Inequalities in Spain: The social elevator has broken down in Spain: How the crisis has hurt upward mobility | Economy and business
“In my younger and more vulnerable years, my dad gave me some advice that I haven’t stopped rethinking ever since. Anytime you feel like criticizing someone, he told me, just remember that not all people in this world have had the perks that you have had.
The opening line of Gatsby the magnificent, F. Scott Fitzgerald’s masterpiece, shows two things: that the world is unjust and that it is unequal. This was the case in the America of the 1920s, and so it is in contemporary Spain.
Being born into a more educated family with more financial possibilities is virtually a guarantee of better employment prospects.
The social lift – the economic and social mechanisms that allow new generations to be better off than their parents and grandparents – is slow, and it continues to make long stops.
It would take a Spaniard born into a low-income family four generations (120 years) to reach the country’s average income. That’s the kind of timeline revealed by a new Organization for Economic Co-operation and Development (OECD) study, “A Broken Social Elevator? How to promote social mobility.
Although this period is shorter than the average for all OECD countries, there are signs that the situation has deteriorated in recent years. Being born into a more educated family with more financial possibilities is virtually a guarantee of better employment prospects.
“During the crisis, with similar training, people from disadvantaged socio-economic backgrounds suffered more. If your parents were manual workers, there’s a 50% chance that you are too, ”says Luis Ayala, who teaches economics at King Juan Carlos University.
Millions of working-class Spaniards seem doomed from birth to remain in precarious, poorly paid jobs with fewer social benefits. This system limits prosperity, economic growth and productivity, while talent is lost along the way. In a low-mobility economy, not only are we overpaying for the work of the privileged few, but we also try to thrive with low-skilled workers, warns David B. Grusky, director of the Stanford University Center on Poverty and Inequality.
American philosopher John Rawls said that people with similar skills and abilities, and an identical desire to use them, should have an equal chance of success regardless of their initial status.
But this is not the case in Spain, where mobility within the same generation is like a stationary elevator. A worker can spend his entire working life without moving up to the next level. According to the OECD, 66% of Spaniards among the poorest 20% of the population will remain stranded there. The average in the richest countries is 57%. “The problem is not so much that the elevator is not working, but that income inequality has increased, which is even worse. Above all, this has consequences for investment in human capital, ”warns Clàudia Canals, senior economist at CaixaBank Research.
Unfortunately, 21st century capitalism cannot be explained without the inequalities, which increased throughout the 1990s, trapping millions of families in rich countries at the bottom of the income scale.
Millions of working-class Spaniards seem doomed from birth to stay in precarious, low-paying jobs with fewer benefits
“The worrying thing about high levels of inequality is that they fragment society and create polarization,” says Branko Milanović, an economist who teaches at the Maryland University School of Public Policy.
And there are indications that greater income inequality goes hand in hand with lower mobility, adds Brian Nolan, professor of social policy at the University of Oxford. This is the Great Gatsby curve, a concept introduced by economist Alan Krueger when he was advising former US President Barack Obama. The curve shows a correlation between low social mobility and high inequality.
“In Spain, the reduction of inequalities among the poorest sections of society has slowed down sharply. Today, unskilled workers have reduced working days and lower incomes, which affects their children’s education, ”says Gonzalo García, market expert at Analistas Financieros Internacionales (AFI). This loss early in life will define the future of children. “The care and training that children aged zero to five receive play a key role in whether they will find good jobs and good wages in the future,” he says.
The scenario is even bleaker if we consider that the horizon holds the beginnings of a new crisis and an increase in unemployment. “When both parents lose their jobs in a Scandinavian country, it has very little impact on their children’s chances of going to university. But it is the reverse in the United States or in Spain ”, explains Markus Gangl, professor of sociology at Goethe University in Frankfurt. Indeed, the countries of Northern Europe protect their citizens with a generous system of unemployment benefits, scholarships and reduced tuition fees. In Spain, 617,000 households have no income and 2.6 million children are at risk of poverty.
“There are many repercussions to this stillness, and women are among the most affected, but if I had to choose one effect it would be the inability of talented people to thrive in the formal economy. Many of them find themselves in jobs below their potential or are forced to move abroad, ”explains Giles Alston, and expert at Oxford Analytica.
The OECD report speaks of “sticky floors” and “sticky ceilings” to illustrate how the poorest members of society remain trapped at the bottom of the social ladder while the rich stay at the top for a long time. Over a four-year period, the poorest 20% have “little opportunity to climb the ladder,” and 66% will remain trapped at the bottom.
“The problem of lack of mobility is very serious,” notes Stefano Scarpetta, Director of Employment, Labor and Social Affairs at the OECD. “This means, for example, that many investment opportunities go untapped and potential businesses never see the light of day.”
No quick fixes
There is no quick fix to accelerate the social lift. Economists offer more support for the unemployed, increasing productivity and improving economic output. But entire generations of Spanish policymakers have tried to make it work. Education should be on the rise, but there are elements that weigh it down. Spain has the highest early school dropout rate in the European Union, 19.9% in 2015.
The rich get richer
There are more and more wealthy people in the world, and their bank accounts are fuller than ever. In 2018, 42.2 million people held financial assets worth $ 1 million or more – 2.3 million more than in 2017, according to Credit Suisse’s latest Global Wealth Report. These fortunes combined represent 317 trillion euros, the equivalent of 300 times the GDP of Spain.
The United States tops the table with 41% of all millionaires, while China is the country where this wealthy club is growing the fastest: 186,000 new millionaires last year. These figures stand in stark contrast to the fact that 64% of the world’s adult population lives on less than $ 10,000.
But even education is not enough to ensure upward mobility. “In my studies, I discovered that more unequal countries like Italy, the United Kingdom or Spain still have a wage gap between people with the same level of education, which favors those who come from more favored, ”explains Michele Raitano, who teaches political economy at La Sapienza University in Rome. “What matters is what the market rewards. If the market only values the productive skills of people, the best policy is to assimilate these skills, for example by encouraging the education of talented young people from disadvantaged backgrounds or by mixing students from different social backgrounds.
This reality contradicts the oft-repeated message that if one works hard and gets a good education, good job prospects and a prosperous future will follow. The privilege of the elites remains strong. In Britain, a system of 2,600 private schools produced 29% of all prime ministers and 74% of judges.
Spain has its own exclusive business schools. “These are drivers of inequality,” admits Gayle Allard, who teaches at IE Business School. “It’s an expensive education. We provide scholarships and loans, but it remains elite education. “
“Sometimes, although there is no equal opportunity, if the economy grows very quickly, it is possible to compensate for it,” said Jorge Rodríguez Menés, who teaches political and social sciences at the university. Pompeu Fabra.
If education is not enough and economic growth is not a guarantee of success, what to do? “The best strategy for increasing mobility is to reduce inequalities within families,” says Suresh Naidu, professor of economics at Columbia University and one of the founders of the Economics for Inclusive Prosperity network.
Spaniards have little trust in the merit system: 53% of those polled in the OECD study believe that a good education and parents with higher incomes are essential factors for success in life. This is much more than the OECD average of 37%. It is perhaps not so surprising in a country with revolving doors, with families which got richer under Franco, and where family contacts remain the best professional network.
“It is true that family nepotism is still alive and well, but the job market is changing a lot. Children are increasingly not following in their parents’ professional footsteps, because perhaps these jobs no longer exist in the first place, ”explains Clàudia Canals of CaixaBank Research.
“Nepotism and the absence of a merit-based system have a direct impact on productivity and potential growth, and this remains one of the outstanding challenges for Spanish companies, universities and also politics”, explains economist José Carlos Diez.
English version by Susana Urra.