Number 24, 4 September 2015

ETHOS INSIGHTS

Insights from talks organised by the Civil Service College, Singapore

MTI-CSC Economics Speaker Series

Promoting Opportunity: What’s Next?

(Combined notes from the Policy Roundtable and Public Lecture)

Speaker: Dr Richard V Reeves *

Policy Director, Center on Children and Families, Brookings Institution

Date: 22 July 2015

Summarised by Peh Gao Xian, Jaclyn Lam and Leon Lim, Institute of Governance and Policy, CSC

IN BRIEF Promoting relative social mobility1 is important because movement between social classes naturally decreases in societies. There are several factors beyond an individual’s control that shape the likelihood of his improving his place in society relative to his parents. These include his parents’ marital status, their education, his race, and the neighbourhood where he grows up. It is also necessary to consider how the definition of “merit” can be broadened to achieve a meritocratic society that is also just and fair. * Dr Reeves is Senior Fellow in Economic Studies at the Brookings Institution. Prior to this, he was Director of Strategy to then-UK Deputy Prime Minister Nick Clegg. He is also a former European Business Speaker of the Year. Dr Reeves recently authored Saving Horatio Alger: Equality, Opportunity, and the American Dream and Character and Opportunity (both in 2014) and is the Editor-in-Chief of Brookings’s Social Mobility Memos.

1 Movement between different income levels and/or classes that is based on one’s own abilities and efforts. © 2015 Civil Service College

Promoting Opportunity: What’s Next? 4 September 2015

WHY RELATIVE SOCIAL MOBILITY? • Relative social mobility across generations will become more of a social issue as slower

economic growth brings lower absolute mobility, and also as society becomes more rigid over time, with less movement between social classes.

• Parents in the top tiers of society have strong incentives to “work every system in society” to ensure their children do not slide down the income distribution curve. The result: a “glass floor” for those at the top, which doubles as a “glass ceiling” preventing the less advantaged from rising in socio-economic status.

• This society’s economic competitiveness might decline in the long run. For example,

Venice’s economic decline can be traced to the monopolisation of trade by her nobles in 1315. Before this event — called “La Serrata” or “The Closing” — merchants from humble backgrounds could form trading relationships with nobility. These relationships played a major role in making Venice a vibrant and thriving city-state. However, as political power and wealth grew increasingly concentrated, the egalitarian institutions that had made Venice wealthy eroded, and the city eventually declined as a maritime and economic power.

INTERNATIONAL MOBILITY "STICKINESS" • The US data on intergenerational mobility2 displays “stickiness” at both ends of the

income distribution, i.e., children from families at both ends of the income distribution curve are likely to remain where they are. This can be explained by the following factors: (1) Parents’ marital status: The significance of marriage seems to lie in its importance as

an institution that facilitates stability, shared resources, parental planning and investment in children. Reeves calculated that children of poor and unwed mothers in the US have a 50 per cent chance of remaining in the bottom 20 per cent of the income distribution curve. Corresponding statistics of children from wedded mothers are lower: 32 per cent (remarriages) and 17 per cent (long term marriages).

(2) Education and race: Education alone is insufficient to offset the effects of an individual’s social-economic background. Children from the top 20 per cent of the income distribution curve have a 14 per cent chance of remaining where they are even without a college degree. On the other hand, children from the bottom 20 per cent have a 16 per cent chance of remaining at the bottom even with a degree. In

2 Many of the statistics in this section were derived by Reeves and his team and reported in the Brookings essay “Saving Horatio Alger”, authored by Reeves. The essay is available at http://www.brookings.edu/research/essays/2014/saving-horatio-alger. For more information on how the statistics were derived, see http://www.brookings.edu/blogs/social-mobility-memos/posts/2014/08/21-data-behind-saving-horatio-alger-reeves © 2015 Civil Service College 2

Promoting Opportunity: What’s Next? 4 September 2015

addition, African-Americans — even if they are middle-class — are much more likely than white Americans to experience downward mobility.

(3) Geography: Relative mobility varies greatly across the US.3 Generally, Americans living in the South and Midwest have lower levels of intergenerational social mobility than those living in the west.

(4) Neighbourhood: “Stickiness” in the lower income quintiles is most likely driven by a “concatenation” of disadvantages in poor neighbourhoods: lack of access to proper housing, education, public transport and other amenities. Hence policies addressing the geographical distribution of low-income families, such as those concerning rental housing locations, would improve social mobility.

THE SOCIAL GENOME MODEL • The Social Genome Model (SGM) is a lifecycle model that models an individual’s

progress in life from prenatal period to age 40. It comprises six stages; each stage possessing a set of indicators for “success” (here defined as reaching “middle income by middle age”).

Figure 1: The six stages of the Social Genome Model. (Refer to Richard Reeves’ presentation slides, slide 22)

• The SGM is used as a “bench test” for multiple policy interventions. It estimates, with

various interventions, an individual’s success rate throughout his “6 stages” of life. These estimates come with several caveats, e.g., that benefits are independent of each other and that successful trials can be scaled up. This approach can be useful for policymakers in deciding where to allocate research funds, or to conduct pilots or feasibility studies.

3 See Chetty, Raj, Nathaniel Hendren, Patrick Kline and Emmanuel Saez, “Where is the Land of Opportunity: The Geography of Intergenerational Mobility in the United States”, Quarterly Journal of Economics, Vol. 129 No. 4 (2014): 1553–1623. © 2015 Civil Service College 3

Promoting Opportunity: What’s Next? 4 September 2015

• However the SGM does not justify “early years determinism”4, because it cannot account for other kinds of effects such as sleeper effects5, non-cognitive skills6 and peer effects7. Also, results can be influenced by the availability of evidence and the intensity of the interventions. Reeves added that Nobel Laureate James Heckman, a long-time champion of early childhood intervention, was lately reconsidering his policy stance.

