Are Rich Kids Naturally Born More Able?

Most of us want an economy where worth, not birth, explains success. We want a fair society and a meritocratic labor market. In other words, we want social mobility. Typically, discussions of social mobility focus on the need to promote upward mobility from the bottom. The ‘American dream' is about being able to go from rags to riches though talent and hard work. In fact it looks hard to escape: four out of ten children raised in the poorest fifth of households remain there as adults, and just one in twenty will make it to the richest fifth.

There's another side to this coin, though: the absence of downward mobility from the top. Four in ten children raised in affluent households (the top fifth) stay there; while fewer than one in ten drop to the bottom. While much is made of the poor performance of the US in terms of upward mobility, a number of academic studies suggest that the biggest difference with other nations is in downwards mobility from the top. Sons born to rich Canadians are much more likely to be downwardly mobile than sons born to rich Americans, for example.

Affluent parents will do a great deal to ensure a great future for their children. And so they should. Indeed, we need more parents to invest in their kids, as my colleague Kimberly Howard and I argue in our recent Brookings' report, The Parenting Gap.

But there comes a point when positive parenting mutates into ‘opportunity hoarding': when the advantages of one generation are used to distort institutions and alter the opportunities of the next. Let's draw a parallel with companies. We want each firm to be profit-seeking, but we legislate against monopolies and cartels. We don't want a firm to be able to use market power to rig the market. The same applies to parents: they can work as hard as they like to give their children the best chance in life, but they can't use institutional power to rig the market in their favor.

So, for one thing, the preference for ‘legacy' college applicants has got to go. It's practically medieval. More pertinent to business, fair and open access to internships has got to become the rule, rather than the exception. Especially when unpaid, internships offer dangerous opportunity-hoarding potential. Internships can be handed out to friends and family: and if they are unpaid, those from a more affluent background have an automatic advantage.

Of course, this is not just a problem for business, or even mostly for business. Politics, journalism and - dare I say it - even think-tanks all play their part in the intergenerational transmission of inequality. Fun fact: D.C.'s pricy Georgetown Day School produced more White House interns this year than the states of Florida, Pennsylvania, or Illinois.

In the UK, the government has encouraged firms to sign a ‘Social Compact' which includes a promise to 'advertise work experience opportunities in local schools rather than filling them through informal networks; and offer internships openly and transparently and provide financial support to ensure fair access.'

This is not just good PR: it is good economics. The perpetuation of elites acts against the workings of a truly competitive labor market. In just the same way that a glass ceiling on women's opportunities means wasted talent, so does a ‘glass floor' holding up less-than-smart children from affluent backgrounds.

Markets work best when there is open and fair competition. The market for talent is no different. Right now, it looks like the market is not working efficiently: unless, of course, we think that rich kids are naturally more able. But if we think that, let's stop talking about the American dream.