Social mobility—or the lack thereof—occupies a unique place in the discussion of social exclusion. Whereas most measures of social exclusion depend on readily observed indices of well-being at discrete points in time, social mobility additionally involves largely intangible but undeniably powerful factors such as the memories, hopes, and expectations of individuals and families over time. Two societies with similar income distributions, for example, can have different welfare levels depending on the degree of social mobility; poverty and other manifestations of social exclusion are more bearable when individuals have a reasonable expectation of improvement in their own circumstances—or those of their children. On the basis of this understanding, the economic analysis of social mobility aims to track the evolution of income distributions over time, considering individuals over the course of a lifetime (intragenerational mobility) and families over generations (intergenerational social mobility).
These concerns are particularly important in Latin America and the Caribbean, which has, as shown in Figure 6.1, the greatest income inequality of any region in the world. Of course, the data in the figure represent only “snapshots” of conditions at one point in time. Over the longer term, income distributions may change much differently across countries because of economic growth; changes in human capital among different groups and in the population as a whole; changes in returns to assets, including human capital; and changes in labor market opportunities. All of these developments may systematically benefit or harm certain groups of the population and thus prevent societies from ensuring equal opportunities for all.
Depending on the importance of inherited abilities—a much-debated issue—intergenerational social mobility in a country is closely related to the degree of equality of opportunities in that country. Higher intergenerational mobility is expected to decrease the influence of socioeconomic background on economic achievement in adulthood. As Friedman (1962) points out, income inequality is much more of a concern in a rigid system in which families stay in the same position in each period than in societies that have the same degree of inequality but also have greater mobility, equality of opportunity, and dynamic change.
The perceived fairness of social mobility can present major challenges to social cohesion. If “winners and losers” or “haves and have-nots” owe their status to causes largely independent of ability and effort, economic growth is likely to be slowed as a result of inefficient allocation of human and other resources, and inequity in the distribution of income and other benefits is a contributing factor to political instability—and even violence—among citizens who do not feel that they have a stake in existing social arrangements (see Chapter 10).
Holding total income and income distribution constant, relative social mobility can mitigate the effects of income inequality and poverty, as it implies that wealthier individuals change places with poorer individuals. As noted by Graham (2005a, 2005b) and Graham and Pettinato (2001), tolerance of inequality seems to be higher where there are perceived (even if not real) prospects for upward mobility. However, downward mobility is more likely to be a source of frustration and unrest than persistent poverty.
This chapter analyzes social mobility in Latin America and the Caribbean and its impact on social exclusion. Of particular interest are the impact on social mobility of the expansion of education, urbanization, and the performance of labor markets. Although the chapter focuses primarily on intergenerational social mobility, intragenerational social mobility receives attention as well, as recent developments in labor markets and social policies have highlighted the dynamics of labor income.
MEASURING SOCIAL MOBILITY
Social mobility is usually defined as the way individuals or groups move upward or downward from one status or class position to another within the social hierarchy. Sociologists generally view social mobility in terms of movements between social classes or occupational groups. Although social class might provide a better overall measure of life chances, definitions of social class can lack precision and are prone to perceptual biases. Research in economics generally concentrates on earnings or income mobility, which represents a direct measure of resources, at least at a specific point in time, as do other quantitative measures such as educational attainment. It should be noted, however, that social mobility has no generally accepted definition other than a disruption in the link between initial conditions and individual outcomes. A more detailed discussion of these definitions is presented in Box 6.1.
WHAT IS THE LEVEL OF SOCIAL MOBILITY IN LATIN AMERICA AND THE CARIBBEAN?
Although data on intergenerational social mobility are widely available only for developed countries, research on the basis of available data in Brazil, Chile, and Peru suggests that social mobility in Latin America and the Caribbean is lower than in developed countries, including those with the lowest levels of mobility, the United States and the United Kingdom. Estimates for these three countries, as well as for developed countries, are presented in Figure 6.2. Intergenerational social mobility is usually measured by how much of the difference across permanent incomes in a parent generation persists across the incomes of their children in adulthood (more technically, how large is the intergenerational income elasticity between cohorts of children and parents). Additional evidence for Chile shows that, as a result either of increased mobility or of life cycle effects on earnings, mobility seems to be higher for younger cohorts (see Figure 6.3). Dunn (2003, 2004) finds a similar pattern for Brazil.