EXPERIENCES IN THE UK COALITION GOVERNMENT: 2010–2012 • Reeves shared his experiences in designing and implementing social mobility policies as

Director of Strategy to former-DPM Nick Clegg. He revealed two strategies adopted by the UK government:

(1) Establishing a list of specific and trackable “Leading Indicators”: These indicators

served as policy commitment devices and guides for government agencies. Each indicator on the list is also evaluated regularly to gauge its relevance and usefulness.

(2) Accountability: Institutions were established with the intent to hold the UK government, across administrations, accountable for its social mobility goals. For example, the creation of a statutory and independent commission reporting to Parliament annually on progress.8 In addition, the Leading Indicators and related reports are made public.

• These strategies provided clearer guidance in helping the coalition government make

policy decisions, as seen from the following examples: Example 1: The UK government chose to provide universal pre-kindergarten education over child tax credits despite the former’s substantial deadweight losses and the latter’s boost to low incomes. This was because the government had earlier clarified to all the need to break the link between a child’s access to early education and her success, so as to improve social mobility.

4 The belief that only interventions in early childhood are effective, and that interventions later in life must suffer high diminishing returns and are hence not worth much attention. 5 The sleeper effect was described as interventions that do not have any measurable impact for a long time, only for the effect to show up in later life stages. 6 Non-cognitive skills refer to a set of attitudes, behaviours, and strategies that are thought to underpin success in school and at work, such as motivation, perseverance and self-control. They are usually contrasted with the “hard skills” of cognitive ability in areas such as literacy and numeracy, which are measured by academic tests. 7 Peer effects refer to the effect of a person’s peer group on his/her outcomes. 8 The Commission on Social Mobility & Child Poverty. © 2015 Civil Service College 4

Promoting Opportunity: What’s Next? 4 September 2015

Example 2: The UK government moved to abolish unpaid internships despite the expected negative publicity, because doing so would shift social and business norms. UK businesses now no longer consider it socially acceptable to have unpaid internships.

BROADENING MERITOCRACY AND CREATING PLURALISTIC OPPORTUNITIES

To improve social mobility, the definition of “merit” should be broadened. • Reeves observed that a meritocratic society based on a singular but objective test of

merit eventually turns into an elitist, highly-stratified society. The reason: since there is only one test, those who have passed the test will train their offspring to do the same. Over time this results in a concentration of resources and power within a small group that naturally comes to define “merit” in their own image.

• Hence policymakers should strive for “opportunity pluralism”9 — understanding how

access to opportunities is structured in society, and working to widen the “bottlenecks” that limit such access.

Broadening “merit” to include socio-economic circumstances might be necessary to maintain meritocracy. • For example, taking a student’s socio-economic background into consideration in

university applications. Research from Cardiff University and Oxford Brookes University showed that students from state schools with slightly lower ‘A’ level grades, when compared to those in private schools, achieved better grades at university on average.10 Hence students from state schools with lower ‘A’-level grades should be offered university places, as they are likely to match a private school student in terms of “merit”.

POLICY POSSIBILITIES, TRADE-OFFS AND POLITICAL CONSIDERATIONS Prioritising mobility over redistribution/transfers • Policymakers concerned about social mobility should work to break the strong links

between social background and life outcomes, and prioritise mobility over immediate

9 Proposed by University of Texas legal scholar Joseph Fishkin, in his book Bottlenecks: A New Theory of Equal Opportunity. 10 Responding to a question on whether such a system could still be called a “meritocracy”, Reeves shared his belief that merit that accounted for an individual’s background circumstances was in fact consistent with, if not a superior form of, operationalising meritocracy. © 2015 Civil Service College 5

Promoting Opportunity: What’s Next? 4 September 2015

redistribution or social transfers. Although these decisions would be politically tough, Reeves highlighted that payments from a government to its people on their own, are insufficient to change individual behaviour or address the “concatenation” of economic, geographical and social disadvantages affecting the social mobility of low-income families. Policymakers need to also consider how policy measures affect one’s access to opportunities.11

Simplifying rules and managing planned disruptions • Policymakers should simplify systems to key services such as education and healthcare,

so as to benefit as many people as possible. This is because complex systems tend to favour those with greater resources. For example, in Singapore’s Primary 1 registration exercise, rich and educated parents tend to best understand all the rules, or can spare the time to volunteer in the schools they have earmarked for their children.

• Reeves drew a distinction between regulating top income earners and their influence. He suggested government invention is needed only in areas where “the 1 per cent is rigging the system”, e.g., through zoning laws and alumni preferences for school admissions. This is analogous to how regulators want companies to be competitive but not form cartels.

11 Reeves also praised Singapore’s policy of spreading out rental housing across different geographical areas, to ensure that Singaporeans there were still able to access good public amenities. © 2015 Civil Service College 6

Promoting Opportunity: What’s Next? 4 September 2015

© 2015 Civil Service College, Singapore. All rights reserved. No part of this article may be reproduced, modified, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Civil Service College, Singapore. For enquiries, please contact: Institute of Governance and Policy Civil Service College, Singapore, 31 North Buona Vista Road Singapore 275983 Website: www.cscollege.gov.sg or www.facebook.com/CivilServiceCollegeSingapore

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