A happy country is a socially mobile one

Executive Director Sam Crosby for The Sydney Morning Herald

Every minute detail of Joe Hockey’s maiden budget is now exposed and being carefully dissected.
Yet surpluses, deficits, levies and breaks – these are all just means.
Boil it down and a federal budget is the government explaining why we will be happier if they take our money. So the interesting question becomes: how? What long-term end is the government seeking? What broad goal is it marching towards to drive societal happiness?
The London-based Legatum Institute examined this question recently by ranking the happiest nations on earth and looking for connections.The standout correlating factor it found was social mobility: the capacity of individuals to move between socioeconomic strata as a result of their efforts and talent.
The institute found the top six happiest nations were Norway, Denmark, Australia, New Zealand, Sweden, and Canada. The OECD’s six most socially mobile nations are Denmark, Australia, Norway, Finland, Canada, and Sweden.
In Australia, this finding has a strong cultural resonance. The “fair go” has always distinguished our progressive tradition from genuine socialism, by focusing not on pure equality, but equality of opportunity.
It was a point not lost on Lenin when he wrote about Australia in 1913: “What a peculiar capitalist country is this in which Labour predominates … and yet the capitalist system does not suffer any danger!”
High social mobility indeed allows the productive risk incentives of capitalism to flourish. It also smooths out class tensions and allows the most potentially productive in society to rise to positions of power.
The latest data indicates Australia’s social mobility has been surprisingly stable over recent decades.
This may appear to be coasting; however, research by former ANU professor and now shadow assistant treasurer Andrew Leigh indicates this stability is probably due to a spectrum of shifts in the economy just happening to cancel each other out.
Factors boosting Australia’s social mobility have included the growth of universal healthcare, the banning of racial discrimination and the abolition of upfront university fees. Yet, countering these factors has been the removal of state inheritance taxes, the rise of concentrated unemployment “hot spots”, and an increase in wealth inequality.
This suggests that far from being locked in, Australia’s current social mobility is actually delicately propped up.
Which leads to the tough part. While most politicians would enthusiastically endorse social mobility in principle, things get trickier when you start unpacking what is required to prioritise it.
Investing heavily in infrastructure, for example – especially public transport – increases the chances of those in disadvantaged areas to access economic opportunities. So a government truly committed to social mobility would prioritise filling the infrastructure deficit over the budget deficit.
We know that property owners in suburbs who oppose higher-density development are denying opportunities for others to access major productivity hubs. Reform here would become an urgent priority.
And we know that programs such as the National Disability Insurance Scheme and the Gonski education reforms would increase social mobility by giving disadvantaged individuals a leg-up into opportunities they would otherwise miss.
Interestingly, an idea recommended by the National Commission of Audit and the Productivity Commission, but overlooked in Hockey’s budget, could also have a powerful impact. Tighter asset testing for aged pensions would greatly reduce a significant impediment to social mobility: inheritances. At present, 4.5 per cent of Australia’s federal budget goes to aged pensions for individuals who own more than $500,000 in assets.
The government has baulked at genuine reform in this area over fears of a scare campaign about turfing pensioners from their homes. Yet a reasonable system would not require retirees to vacate, but simply to draw on their equity to fund their retirements.
The only true “victims” of such a change would not be the retirees themselves – who would maintain their lifestyles – but their children, who would have their bestowments trimmed.
A government committed to social mobility, however, could see this only as a positive, because it would limit the ability of rising property prices to make the gap between owners and renters intergenerational and entrenched.
Social mobility is a beautifully balanced tenet for 21st century progressives. It champions individual rights, but not at the cost of society.
It offers a more genuine freedom than the laissez-faire model offered by conservatives by promoting real options to exercise individual choice, instead of mere statutory rights.
Mark Latham’s oft-cited “ladders of opportunity” have been warehoused along with the rest of his legacy. This is a shame. Constructing and maintaining such ladders could well be the key for any government wishing to ensure a happy Australia.

Sam Crosby is executive director of the McKell Institute