 100 100 100 100 100 500

UK 1950-1975/8Son

Father 1 2 3 4 51 44.9 15.4 14 16.9 8.8 1002 23.1 27.2 23.1 13.3 13.3 1003 11.8 21.6 35.3 15.7 15.6 1004 14.3 35.7 21.4 14.3 14.3 1005 5.9 0.1 6.2 39.8 48 100

Total 100 100 100 100 100 500

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UK 1974-1990sSon

Father 1 2 3 4 5 Total1 29.7 21.7 21.3 15.2 12.1 1002 25.4 22.8 19 18.3 14.5 1003 22.2 22.5 19.2 18.8 17.3 1004 13.7 18.6 21.7 24.4 21.6 1005 9 14.4 18.8 23.3 34.5 100

Total 100 100 100 100 100 500

UK 1950-1975/8Son

Father 1 2 3 4 51 44.9 15.4 14 16.9 8.8 1002 23.1 27.2 23.1 13.3 13.3 1003 11.8 21.6 35.3 15.7 15.6 1004 14.3 35.7 21.4 14.3 14.3 1005 5.9 0.1 6.2 39.8 48 100

Total 100 100 100 100 100 500

Difference

SonFather 1 2 3 4 5

1 -15.2 6.3 7.3 -1.7 3.3 02 2.3 -4.4 -4.1 5 1.2 03 10.4 0.9 -16.1 3.1 1.7 04 -0.6 -17.1 0.3 10.1 7.3 05 3.1 14.3 12.6 -16.5 -13.5 0

Total 0 0 0 0 0 0

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Cumul = FUK 1974-1990s

Father 1 2 3 4 51 5.94 10.28 14.54 17.58 20.002 11.02 19.92 27.98 34.68 40.003 15.46 28.86 40.76 51.22 60.004 18.20 35.32 51.56 66.90 80.005 20.00 40.00 60.00 80.00 100.00

Cumul = FUK 1950-1975/8

Father 1 2 3 4 51 8.98 12.06 14.86 18.24 20.002 13.60 22.12 29.54 35.58 40.003 15.96 28.80 43.28 52.46 60.004 18.82 38.80 57.56 69.60 80.005 20.00 40.00 60.00 80.00 100.00

Differencecumul F

SonFather 1 2 3 4 5

1 -3.04 -1.78 -0.32 -0.66 02 -2.58 -2.2 -1.56 -0.9 03 -0.5 0.06 -2.52 -1.24 04 -0.62 -3.48 -6 -2.7 05 0 0 0 0 0

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Conclusions

• Need to clarify meaning of meritocracy

• Need model of labour market that separates different elements

• Relation to mobility is complex

• Intergenerational mobility in UK either

∩ or