Mobility is a productivity policy: wasted ability is inefficiency.
Andrew Leigh, Assistant Minister for Productivity, Competition, Charities and Treasury, has argued that reducing economic inequality and increasing social mobility can generate broad economic benefits. In a speech at the Australian National University, Leigh stated that a productive economy discovers, nurtures, and matches talent to suitable tasks—and when these mechanisms are weak, mobility is lower.
The Geography of Opportunity
Where a child grows up has a causal effect on adult income, education, marriage, and fertility. A 2020 study by Nathan Deutscher found these effects are larger during teenage years, with suggestive evidence of peer influence.
Leigh noted that neighborhoods with more cross-class connection generate higher rates of mobility for poorer children. However, higher housing costs push lower-income households out of wealthier areas, concentrating opportunity.
The Persistence of Advantage
Research by Bell et al. (2019) reveals a stark disparity: children of parents in the top 1% income are 10 times more likely to become inventors than those with below-median incomes, even when math performance is similar.
The Productivity Commission's 2024 Findings on Australian Mobility
The Commission's report found:
- Intergenerational earnings elasticity of 0.197 and rank-rank slope of 0.176.
- Income is about half as heritable as height.
- Mobility is greatest for middle-income households; lower at the top and bottom.
- Children with parents in the bottom 10% are 2.5 times more likely to stay there than reach the top 10%.
- Children with parents in the top 10% have a 20% chance of remaining there; only 7% drop to the bottom 10%.
- Wealth is stickier than income; over 40% of people in the top or bottom two deciles in 2001 remained there by 2022.
Despite these figures, Australia's intergenerational mobility is higher than that of the United States.
The Cost of Packed Opportunity
Leigh suggested that factors such as location, peer effects, access to capital, and networking contribute to low mobility. He argued that if talent is spread widely but opportunity is packed tightly, low mobility is both unfair and wasteful.
Potential Policy Levers
As possible ways to improve mobility, Leigh mentioned:
- Strong schools
- Mentoring and internships
- Enrichment programs
- University-community links
- Deliberate efforts to broaden social opportunities for children from modest backgrounds