While income inequality in Austria is relatively low compared to many other OECD countries,
social mobility lags behind. Socio-economic outcomes carry over strongly from one
generation to the next: more than elsewhere, fathers’ earnings are a strong predictor
of the earnings of their prime-age children. This reflects strong persistence across
generations in occupational and educational outcomes, particularly for women and migrants.
Relative income positions also tend to strongly persist over people’s lives, in particular
at the top and bottom. Meanwhile, the middle-income group is polarising, with downward
risks rising for the lower middle. Longer-term earnings trajectories (over 15 years)
display marked gender differences, with women facing weaker chances of moving up and
greater risks of sliding down.
This paper identifies policies that promote or hamper social mobility in four domains.
First, good-quality early childhood education and care can be a catalyst for upward
mobility. Participation rates have significantly risen over the last decade, but still
lag those in many OECD countries. Further investment is needed to improve quality
and status of formal childcare. Second, tackling low educational mobility in Austria
requires ensuring a successful school-to-work transition. Austria provides targeted
support for those who struggle, but it could improve funding for disadvantaged schools
and consider the appropriateness of "tracking" students at such a young age. Third,
reducing gender inequality in the labour market would greatly improve social mobility.
This requires raising incentives for a more equal sharing of family and work responsibilities
in the areas of tax policy, parental leave and family and care benefits. Fourth, the
Austrian tax and benefit system provides comparatively adequate protection against
income shocks. The high concentration of household wealth, combined with the absence
of inheritance taxation, however implies that inequalities of opportunity remain large.