Why Europe’s employers can – and should – do more to improve social mobility

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Massimo Giordano, Senior Partner and Managing Partner for Europe, McKinsey & Company, Marie Christine Padberg, Partner and Global Leader, McKinsey & Company Talent Attraction

• Europe has been hailed as a land of opportunity but its environment for enabling social mobility is waning.
• The changing nature of work alongside the impacts of digitization and automation, wage inequality and more are exacerbating a decline in social mobility.
• While universities and schools can work to address the skills shortage, corporations can contribute by considering social mobility in outreach, recruitment, upskilling, retention, and leadership.

Europe is often regarded as a land of opportunity. In global research on social mobility – the ability for people to move up the economic ladder – the top 13 countries, led by Denmark, are all in Europe. The United States ranks 27th.

There are troubling signs, however, that the ladder is becoming rickety.

In the decade before the pandemic, European wages stagnated and household incomes increasingly failed to lift people out of poverty. According to the European Union (EU), over one in five people in the bloc are at risk of poverty or social exclusion.

Organization for Economic Co-operation and Development data shows this ratio has remained relatively the same since 2008. Inflation and COVID-19 have taken a disproportionate toll on low-income households in recent years. For example, in Britain, students from lower-income backgrounds suffered greater learning losses and lower-skilled jobs were more likely to be lost or subject to lockdowns.

Most importantly, the nature of work is changing in ways that could exacerbate these trends:

• Digitization and automation play a significant role in the growing income polarization between high-skill and low-skill workers in some European countries.
• The reduction in labour’s share of total income, added to these technological changes, has increased inequality across the continent. These dynamics matter because there is a direct relationship between income inequality and social mobility.

Increasing social mobility should be seen as a matter of urgency. Governments have the lead role here, in terms of policies around taxation, education and the labour market. But business leaders cannot stand aloof and let policymakers do all the heavy lifting.

Embedding social mobility

After all, employment is the primary mechanism enabling people to improve their economic status. Moreover, it is in the interest of business to do its part to create a system in which people have scope to build and use their talents.

There is already a significant shortage of skilled workers in many fields; the percentage of job vacancies in the EU has doubled over the past decade. This trend could get worse as Europe ages, making the matter more urgent.

In the decade to 2030, Germany alone could see its labour force decline by 4 million people. Working with schools, universities and other organizations to expand and improve skills training could enable European companies to meet their needs and widen the pathway to success.

At the corporate level, initiatives promoting social mobility can be implemented around outreach, recruitment, upskilling, retention and leadership.

Take recruitment. Common practice is for companies to seek candidates with specific credentials and experience. Of course, for some jobs, this is necessary. But for many others, that approach is unnecessarily restrictive, screening out people with talent but not an exact resume match. Putting greater emphasis on existing skills and future potential, as opposed to credentials and past performance, can be a rewarding strategy.

So we can rethink where talent is sourced. For example, proximity is a major factor when disadvantaged students choose a university. Expanding recruiting to a broader range of institutions might be a way to find talent that would otherwise be overlooked.

Broadening perspectives

Another approach to identifying high-potential people just getting started is offering paid internships. Unpaid internships can keep less affluent or unconnected people out of the action. Indeed, a candidate who has had to work while studying may demonstrate qualities like grit and adaptability. It’s important to ask whether the application process considers these kinds of experiences.

Finally, companies can seek ways to offer remote work to reach a more socio-economically diverse workforce.

Some companies are making such efforts and seeing tangible benefits. One global insurance company developed learning and job experience programmes specifically to reach those from lower socio-economic backgrounds. From 2020-22, the percentage hired from this cohort rose 8 percentage points. In retail, another industry leader offers 100% education reimbursement and training programmes to upskill its staff. The result is 75% higher retention among those who participate.

McKinsey has broadened where it recruits and, in 2015, launched Generation, a nonprofit that has trained and placed more than 100,000 young adults from 18 countries (including five from Europe) into high-demand careers.

In strictly economic terms, healthy social mobility is valuable. The World Economic Forum found that a modest improvement in social mobility could add $13 billion a year to the UK economy, $12.6 billion to France and $10.2 billion to Italy. More important, though, is that it contributes to stability and well-being. At the bottom, social mobility is a barometer of hope.

For that reason and their own good, business leaders would do well to find ways to advance social mobility in their organizations and beyond.