Caution must be exercised, however, in interpreting Figure 6.2 to gauge differences in social mobility across countries using intergenerational income elasticities. Countries differ significantly in the extent to which family economic status is related to children’s labor market outcomes. From the child’s perspective, however, the relationship between parents’ and children’s labor market outcomes provides a useful indicator of the persistence of social exclusion within a particular country.
An important caveat must be interjected at this point. Most research to date on intergenerational income mobility has focused on the relationship between fathers’ and sons’ incomes. This is because women’s income can be biased, given issues of labor force participation as well as women’s entrance into and exit from the labor market because of maternity and other life cycle issues that frequently require women to take on additional work in the home, such as taking care of an elderly parent or ill family member. As argued by Chadwick and Solon (2002: 335), the “neglect of daughters has stemmed partly from unconscious sexism and partly from a recognition that, in a society in which married women’s labor-force participation rates are lower than men’s, women’s earnings may often be an unreliable indicator of their economic status.”
Persistence at the Extremes
Levels of mobility in a society vary among income groups. Whereas higher levels of upward and downward social mobility exist in the middle ranges of income distributions, there is far less mobility among the richest and poorest groups. Lack of upward mobility among the poorest populations, which may be associated with poverty traps, is particularly prevalent among excluded populations (such as Afro-descendants in Brazil, as illustrated in Table 6.1) and in poorer regions. Such social immobility can be associated with exclusion from basic services and markets, resulting from geographical isolation, segregation, or labor market discrimination. In addition, because investment in children depends upon family resources, the credit constraints of poorer families reinforce immobility.
Lack of downward mobility among the richest segment of the population is likewise clearly associated with certain traits, such as membership in a historically privileged racial or ethnic group (such as whites in Brazil) and residence in more-developed regions. The richest part of the population further enjoys greater access to better-paying jobs through greater access to higher education and “positive discrimination” in the form of various social networks. Social immobility at the high and low ends of the income distribution in Chile and Brazil, with comparable figures for other countries, is illustrated in Table 6.2.
Brazil displays a strong intergenerational persistence of wages at both ends of sons’ conditional wage distribution. This implies that the wage mobility is low at both tails of the distribution. In the case of Brazil, the probability that the sons of fathers in the lowest quintile will remain in that quintile is 35 percent, whereas the probability that the sons of fathers in the richest quintile will remain in the richest quintile is 43 percent (Ferreira and Veloso, 2004). The lack of mobility at the tails of the income distribution may be a response to two sources of exclusion: the lack of opportunity for the children of the poor to acquire better skills and improve their employment prospects and the reproduction of socioeconomic privileges among the children of the “well-off.” These figures also imply that there is more upward mobility from the bottom of the earnings distribution than downward mobility from the top: it is more likely that a poor person will become richer than that a rich person will become poorer.
Upper-tail immobility (inability to enter the upper classes) is usually linked to low levels of access to higher education opportunities or to segmentation in labor markets. Institutions such as credit markets, government loan guarantee programs, and public schooling are important in determining a society’s degree of income mobility. Ferreira and Veloso (2004) present nonlinear estimates of the persistence of wages to provide a better idea of mobility across generations. Their results indicate that 62 percent of sons whose fathers’ wages are below the median end up in the same wage group as their fathers and that this fraction is much lower (53 percent) for sons whose fathers’ wages are above the median. This is consistent with the borrowing constraints theory, since rich families are less likely to be financially constrained in investing in their children. Andrade et al. (2003) also find that borrowing constraints play a large role in determining the extent of intergenerational mobility in Brazil.
Additional Factors Related to Intergenerational Mobility
Other studies have identified further constraints on intergenerational mobility. Bourguignon, Ferreira, and Menéndez (2003) find that 20 percent of income inequality in Brazil (as measured by the Gini coefficient) is due to inequality of initial circumstances such as parental schooling, parents’ occupation, and race. Núñez and Tartakowsky (2006) find a similar magnitude for income inequality in Chile.
