Relative mobility

What Is Relative Mobility?

Relative mobility is a concept within Socioeconomic Mobility that measures how an individual's position in an economic or social hierarchy changes compared to others in that same hierarchy. Unlike measures that focus on overall economic improvement, relative mobility specifically assesses shifts in rank or percentile within a given income distribution or wealth distribution. It addresses the question of whether an individual or a group moves up or down the economic ladder relative to their peers or their parents, indicating the degree of fluidity or rigidity in a society's class structure.

This concept is crucial for understanding economic inequality and economic opportunity within a society. When relative mobility is high, it suggests that an individual's starting point has less bearing on their ultimate economic position. Conversely, low relative mobility indicates that an individual's economic standing is largely determined by their initial socioeconomic status.

History and Origin

The study of relative mobility gained prominence as economists and sociologists sought to understand the dynamics of social stratification and inequality. While concepts of social hierarchy have existed for centuries, the systematic measurement and analysis of relative mobility became more feasible with the advent of large-scale data collection. Early studies often focused on occupational status, but with improving data availability, attention shifted to income and wealth.

Significant academic contributions, particularly in the mid-20th century, laid the groundwork for modern analyses of mobility. The National Bureau of Economic Research (NBER) and the Organisation for Economic Co-operation and Development (OECD) have been instrumental in advancing the research and data collection on social and economic mobility across countries. Recent studies on intergenerational mobility, including those published as NBER working papers, have explored historical trends in relative mobility over two centuries, often questioning earlier narratives about changes in mobility over time.¹³,¹²

Key Takeaways

• Relative mobility measures an individual's change in rank within an economic hierarchy, such as income or wealth, compared to others.
• High relative mobility suggests greater economic opportunity and less influence of starting conditions on future outcomes.
• It is a key indicator for assessing the fairness and fluidity of a society's economic structure.
• Low relative mobility can indicate persistent economic inequality across generations.
• Measuring relative mobility often involves comparing an individual's position to that of their parents (intergenerational) or tracking changes within an individual's lifetime (intragenerational).

Formula and Calculation

Relative mobility is typically not represented by a single universal formula but rather by statistical measures that quantify the association between an individual's starting rank and their ending rank within a distribution. Common approaches involve:

1. Rank-Rank Elasticity: This measures the percentile-to-percentile association. For intergenerational income mobility, it would quantify how much a child's income percentile changes for each percentile change in their parents' income. A lower elasticity indicates higher relative mobility. If (P_c) is the child's income percentile and (P_p) is the parent's income percentile, the rank-rank elasticity can be conceptualized as:
   $E_{rank} = \frac{\Delta P_c}{\Delta P_p}$
   A value closer to 0 indicates greater mobility, while a value closer to 1 suggests less mobility (i.e., a child's rank strongly correlates with their parents' rank).

2. Transition Matrices: This method divides the income distribution (or other economic measure) into segments, such as income quintiles, and calculates the probability of an individual moving from one segment to another. For example, a transition matrix might show the percentage of children born into the bottom quintile who end up in the top quintile as adults.

These methods rely on comprehensive data tracking individuals or households over time, often requiring linking records across generations to understand intergenerational mobility.

Interpreting Relative Mobility

Interpreting relative mobility involves understanding the degree to which an individual's economic outcomes are determined by their starting conditions. A society with high relative mobility is often seen as one where effort and talent are more significant determinants of success than one's background. This implies that individuals from disadvantaged backgrounds have a real chance at upward mobility. Conversely, low relative mobility suggests a more rigid class structure, where individuals are likely to remain in the same relative economic position as their parents or their initial starting point.

For instance, if a study finds that children born into the poorest 20% of the population have a very low probability of reaching the top 20%, it indicates low relative mobility. Such findings often prompt discussions about systemic barriers, access to economic opportunity, and the need for policy interventions to foster greater economic fluidity. The OECD highlights that in an "average OECD country," it could take five generations for children of poor families to reach the average income in their country, underscoring significant intergenerational persistence in relative economic positions.¹¹

Hypothetical Example

Consider two hypothetical countries, A and B, each with 100 individuals ranked by annual income from 1 (lowest) to 100 (highest).

Country A (High Relative Mobility):
A child born to parents in the 20th income percentile (meaning 80% of the population earns more) has a 40% chance of reaching the 50th percentile or higher by adulthood. Similarly, a child born to parents in the 80th percentile has a 30% chance of falling to the 50th percentile or lower. This indicates that while parental income provides a head start, it does not guarantee a similar future rank, and there is considerable movement up and down the income distribution.

Country B (Low Relative Mobility):
In contrast, a child born to parents in the 20th income percentile has only a 10% chance of reaching the 50th percentile or higher. A child born to parents in the 80th percentile has only a 5% chance of falling to the 50th percentile or lower. In Country B, an individual's relative economic position is largely "sticky"; those born into lower ranks are likely to remain there, and those born into higher ranks are likely to retain their advantage. This scenario points to limited economic opportunity for those at the bottom and strong persistence of privilege at the top.

