Well, it makes sense to me. I have a whole theory about grades, and even have an essay (http://www.farsight.net.nz/essays/grades.htm) on my site about it, written as a new fan. I think there's quite a bit of in-built inertia, otherwise society would be very unstable if children from one family could all test as different grades, and Federation society strikes me as very reactionary. In my canon, only the top and bottom extremes are promoted or demoted, which would explain some of Avon's attitude and Vila's remarks about a friend at the testing centre. (In fact I wrote a story about that last week for b7friday, soon to be cross-posted here.) Also, going by Jarvik becoming a labour grade so he could use his only attributes (muscle) I assume that people could also choose demotion. I've used that in a story I hope will be in the next Chronicles.