Benavides (2002) focuses on the labor market opportunities of sons compared to their fathers in urban Peru and finds that, even though increases in migration and the expansion of formal education were supposed to increase mobility, these factors have largely been neutralized by a lack of change in economic and cultural relations. Although there is considerable dynamism between and among the medium-low and low social classes, there is no significant movement between high and low social classes.
Intragenerational Mobility
A range of issues must be considered in analyzing intragenerational mobility. Measurements of such mobility usually focus on earnings mobility, which is closely linked with the economic cycle, especially over short periods of time. The macroeconomic framework is thus crucial in determining earnings mobility, even after individual characteristics are controlled for. Any analysis must further take into account that high levels of intragenerational mobility are not necessarily desirable, as they imply high risk and variability in labor earnings. Likewise, very low levels of mobility may be related to poverty traps and are undesirable as well.
Several other factors must also be assessed. First, it must be assumed that adults will accumulate little or no human capital beyond what they currently have. Second, it must be borne in mind that individuals with the highest human and physical capital additionally have access to political and social connections as well as credit. Third, individuals and groups with low levels of education are vulnerable to poverty traps and are likely to remain at their (low) current social levels. Fourth, individuals aim to keep their consumption as smooth as possible, avoiding too much variance (or at least decline) in their lifetime income. Finally, in a globalized and technology-dependent world, there is an increase in demand for high-skilled workers, which can increase opportunities for some members of the population but intensify the exclusion of others (see Chapter 5).
Research on intragenerational mobility in the region finds no large-scale trend. Considering Argentina and Mexico from 1988 to 1996, Wodon (2001) finds no evidence of increased mobility overall in either country through time, although mobility in Mexico has increased among the young and the less educated. In recent work on Argentina, Mexico, and Venezuela, Fields et al. (2005) compare income mobility patterns during positive and negative growth spells and find no evidence to support the hypothesis that the groups that experience large earnings gains when the economy is growing are the same ones that experience losses during recessionary periods. Additionally, they attempt to determine whether individuals who start from a privileged position are those who experience the greatest gains in good times and the greatest losses in bad times. This appears to be the case in Mexico, but not in Argentina and Venezuela.
CURRENT PERCEPTIONS OF SOCIAL MOBILITY AND MERITOCRACY
Given that people respond to incentives, perceptions of social mobility and meritocracy are fundamental for the long-run prospects of economies and societies. Rational individuals will have little incentive to work hard and invest in human and physical capital if they do not believe that they have good chances of moving upward in society. Individuals who feel trapped in a situation with no prospect for improvement have fewer disincentives to engage in dysfunctional and antisocial behavior, since they have little or nothing to lose. At the same time, without investment in human capital and hard work, there are no chances for these individuals to move upward, which means that the poor will remain poor.
Figure 6.4 shows the relationship between social mobility and income inequality (measured with a Gini coefficient adjusted to be comparable among countries). As argued by Andersen (2000), there is no clear relationship between social mobility and inequality. However, Brazil, Colombia, Ecuador, and Guatemala are among the most “unfair” countries, with high inequality and low mobility.
Under these circumstances, it is hardly surprising that Latin Americans are generally pessimistic about their prospects for mobility and generally do not believe that their societies are meritocratic. An analysis of the Latinobarometer opinion survey by Gaviria (2005) presents some of the more telling statistics from this annual poll of seventeen countries in the region. As shown in Table 6.3, 74.1 percent of individuals surveyed in 2000 indicated that opportunities to overcome poverty are unequal, and 63.6 percent thought that poverty is not a consequence of lack of hard work. Conversely, 71.5 percent of the survey sample attributed success to personal connections.
Figure 6.5 presents perceptions of past and future mobility. According to the figure, Latin Americans believe that the past generation (i.e., their parents) was somewhat better off than the current generation. For perceptions of “past” mobility, the bars in the figure represent the difference between how one perceives oneself compared to one’s parents. On the other hand, for “future” mobility, the bars show the difference between the social status of the next generation (one’s child) compared to one’s own social status. As the figure indicates, there are expectations among Latin Americans of upward social mobility for the future generation.