Practical Applications

Relative mobility is a vital metric for policymakers, economists, and researchers across several domains:

• Social Policy and Redistribution: Understanding patterns of relative mobility informs discussions about the effectiveness of social programs, education initiatives, and tax policies in promoting fairness and social cohesion. If relative mobility is low, it suggests that existing structures may perpetuate disadvantage, leading to calls for policies aimed at broadening economic opportunity.
• Education and [Human Capital](https://diversification.com/term/human-capital] Development: Studies on relative mobility often highlight the critical role of education and skill development in improving an individual's life chances. Policies aimed at ensuring equitable access to quality education can be seen as direct interventions to boost relative mobility.
• Labor Market Dynamics: Analyzing relative mobility can reveal how changes in the labor market, such as the decline of certain industries or the rise of the gig economy, affect different segments of the population. It can inform vocational training programs and employment support.
• Housing Policy: The cost and availability of housing significantly impact an individual's ability to improve their financial well-being and their relative economic position. Research has shown that increasing housing supply, even for higher-income residents, can slow rent growth for older, more affordable units, which disproportionately benefits low-income renters and can influence their economic mobility.¹⁰,⁹ This highlights how housing policy can indirectly affect relative mobility.
• Monitoring Economic Growth Benefits: While overall economic growth might increase the standard of living for everyone, relative mobility indicators show whether the benefits of that growth are distributed in a way that allows individuals to change their economic standing relative to others.

Limitations and Criticisms

Despite its importance, relative mobility has several limitations and criticisms:

• Data Challenges: Measuring relative mobility accurately requires robust, longitudinal data that tracks individuals or families over decades, often across generations. Such data is expensive to collect and maintain, and historical data can be incomplete or inconsistent.⁸
• Focus on Rank, Not Living Standards: Relative mobility focuses solely on rank changes. It does not directly tell whether individuals are experiencing an absolute improvement in their standard of living. A person might move up in rank in a declining economy, but still be worse off in absolute terms.
• Methodological Variability: Estimates of relative mobility can vary significantly based on methodological choices, such as the specific measure of economic status (income vs. wealth), the age at which individuals are compared, and the statistical techniques employed.⁷,⁶ This makes cross-study comparisons challenging.
• Ignores Initial Circumstances: While relative mobility measures movement within a distribution, it doesn't always capture the inherent disadvantage of starting at the very bottom. Even with some relative movement, significant disparities in starting points can persist, requiring a broader view of economic opportunity.
• Causality vs. Correlation: Studies of relative mobility often demonstrate correlations between parental and child outcomes, but establishing direct causality between specific factors and mobility is complex. Many intertwined factors, from access to education to inherited wealth, contribute to an individual's eventual economic position.

Relative Mobility vs. Absolute Mobility

Relative mobility and absolute mobility are two distinct but complementary measures within socioeconomic mobility. The primary difference lies in what they measure:

• Relative Mobility: Focuses on an individual's rank or position within an economic hierarchy. It asks whether someone moves up or down the ladder compared to others. For example, did a child born into the bottom quintile surpass the income of a child born into the middle quintile? High relative mobility implies that one's starting position does not strictly determine one's future position.
• Absolute Mobility: Focuses on whether an individual's actual economic well-being improves or declines over time, often compared to their parents or a previous generation, without regard to their rank. It asks whether a child earns more (in real, inflation-adjusted terms) than their parents did at the same age. It is about an upward or downward shift in actual income or wealth.⁵

It's possible for a society to have high absolute mobility (everyone's income is rising) but low relative mobility (everyone stays in roughly the same rank order), or vice versa. For example, during periods of strong economic growth, most people might experience an increase in their real income (high absolute mobility). However, if the richest individuals see disproportionately larger gains, the relative positions might remain largely unchanged, indicating low relative mobility. Conversely, in a stagnant economy, there could be significant relative shifts if some individuals gain at the expense of others, even if overall absolute incomes are not growing.

FAQs

How does wealth inequality relate to relative mobility?

High wealth distribution tends to correlate with lower relative mobility. When wealth is highly concentrated, it can create significant advantages for those at the top, such as better access to education, networks, and investment opportunities, making it harder for individuals from less wealthy backgrounds to improve their relative economic standing. The Federal Reserve provides data illustrating the distribution of household wealth in the U.S., showing significant concentration.⁴,³

What factors typically hinder relative mobility?

Factors that can hinder relative mobility include limited access to quality education, unequal access to healthcare, geographic disparities in economic opportunity, systemic discrimination, and persistent poverty reduction challenges. These issues can create "sticky floors" at the bottom and "sticky ceilings" at the top of the economic ladder.

Can government policy interventions improve relative mobility?

Yes, government policy interventions can influence relative mobility. Policies aimed at equalizing access to education, investing in early childhood development, providing financial literacy training, and addressing discriminatory practices in the labor market can all contribute to fostering greater relative mobility by expanding opportunities for disadvantaged groups. The OECD actively studies and advocates for such policies.²,¹