While some senior economic experts in the UK are advising citizens to make peace with being poorer, for fear of wage rises increasing inflation, research from one of the world’s leading strategy consultancies suggests otherwise. According to a paper from McKinsey & Company, enabling greater social mobility in Britain and helping people access the wages that come with it could boost the UK economy by more than £170 billion each year.
Social mobility is the movement of individuals, or groups, within or between social strata in a society. The state of social mobility in the UK has long been a topic of debate in the UK. That is to say, the government insists that the country has a ‘stable’ level of social mobility, and everyone else says that it does not. In 2022, the government claimed “the evidence is not as gloomy as the popular narrative” adding that “the UK’s total occupational mobility rate [note: this broader term refers to the ease with which a worker can leave one job for another in a different field, rather than the ease which they may move between socio-economic classes] has remained stable for many decades”.
Voices giving opinions to the contrary are far from the radical voices you might normally expect, though. Also in 2022, Goldman Sachs – the second largest investment bank in the world by revenue – warned that “compared with other countries, the most disadvantaged in the UK are less likely to climb the income ladder”, adding that “the economically advantaged tend to stay at the top”, and that Covid-19 had “increased inequality further,” while rises in inflation, especially energy costs, are intensifying the problem, as they hit those on lower incomes hardest.
Now, McKinsey & Company has added to the chorus of corporate voices sounding alarm at the problems social mobility in the UK faces – and suggested overcoming them could be key to the country’s future economic progress. Again, McKinsey is far from a militant force for Leftism – it was cited by Duff McDonald’s book ‘The Firm’ as having spent the 1980s helping Carlos Salinas privatize 85% of Mexico’s state-owned businesses, and Margaret Thatcher do similar in Britain. Meanwhile Walt Bogdanich and Michael Forsythe’s recent ‘When McKinsey Comes to Town’ suggested the firm has continued to champion privatisation, with the NHS one alleged target – though the firm claims the book ‘misrepresents’ the work it does.
Looking at the state of play in the UK now, McKinsey warned that – while there are “ethical arguments for social mobility” – the UK’s performance on this front is damaging its economy. According to the firm, “as an economic principle, the more efficient an economy is at matching job positions to those with the greatest potential to perform them well, the higher the economic output per person.” It therefore follows that low social mobility could affect both employment and productivity, as those from a disadvantaged background, who have sought-after skills such as digital knowhow, may see their talents go to waste, as they never have access to the opportunities to use them.
As Britain continues to flirt with recession, tackling this could open up large economic opportunities for the UK, at a moment when consumer demand has collapsed due to inflation. Even as Bank of England economist Huw Pill has encouraged people to “accept that they’re worse off”, the research pointed out by McKinsey suggests that rather than entering into a race to the bottom to quell inflation, a modest increase in the UK’s social mobility, raising it to at least the average level across Western Europe, could be associated with about a 9% increase in GDP, equivalent to £2,620 per person, or £170 billion, to the UK economy annually.
McKinsey noted that those original estimations were based around UK charity The Sutton Trust in 2016, and that since the societal shocks of the past three years, that opportunity for the UK economy may even have increased further. At the same time, McKinsey’s research suggests that diverse companies may be able to outperform their rivals, because they recruit from the widest pool of talent and, in doing so, improve customer orientation, employee satisfaction, and decision making, all of which lead to a virtuous cycle of better performance. While this has more-often been applied to gender or ethnicity, a greater level of socio-economic diversity could also boost performance.
As with those other demographics, McKinsey also found that hybrid working could be one key to boosting recruitment from lower-income backgrounds. With housing prices having exploded in the UK’s major cities, people having to live outside those population centres in cheaper housing are at a disadvantage when it comes to finding work there – but allowing for more remote work could see the accessible labour market almost triple in Bristol and Cardiff, and double in Edinburgh and Manchester.
While admitting that improving social mobility in the UK will still take hard work, McKinsey also offered up another relatively simple option that companies can use to boost their own social mobility rapidly. Unpaid internships can exclude those who don’t have financial means, just as unadvertised or informally promoted internships can exclude those without professional connections. They have long been criticised as an unofficial means to exclude people from lower-income backgrounds from getting their foot in the door of certain businesses. In this case, McKinsey suggested employers should offer paid internships, as “Remuneration and open advertisement can raise diversity in what is an important entry route into employment.”