WHAT MAKES LATIN AMERICA AND THE CARIBBEAN LESS MOBILE? DETERMINANTS OF SOCIAL MOBILITY IN THE REGION
The level of intergenerational social mobility in a society is determined by a wide range of factors. Known influences include the following:
• Variance of effort. Some individuals work harder, for longer hours, or more effectively than others. Effort can be affected by many other factors, however, and measurements and perceptions of effort can be affected by observers’ biases.
• Degree of inherited ability. Separating inherited ability from other factors poses an ongoing challenge, and both social science and biology continue to address the roles of “nature” and “nurture.” Nonetheless, the role of inherited abilities cannot be disregarded in areas of endeavor such as music and sports, and real if less obvious inherited abilities may be expected to influence other activities as well.
• Importance of family background. The term “family background” encompasses a wide variety of factors such as parental education, parental income, and cultural background, factors that can be reinforced across generations by assortative mating (i.e., marriage and parenthood among individuals of the same social class and/or income level). These factors can influence cognitive and noncognitive abilities, human capital accumulation, and employment opportunities. The means for transferring advantages and disadvantages across generations encompass such disparate factors as prenatal and infant nutrition, home environment and education, and access or lack of access to social networks.
• Market failures (especially in financial markets) and credit constraints. Families whose members cannot borrow to finance education, business start-ups and expansions, or housing remain “stuck” from one generation to the next in a suboptimal equilibrium of low earnings and investment.
• Exclusion from the supply of basic services and access to markets. Families subject to geographical isolation or various forms of discrimination are likely to have access to a low quantity and quality of services, including education and basic infrastructure, and enjoy only limited access to labor and other markets.
• Segmentation in job creation in each occupational stratum. Labor market segmentation can reduce mobility, as individuals belonging to excluded groups have less access to clusters of jobs characterized by higher job quality, earnings, benefits, and union coverage.
• Lack of safety nets and compensatory programs. Families who lack the protections of unemployment insurance and social security mechanisms must restrict their consumption and investment in response to shocks, including unemployment, illness, and natural disasters. The resulting missed opportunities for education, savings, and investment have ripple effects that can extend for generations.
It is almost impossible to estimate the influence of each of these factors, even in developed countries, in a rigorous way. Some factors, though, are particularly relevant to Latin America and the Caribbean: the role of education and the effects of the expansion of education coverage and education opportunities, urbanization and certain patterns of regional development, and the effects of recent labor market developments (macroeconomic stabilization, globalization, and technical change).
Education
Many Latin American countries have expanded educational coverage and access to formal education for all social levels. Nonetheless, quality matters as well, and the low quality of public education, together with the opportunity cost of going to school, results in high failure and dropout rates in the early years of secondary education.
Peru, for example, has undergone a massive expansion of its educational system. Benavides (2004) argues, however, that the country is experiencing only a weak version of meritocracy, with little benefit for social mobility; education, though directly linked with job placement, is not completely independent from social origins. Furthermore, as pointed out by Escobal, Saavedra, and Torero (1998), there are significant differences in access to education among social classes in Peru, especially in rural areas.
Although data remain scarce for Latin America and the Caribbean, some researchers have attempted to study social mobility by using educational indicators. If family background is important in determining educational outcomes, one can argue that low social mobility results from the role of family background in providing opportunities for obtaining higher education. Even though educational mobility is only one of the channels through which earnings mobility is transmitted across generations, it is one of the main determinants of social mobility in meritocratic societies.
Not surprisingly, evidence from the region shows that children from high-income and more-educated parents are more likely to do better in life. One of the most widely used indicators of intergenerational educational mobility is estimates of schooling elasticity (the coefficient of the correlation between child and parent educational attainment, which measures the association between the educational achievement of cohorts of sons and fathers). As shown in Table 6.4, almost all available coefficients for Latin American and Caribbean countries are higher than those for developed countries, indicating that levels of mobility are lower in the region than in developed countries. The exception in the region is Chile (Table 6.5), where schooling elasticity has been decreasing, which implies more mobility for younger cohorts.
