Mobility and Meritocracy

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LABOR June 2007
Mobility and Meritocracy
A B Atkinson, Nuffield College, Oxford
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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-o
ff 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 (?-1) people, generating
  profit ?A-w-c
• Workers receive wage depending on match
• w w0(1-?)?A
• Workers decide on basis of Ew

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If all A A are entrepreneurs, and distribution
has a Pareto tail, then EA hA (h gt 1)
determines Ao such that all with A Ao are
workers.
Entrepreneurs
Assignment
Self-employed
Workers Ew
Ability
A
Ao
Reward
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Et a At ßEt-1 et 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 ?2
• (set median A 1)
• With random assignment, output 2
• With perfect meritocracy, output 2h gt 2.
• With ß inheriting position, output 2h -
  2ßh(1-?)-1
• where ? is the degree of heritability of ability

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Inter-generational mobility in the UK
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).
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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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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
• n or