Moving up the social ladder in Britain has become harder than at any point in more than half a century for children born into poor households, according to the country’s foremost economic thinktank.
Exposing a striking breakdown in social mobility, the Institute for Fiscal Studies (IFS) said those growing up in the north of England and the Midlands, as well as those from a minority ethnic background, would find it a lot harder than others to become wealthier than their parents.
The IFS said children from poor households were finding it harder than 40 years ago to move into higher income brackets, made worse by years of sluggish growth in average earnings. It found that inheritances were becoming more important in determining lifetime income.
“It may be harder now than at any point in over half a century to move up if you are born in a position of disadvantage,” said David Sturrock, a senior research economist at the IFS.
Analysing income data for those born in the 1960s, 70s and 80s, the IFS report, called Intergenerational Mobility in the UK, found parental income had become a much stronger predictor of the earnings people born from the 1970s onwards could expect by the age of 28.
On top of this, the IFS said the growth of inheritances for the children of wealthy parents was likely to drive a further decline in social mobility for the 1980s generation compared with previous decades.
After an explosion in house prices in recent decades – helping parents already on the property ladder to pass on greater wealth to their children – it said inheritances would be twice as big on average for those born in the 1980s as for the 1960s.
The findings come as Rishi Sunak comes under pressure from the right of his party to abolish inheritance tax as part of the Conservatives’ manifesto for the next general election. The party continues to trail Labour in the polls.
Rachel Reeves, the shadow chancellor, has also ruled out Labour imposing a wealth tax if it wins the next election, as the party doubles down on efforts to demonstrate economic competence.
The IFS said the challenge of moving up income and wealth brackets was more striking for some people than others.
It said there were marked regional differences for earnings mobility, with children born in and around London likelier to earn more than their parents compared with those from big northern English cities – including Manchester, Leeds, Newcastle, Hull and Middlesbrough.
The report found men who grew up on free school meals in the highest areas for social mobility – around London – were paid £8,700 more at age 28 than if they grew up in the lowest-mobility areas, in the north of England. The difference for women was £8,100.
Those with parents living in London also stood to inherit about twice as much as those in the north-east or Yorkshire and the Humber, reflecting the surge in property values in the capital in recent decades compared with weaker growth elsewhere.
The IFS said there were also striking differences between ethnic groups, including a difference of £8,000 in the earnings of young men from a black Caribbean background who grew up on free school meals compared with someone from an Indian background.
It also found that men from Pakistani, black African and black Caribbean backgrounds who grew up on free school meals end up earning less than white men who had been in the same position.