Social (im)mobility: Why middle-income countries are stuck in the slow lane

The World Development Report 2024 paints a stark picture: middle-income countries, despite their potential, are struggling to achieve sustained economic growth. A key culprit: - the forces of preservation, that work to maintain the existing power structures and inequalities, benefiting those who are already in privileged positions while making it difficult for others to move up hindering the development and utilization of talent.

As middle-income countries grow, their economies become more complex, requiring more skilled workers to manage sophisticated production processes, infuse new technologies, and innovate (figure 1). But in many of these countries, there's a shortage of talent, and the talent that does exist isn't being put to its best use. Why? Because often, it's not what you know that determines your opportunities. In many middle-income countries, decisions on who studies where and what, who gets a sought-after job and what they are paid, and who gets to start a business are not based on merit. This unfair system discourages people from trying to improve their skills or aiming for success. Why invest in education or strive for success if the system is rigged against you?
 

Figure 1. The demand for highly skilled workers increases in middle-income countries

^{Source: WDR 2024 team using DataBank: Jobs, World Bank, Washington, DC, https://databank.worldbank.org/source /jobs; WDI (World Development Indicators) (Data Catalog), World Bank, Washington, DC, https://datacatalog.worldbank.org /search/dataset/0037712.
Note: Skilled workers consist of the top three International Standard Classification of Occupations (ISCO) codes (“Legislators, sr. officials, managers”; “Professionals”; “Technicians and associate professionals”). See ISCO (International Standard Classification of Occupations), International Labour Organization, Geneva, https://ilostat.ilo.org/methods/concepts-and -definitions/classification-occupation/. GDP = gross domestic product; PPP = purchasing power parity}
 

Social Mobility: The Key to Unlocking Talent

In the World Development Report 2024, we argue that social mobility—the ability for individuals to move up the social ladder—is crucial for developing skills. Countries with higher social mobility have more skilled workers because people are encouraged to take chances and are rewarded for their abilities, no matter their background or where they live. But when social mobility is blocked, countries can't move forward as quickly.

The report identifies three forces of preservation that stifle social mobility, making middle income countries drive in the slow lane.

1. Networks: The Power of the Elite Pact. In many places, who you know matters more than what you know. Family ties and social networks can lead to better education and jobs for some, leaving others at a disadvantage. This "in-group" favoritism is seen worldwide, with different names like "wasta" in the Middle East,"guanxixue" in China or the “old boys’ network” in Western countries, all of which perpetuate a system of privilege and limit opportunities for those outside the circle.
   
2. Neighborhoods: The Geography of Opportunity. Where you are born and raised can have a profound impact on your life chances. The report highlights the stark reality of "neighborhood effects," where children from disadvantaged areas face a multitude of obstacles: poorer schools, limited access to role models, and even higher exposure to crime and violence. This can trap them in a cycle of poverty, making it hard to find the opportunities they need to succeed.
   
3. Norms: The Weight of Patriarchy. Social norms, especially those that favor men over women, hold back entire communities. The report shows that women face significant challenges in education, work, and starting their own businesses. They often earn less, have fewer chances to lead, and struggle to access financial services like bank accounts and loans, partly due to unfair laws and customs.
   
   

Breaking the Cycle

The benefits of increasing social mobility are enormous. For example, closing the employment and entrepreneurship gap between men and women could boost global GDP per person by over 20%.

The report identifies five public policy actions that can help increase social mobility:

1. Invest in Education: Provide high-quality education for everyone, focusing on essential skills and fair access to higher education.
2. Identify and Support Talent: Use standardized tests and other measures to find and help advanced learners, making sure the process is fair.
3. Expand occupation choice and rewards: Make job opportunities and qualifications more transparent and based on merit, with better information about opportunities and credible certifications of skills.
4. Encourage Innovation: Invest in research and development, support partnerships between universities and industries, and create an environment that encourages innovation.
5. Discipline Elites: Implement progressive tax policies to reduce wealth inequality and ensure that elites are held accountable for their actions.

For middle-income countries to continue their rapid growth, they need to change their mindset and move away from old policies and institutions that keep inequality in place. Instead, we argue, they should adopt a system that rewards merit and encourages everyone to climb the social ladder.

To delve deeper into the transformative strategies that can lead middle-income societies to a more equitable and prosperous future, we invite you to read the full report. The future of these countries—and indeed, the world—depends on it.