Measuring inequality of opportunity
What does the data tell us about whether Britain is a meritocracy?
We don't have many hard numbers, of course, because these things are incredibly difficult to measure. There is an emerging academic literature on measuring inequality of opportunity - this is a good primer - but it probably underestimates the extent to which, for example, childhood circumstances influence income inequality, because quantifying some of these structural influences is so tricky to do robustly.
Luck, in the form of the circumstances into which someone is born, has a huge impact on educational attainment, which undermines equality of opportunity in the UK.
Children born into more affluent families tend to have access to better educational resources and opportunities, including private tutoring, extracurricular activities, and well-funded schools. They also usually have access to better-funded schools.
By contrast, children growing up in economically deprived areas may attend schools with fewer resources and experienced teachers. Children from low-income families often face barriers to accessing quality education and may have limited access to educational support.
Meanwhile, the cost of higher education in the UK, including tuition fees and living expenses, can be a significant factor in determining a student's educational opportunities. Students from disadvantaged backgrounds may be more likely to incur substantial student loan debt, which can affect their post-graduation financial stability.
Educational attainment often has intergenerational effects; children born into low-income households may face challenges that persist across generations, perpetuating cycles of poverty and limiting their educational attainment.
A UCL study found that most of the young people who became first in their family to access higher education had benefited from “luck” that opened up opportunities that they could use to achieve socially mobile outcomes. The analyses challenge popular views that attribute social mobility to meritocracy and individual agency, talent or “grit”.
Measuring the impact of luck on inequality of outcome
Some of the more traditional measures of success, focused on outcomes, also tell a damning story.
In the Fairness Index we point to some of most egregious examples of ‘unfair inequality’ in the UK today. For example, the average FTSE 100 CEO is paid 80 times more than their average employee; and the richest 20% of the country own 63% of its wealth, while the poorest 20% own just 0.6%.
The Economics Observatory pointed out in 2021 how “external circumstances affect people’s outcomes as early as in the womb”, with inequalities continuing to widen throughout childhood and into adulthood (see also the Education Policy Institute on the many ways in which deprivation degrades cognitive development and performance). The Economics Observatory highlighted UK government estimates from 2019 that parental income alone explains 40% of people’s earnings (while the economist Branko Milanovic estimates that when you add factors such as citizenship, gender, race and ethnicity, this rises to above 80%).
Does this mean that the 80/20 principle is in play - that merit (talent and hard work) is only responsible for 20% of people’s earnings, while the other 80% is effectively down to luck (given that we can count the circumstances into which someone is born as the purest form of ‘unearned’ luck)? Perhaps the contribution of luck to life outcomes is higher than 80%, given that the talents with which someone is born (and the financial and social value that society places on those talents) are also a matter of luck?
There is plenty of evidence that ‘random luck’ has a much bigger impact than merit on success or failure.
A fascinating article by the Canadian author and coach Ray Williams brings together some recent academic research on the relative contributions of luck and merit to career success. There is evidence that characteristics such as drive, tenacity, creativity and intellectual curiosity influence success, but much of the variation in levels of success between individuals is unaccounted for.
There are several studies showing the impact of luck on success, such as that people born in the winter are more likely to become a CEO than people born in the summer; that people with surnames earlier in the alphabet are more likely to receive tenure at top universities; that people with easy-to-pronounce names are judged more positively than those with difficult-to-pronounce names; and that women lawyers with male-sounding names are more successful than their peers with female-sounding names. An Italian study that created a mathematical simulation to quantify the influence of luck and talent on career success found that people of average talent who were lucky were much more successful than those with more talent but less luck.
Nassim Nicholas Taleb argues in Fooled by Randomness that luck plays a much bigger role than merit in influencing who is ‘successful’ and who is not, and that we underestimate the impact of random luck on our lives, preferring to attribute success to skill, talent and hard work and to explain past events in these terms, whereas in fact the biggest driver of success is simply being in the right place at the right time.
Good or bad luck at birth (in the sense of whether someone is born into a wealthy or disadvantaged family) also has a big impact on how people experience good or bad luck later in life.
For example, someone who is living in poverty has lower levels of resilience and security, so is much less able to weather minor episodes of bad luck, such as a car breaking down (as well as being more likely to experience them).
For someone with a financial cushion they might only be a minor inconvenience, but for someone in a more precarious situation (facing scarcity), their cumulative impact can easily be overwhelming.
There is a similar dynamic at play when it comes to good luck. Vicious or virtuous cycles very quickly become self-reinforcing in an unequal society. Experiencing good or bad luck at birth increases both the impact and likelihood of experiencing good or bad luck respectively later in life.
However, this reality does not conform with most people’s perception of how the world works. The popular perception of luck is grounded in economic naturalism - stuff just happens, with no apparent link to the underlying systems and structures that might (however unintentionally) be exerting an influence on events.
This naturalistic way of thinking reinforces a sense of fatalism as well as of individualism.
Other dynamics at play
Luck is becoming increasingly important due as successful companies achieve ever more dominant market positions.
In Success and Luck: Good Fortune and the Myth of Meritocracy, Robert Frank argues that luck is especially important to economic success in the era of ‘winner-takes-all’ markets. These are more common in a globalised economy in which technology allows the producers of the best products and services to obtain a monopoly position, as is the case with many software companies in particular. Frank describes how one piece of good or bad luck can rapidly snowball, and that under ‘winners-take-all’ circumstances, luck becomes more important than ability and effort in determining the outcome of the competition to dominate a particular market.
Inherited wealth is having a growing impact on life chances and outcomes, compared to income earned from work.
Younger generations are likely to find that inheritances are larger as a share of lifetime incomes than previous generations (so that working hard and getting paid well are less likely to make up for not getting an inheritance).
Inheritances will be much larger for people with higher incomes than for those with lower incomes (even if, as a percentage of lifetime incomes, they will be similar for people on low and high incomes).
Inheritances will increase inequality between people with richer and poorer parents, which will reduce social mobility. Although many people only receive an inheritance later in life, the expectation of receiving it can affect life outcomes much earlier (for example, people might choose to save less).
People with wealthy parents are normally wealthier themselves; children of the wealthiest 20% of parents are eight times likelier to be in the top 20% than children of the poorest 20%. About half of the intergenerational persistence of wealth is due to the persistence of education and earnings, so ‘human capital’ is important as well as direct transfers of wealth. Children of wealthier parents are much more likely to be homeowners by the age of 30.