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New Report Reveals Where You Live and Work Affects Your Economic Mobility

July 24, 2013 at 12:00 AM EDT
Children of low-income families in certain communities are more likely to move up the economic ladder than others, says a new report by Harvard University and University of California, Berkeley. Jeffrey Brown talks to co-author Raj Chetty, Harvard professor of economics, for more on their portrait of American social mobility.
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JEFFREY BROWN: And now we pick up on a key economic theme raised by the president today and many others in recent times: increasing inequality.

Many factors are involved in determining the potential for upward mobility, but a new study has highlighted what turns out to be a hugely important one: geographical location. For instance, a child born in poverty in Atlanta or Charlotte has roughly a 4 percent chance of rising to the top fifth of income earners, while odds of a similar climb for a child born in Salt Lake City or San Francisco are over 11 percent.

It also found that geography mattered less for well-off children than for middle-class or poor ones.

One of the study’s co-authors joins us now, Raj Chetty, professor of economics at Harvard University.

Well, welcome to you.

Let’s begin with how you define economic mobility. What does that mean and how is it measured?  

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RAJ CHETTY, Harvard University: So, we define economic mobility as the odds that a child from a low-income family moves up in the income distribution.

So, for instance, a child growing up in a family in the bottom fifth of the income distribution, what’s the chance that that child reaches the top fifth, for instance?

JEFFREY BROWN: And this — so it’s the American dream, so to speak, of upward mobility is what you’re looking at?

RAJ CHETTY: That’s exactly right.

The idea is to try to measure, is the American dream alive and how does it vary across areas of the U.S.?

And what we’re finding, basically, is that the classic question is America the land of opportunity might not actually be the right question to ask, because there are some places in America that are well-described as lands of opportunity, where children from low-income families have a high probability of succeeding.

But there are other places that are better described as, unfortunately, lands of persistent inequality, where generation after generation, we see persistent poverty.

JEFFREY BROWN: Well, were you surprised by the results of what you found? And explain how geography does come to work as a factor.

RAJ CHETTY: Yes. I think we were quite surprised because we weren’t expecting to find so much variation within the U.S.

There’s been a lot of talk in the media and in academic research about how the U.S. now has lower rates of mobility than other developed countries, such as European countries Denmark and Sweden and so forth.

What we were quite surprised by is that there are places within the U.S. comparable with rates of mobility that are comparable to Denmark and Sweden, and then there are other places that have rates of upward mobility that are lower than any other rich country for which we have data today.

And so you were giving some examples. Salt Lake City, San Jose, these are places that are at the very top in terms of upward mobility. Other cities like Charlotte, Raleigh, N.C., Atlanta, all generally quite vibrant economies, actually, in the U.S., nevertheless have relatively low rates of upward mobility.

JEFFREY BROWN: Well, so if they’re all vibrant economic locations, as you say, what are the factors that make them different?

RAJ CHETTY: Yes, that’s a great question. So, that’s something we’re trying to investigate. We have a bunch of hypotheses for which we have some correlational evidence at this point.

We don’t know exactly what the key causal factors are, but some of the channels that appear to potentially be important are the levels of inequality within the area, so how much difference is there between the high — higher incomes and lower incomes within a given city, picking up on a theme the president talked about earlier today.

Also, what appeared to be fairly important is the amount of segregation in the area. So a city like Atlanta, for example, lower-income individuals are not living in neighborhoods with — that are well-integrated with higher-income families. And that we found was a common characteristic of the cities that had lower rates of upward mobility.

We also found correlations with — perhaps not surprisingly — the quality of local schools and also various factors that are related to family structure, so the fraction of two-parent families in an area, and measures of civic engagement and religiosity, the cohesiveness of the community, if you would like.

JEFFREY BROWN: And within a given city, you do see differences in terms of upward mobility?

RAJ CHETTY: So we’re focusing on differences in upward mobility across cities.

Our statistics don’t allow us to study differences within a city. And so what we’re doing is comparing 740 different regions of the U.S. We break up the U.S. into 740 subregions and we’re comparing across those areas.

JEFFREY BROWN: I’m curious, now, how did you come to focus on geography in the first place? What were the questions that you and your colleagues were asking?

RAJ CHETTY: Yes.

So the way we came at this, I think, is we wanted to get a better picture of what the determinants of equality of opportunity are in America. And our view was that potentially we could learn quite a bit if there was variation across places within America.

So the idea is, if we can find out what it is that places like Salt Lake City and San Jose and Boston have that are generating these high rates of upward mobility, maybe we can figure out the key factors that are going to increase rates of upward mobility in Atlanta and in Charlotte and in other places in the U.S. that aren’t at the moment having high rates of upward mobility.

JEFFREY BROWN: Well, that leads to the next question, is how — do we know how locked in a city is once it’s in a certain place, whether for good or ill, whether it can move up?

RAJ CHETTY: Yes. So, that’s a fascinating question to think about going forward.

My own view is that it’s unlikely that any city is totally locked in. I’m optimistic that there are things one can do to change the level of mobility. We have some hypotheses about what these are. So, for instance, if we think it’s something related to school quality, we have done some prior work in our research team, which I discussed earlier on the NewsHour, showing that the quality of teachers and the quality of schools can have very important long-term impacts.

And that’s an area in which we can make concrete strides to try to improve school quality in areas that don’t have as good schools at the moment. And I think that’s the type of thing one could do to try to increase rates of upward mobility throughout the U.S.

JEFFREY BROWN: And does the data tell you now or is this something you look at whether the problem is getting worse? Does it point to this country as even more of a class society than we have thought of in the past?

RAJ CHETTY: So our data at the moment basically provide a snapshot of children who were born in the 1980s and whom we’re seeing at age 30 today.

We don’t have enough data at the moment to look at changes over time. But going forward, the great thing about having statistics like this to do research is that you have the prospect of understanding how things are changing and figuring out which cities are getting better and learning more about how we can make the other cities even better going forward.

JEFFREY BROWN: All right, Raj Chetty of Harvard University, thank you very much.

RAJ CHETTY: Thank you. It’s my pleasure.