Social mobility in Denmark and the US are similar, but mitigated differently

From Denmark May Not Be All That Socially Mobile by Ben Southwood.

A good point reinforcing a theme I have sounded. Income inequality is difficult to measure, particularly in ways which convey commonsensical understanding. Social mobility is a little easier to measure though still hard, given that most people over a lifetime usually occupy most categories at some point.

Gregory Clark's has been especially interesting and challenging. His research suggests that 1) social mobility is far lower for virtually all societies than had been believed and that 2) genes play a much greater role than was anticipated.

The American clerisy/Mandarin Class have a fixed understanding of the success of socialist Scandinavia, studiously ignoring that those countries have been evolved away from the traditional model of socialism in the early 1990s. Consequently research based on Sweden and Denmark in particular tend to throw up interesting findings at odds with the received wisdom.

It's commonly thought that Denmark—and Scandinavian countries in general—are especially socially mobile. In these paradises, the theory goes, birth is not destiny. Because of high quality egalitarian education, healthcare, and progressive social attitudes, one's birth has less connection with one's life outcomes than anywhere else, especially the cut-throat conservative USA.

There's something to this view, but a new working paper from famed Nobelist economist, and education expert James Heckman (pdf), throws it into question. Heckman finds that Denmark does indeed have a more mobile society than elsewhere in terms of income, but that this does not mainly come from a generally more fluid and equal society in general.

In fact, the higher measured income mobility is "largely a consequence of redistributional tax, transfer, and wage compression policies". When it comes to educational mobility, the countries are more or less the same. To state that another way: those growing up with less advantage in Denmark don't do better than those in the US because they have high-flying careers and great labour market success, but because Denmark has higher taxes and benefits.

This adds to a large literature finding that there is little we can do to strike at the causes of inequality. Intelligence and the abilities that the labour market rewards come mostly from things we can't do much about. But we certainly can blunt the income effects of unfair endowments of skills through handouts from the state.

That fits my understanding closely. In some ways it is a welcome validation of that which is known but not readily accepted in the Mandarin Class mind.

On the other hand, it is also somewhat concerning.

Not the fact that productivity tends to be mediated by class and genes and not subject to obvious policy solutions. My concern is that the Danish experience portends significant constraints on the use of redistributional tax, transfer, and wage compression policies in order to mitigate social mobility deficits.

Scandinavian countries in general in the post-World War II era started from very low levels of racial, ethnic and religious diversity. This changed significantly in the 1990s-2010s but there is still quite low diversity of that nature compared to the more open Anglo-phone countries such as USA, Canada, Australia, Britain.

Redistributional tax, transfer, and wage compression policies are highly dependent on social trust in order tow work well. Everyone has to be able to anticipate that they could at some point be in need of such assistance in order to be willing to pay into it when they do not need it. This level of shared social trust is more easily achieved in more homogenous societies.

The more diverse the society, the less likely there is to be such shared trust and therefore the less likely it is that there will be the support otherwise required for the redistributional tax, transfer, and wage compression policies necessary to mitigate the consequences of low social mobility.