Other studies echo these results. Studying sixteen countries in the region, Dahan and Gaviria (2001) find that the correlation between parents’ and children’s education is 1.8 to 3 times higher in Latin America than in the United States. Andersen (2001) assesses social mobility via a measure of the importance of family background for the educational level of teenagers in eighteen countries of the region, using an indicator equal to one minus the coefficient of the correlation between family background and child schooling gap (higher values of the indicator imply less correlation). She finds that, as shown in Figure 6.6, Chile, Argentina, Uruguay, and Peru display higher social mobility, whereas Guatemala and Brazil are among the least mobile societies.
Behrman, Gaviria, and Székely (2001) also infer lower levels of social mobility in the region by finding low levels of educational mobility compared with those of the United States. They examine the intergenerational transmission of educational attainment in four Latin American countries and the United States. Their results indicate that the intergenerational transmission of educational attainment in Brazil, Colombia, Mexico, and Peru is higher than in the United States (see Figure 6.7). The results of Behrman, Gaviria, and Székely are corroborated by Gaviria (2005) using data from the Latinobarometer and the U.S. General Social Survey (see Figure 6.8). Behrman, Gaviria, and Székely also illustrate gender differences in educational mobility in the region compared with the United States (see Figure 6.9). Their estimates for the intergenerational transmission of educational attainment are higher for men in Brazil and Colombia, indicating that women are more mobile in these two countries. Men tend to be more mobile in the United States, Mexico, and Peru, though there is no great variance between the estimates for men and women in the United States and Brazil.
Trends in the distribution of intergenerational educational mobility for Mexico show that parents’ education plays an important role in children’s education, though some changes may be occurring. Binder and Woodruff (2002) argue that in urban Mexico, for example, the evidence on educational mobility is mixed. On one hand, the decrease in the intergenerational educational correlation in cohorts presented in Table 6.6 suggests an increase in intergenerational mobility over time; on the other hand, that rate of increase appears to slow or even reverse for the cohorts 23–29 years of age. An additional interesting pattern derives from a gender comparison for urban Mexico, as older women are revealed to have greater intergenerational mobility when compared to men.
Returns to education are very high in Latin America, which implies that differences in schooling eventually translate into differences in earnings. For example, for the case of Brazil, there is evidence that returns to education increase with levels of parental schooling (Lam and Schoeni, 1993). These factors are linked to family connections and better employment opportunities, which indicates that the intergenerational correlation for earnings can be even higher than that for levels of schooling. For Brazil and Colombia, Behrman, Gaviria, and Székely (2001) find very low educational mobility for children of parents with low levels of education (see Table 6.7).
Educational Quality and Cognitive Outcomes
Most studies on the relationship between education and intergenerational social mobility look at years of schooling completed. However, increasingly the evidence for the region shows important gaps in educational quality and cognitive outcomes between high- and low-income children. Researchers and policymakers are thus considering “equality of opportunities” in order to identify the causal processes determining the long-term labor market outcomes of children. Generational earnings mobility, understood in the context of equality of opportunities, thus offers an overall indicator of children’s social inclusion. In practical terms, there is a need for measurements of the extent to which children have equal opportunities in life regardless of their social status or family background (see, for example, Corak, 2006, and Roemer, 2004). Since children start building the bases for human capital accumulation and development of cognitive abilities in early childhood, the effects of parental income on early childhood development, and in turn on human capital accumulation and productive capacity, must be taken into account.
Many studies have found that household economic resources, variously defined, are important determinants of children’s health, which influences children’s educational attainment. Rubalcava and Teruel (2004) find that maternal cognitive ability is an important factor in determining children’s height—a proxy for overall health—and early childhood health is in turn eventually linked with schooling. Studying Mexican households, Mayer-Foulkes (2004) likewise finds that early childhood health and nutrition are strongly associated with the probability of continuing schooling later in life. Early childhood development also affects the productive capacity of adults through the effects of infant malnutrition and early infection on cognitive ability and various adult ailments.[1] Moreover, the medical literature suggests that deficits in early childhood are difficult if not impossible to offset later in life, particularly because of irreversible processes in brain formation.
Urbanization and Regional Development
Although recent research has not emphasized the importance of spatial issues (see, for example, Cass, Shove, and Urry, 2005), exclusion that results from a combination of urbanization, geographical isolation, inadequate transportation, and limited means of communication reinforces the existence of mobility traps in certain regions. The lower dynamism of rural and isolated poor areas, for instance, should imply relatively low levels of income mobility, and countries with higher percentages of rural population should similarly be expected to have lower levels of income mobility. Although the urbanization process and increased opportunities for migration from poorer areas may be expected to promote higher mobility, this expectation can be frustrated by development that is concentrated in certain regions and not accompanied by adequate migration opportunities into these regions from poorer areas.
Problems of this nature have attended Brazil’s “conservative modernization” pattern, characterized by the nonintegration of large segments of the population into modern sectors of the economy, society, and political system (see, for example, Gacitúa Marió and Woolcock, 2005a). The effects extend to regional development; one can identify distinct mobility patterns according to regional development and urbanization. These patterns seem to translate into lower social mobility in less-developed regions, as Ferreira and Veloso (2004) (see Table 6.8) find that income persistence varies substantially across regions.
Figure 6.10 depicts the positive relationship between social mobility and urbanization rates. This positive relationship may arise from the fact that for highly urbanized countries, it is easier to promote social mobility through access to education and labor market opportunities when children and workers are clustered in urban areas. Migrants to urban centers, especially those from isolated rural areas, tend to have broader economic and human capital opportunities than their parents, which should translate into upward social mobility. It is important to take into account, however, that urbanization is not a panacea, as it does not necessarily help all population groups. Using a social mobility index based on educational attainment levels of teenagers in eighteen countries, Andersen (2001) finds that, with the exception of those in Bolivia, urban teenagers are not necessarily more mobile than their rural counterparts; that is, rural and urban teenagers are affected in approximately the same way by family background.
Labor Market Developments
The most important determinant of social mobility is the human capital that individuals bring to the labor market. However, labor market dynamics can also alter levels of social mobility, as returns to human capital vary with changes in the supply of and demand for certain groups of workers, either strengthening or weakening the effect of greater education opportunities on mobility. In addition, discrimination and labor market segmentation can lower social mobility, even in countries with ample access to education, by reducing the labor returns of educated but excluded groups.
Prospects for improved social mobility are further complicated by the fact that, with some exceptions, the region’s labor markets have in recent decades suffered from stagnant wages, rising wage inequality—mostly associated with high returns to education—and increasing levels of unemployment. Possible explanations for these phenomena have been explored in the previous two chapters of this report. Researchers generally agree that the region’s low wage growth stems primarily from an absence of growth in productivity, particularly among low-skilled workers.
Changes in labor markets have had a variety of effects on social mobility. As shown in Figure 6.11, national changes in the inequality of household income (i.e., the income of all members of a particular household) have displayed varying patterns, decreasing in some countries (Brazil, Colombia, El Salvador, Honduras, Panama, and Uruguay), increasing in others (Argentina, Ecuador, Costa Rica, Paraguay, and Venezuela), and remaining relatively constant in still others (such as Mexico and Chile). On the other hand, inequality in wages (i.e., the labor income of individual workers) has increased in the majority of countries in the region (Figure 6.12), decreasing only in Brazil and Colombia, and remaining unchanged in Argentina, Chile, Guatemala, and Honduras.[2] For purposes of simplicity, inequality in wages, rather than household income, is emphasized here.
Given that most of the region’s population depends on labor income as its primary source of income, it is important to determine the conditions under which changes in income inequality, and more specifically in wage inequality, translate into changes in social mobility. Whether worsening inequality will correspond to lower social mobility clearly depends on the conditions underlying changes in labor mobility and how they affect families at different socioeconomic levels.
Although data on these issues remain limited, some hypotheses can be advanced. With respect to returns to education, under low levels of intergenerational mobility in educational attainment, a widening gap of returns to skills should increase inequality and reduce social mobility as the advantages in labor market outcomes for some families increase over time. An increase in intergenerational educational mobility, on the other hand, should ameliorate the effects of widening gaps in returns to skill.
The available evidence suggests that the widening of gaps in returns to skills contributes to increased income inequality in some of the countries of the region that have experienced increases or no changes in wage inequality; in Mexico, for instance, the widening gap in returns to education explains 25 percent of the increase in income inequality between 1984 and 1994 (Legovini, Bouillón, and Lustig, 2005). In contrast, reduction in wage inequality in Brazil is associated with a decrease in both inequality of educational attainment in the labor force and the gap in returns to education (IPEA, 2006). As Figure 6.13 indicates, wage inequality decreased in Brazil between 1987 and 2004, and the ratio of skilled to unskilled workers’ wages fell by 14.3 percent between 1987 and 1995 (Ferreira, Leite, and Wai-Poi, 2007); Gonzaga, Menezes Filho, and Terra (2006) found similar results when analyzing the skill premium in manufacturing.
There are several explanations for the occurrence of these changes in Brazil. First, there was a reduction in the gap in wage returns by educational level, especially the gap between those with no education and those with primary education (IPEA, 2006), which may be attributed to the expansion of the country’s primary education system. In addition, from 2001 onward, even returns to postsecondary education over no education started falling. Second, trade liberalization during the 1988–1995 period also contributed to the reduction in wage inequality in the country. Protection in Brazil had been particularly strong for skilled-worker-intensive industries and, unlike the experience in Mexico, Chile, and Colombia, trade liberalization in Brazil seems to have promoted wage gains at the bottom of the distribution. Liberalization efforts in the latter country have led to both productivity gains and wage gains for the poor and have promoted mobility, as well as reducing poverty and inequality (Ferreira, Leite, and Wai-Poi, 2007).
A more general explanation, for many countries in the region, is that increases in wage inequality have not translated directly into increases in household income inequality because of increased female labor force participation and lower fertility rates. Reductions in inequality arising from these factors thus do not necessarily translate into higher social mobility.
CONCLUSION
The measurement of social mobility in Latin America and the Caribbean is still in its infancy, but what is known so far presents a troubling scenario. Aside from limited progress in some countries and among some groups, most individuals in the region are unlikely to see significant improvements in their income or social position, or that of their children, regardless of effort or ability. Incentives to work, acquire skills, or refrain from socially undesirable behavior are seriously constrained when there is no clear path out of social exclusion.
Conversely, the much smaller portion of the population that enjoys income and opportunities comparable to those of the developed world’s middle and upper classes displays little downward mobility, again regardless of (lack of) effort or ability. The consequences of this situation may not be apparent in the short term, but the long-term consequences cannot be ignored. With notable exceptions, privileged and more fully “included” citizens who have little chance of losing their means or status are unlikely to engage in innovation or risk taking that leads to economic growth and other forms of social dynamism. These privileges and advantages of fully included citizens may even lead to claims that members of more privileged groups, including public officials, are more concerned with maintaining their status than furthering the public good.
The region’s low level of social mobility thus presents policymakers with an array of challenges. The first is to design policies and programs, and possibly to undertake legal reforms, that will equip individuals to participate in both the benefits and responsibilities of society. Improvements in educational quality and access, health care and nutrition, and access to credit represent only a few possible areas for improvement. Second, labor institutions, social security systems, and macroeconomic conditions must ensure that effort, talent, and socially desirable behavior are rewarded both immediately and across generations. Third, policymakers would be ill-advised to address insufficient social mobility with short-term redistributions of wealth that, though initially popular, may ultimately prove ineffective in improving the socioeconomic status of recipients in the long term. Policies must therefore emphasize equality of opportunities through the development of human and social capital rather than short-term attempts to equalize outcomes. Finally, policymakers and politicians must find ways to convince the electorate and their colleagues that these policies are ultimately in their own interest and build support for their proposals accordingly. This may prove the hardest task of all.
