What Gives Kids a Chance at a More Successful Future? New Study Explains

BIANNA GOLODRYGA, SENIOR GLOBAL AFFAIRS ANALYST: Well, for many parents, it’s their dream to give their children a better start in life than they were given. Now, historically in America, race has played a huge factor in this. Raj Chetty, director of Harvard’s Opportunity Insights Initiative, is finding that the racial gap is closing. Here he tells Hari Sreenivasan how this was achieved and what determines our children’s futures today.

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HARI SREENIVASAN, INTERNATIONAL CORRESPONDENT: Bianna, thanks. Raj Chetty, thanks so much for joining us. Raj, you run Opportunity Insights at Harvard, which takes a look at a lot of things. And really, the most fascinating stuff is the research you’ve done on social mobility over the decades. And also, where’s the data on how people get a leg up in America? And you had a recent report out looking at kids and what the kind of best predictors of social mobility and outcomes were. Walk us a little bit through your findings.

RAJ CHETTY, DIRECTOR, HARVARD’S OPPORTUNITY INSIGHTS AND PROFESSOR OF ECONOMIC, HARVARD UNIVERSITY: Yes, Hari. So, great to be with you again. So, as you mentioned, our team has been studying issues of economic opportunity. Basically, who gets to achieve the American dream of rising up. I think one of the cornerstone ideals of this country. No matter where you come from, no matter the color of your skin, no matter your background. And we’ve been studying those issues using big data, data drawn from anonymized tax returns, covering all Americans, millions of kids and their parents for over a decade now. And a decade ago, we put out a study called The Land of Opportunity, basically trying to figure out where the American dream was alive and who had the best chances of rising up. And in this most recent study that we put out a week ago, we’ve now updated that data to look at how economic opportunity, upward mobility is changing by race and class in the United States. And the headline findings are that the landscape of opportunity. Is changing quite a bit in America. In particular, racial gaps in economic opportunity between black and white Americans are narrowing somewhat. So, it used to be the case, and it still remains the case to a large extent, that white kids growing up in low-income families have much better chances of rising up and achieving the American dream than black kids. But that advantage, which was extremely large, if you look at kids born back, say, in the late 1970s around when I was born, that advantage has shrunk by about a third already in the past 15 years. And then one-third change, you know, that doesn’t mean we have perfect equity by race by any means, but that’s quite a substantial change over a 15-year period. So, that’s one key aspect of what has happened, shrinking race gaps. On the other side, we find that class gaps are growing. And by that, I mean, parent income is a more and more important determinant of how well you’ll do in America. To divide between kids growing up in rich families and poor families, especially among white children is growing by about a third over the past 15 years. And so, the headline findings from these new data, covering 57 million kids are a story of shrinking race gaps and growing class gaps in economic mobility.

SREENIVASAN: What do you think is the largest set of factors in shrinking the race gap? I mean, people are going to want to sort of ascribe their own political interests onto, oh, it’s because of this policy or that policy, but what’s been working?

CHETTY: Yes. So, I think that’s a complicated question. We investigated many different factors that might be causing this. Let me first say, you know, just as a starting point, what is driving that shrinking of the race gap? Half of it is driven by black kids growing up in low-income families, doing better than they were before. They’re more likely to rise out of poverty, less likely to be unemployed, less likely to be incarcerated. Positive progress for black kids growing up in low-income families, which I think we should celebrate. On the other side, we have white kids growing up in low-income families, unfortunately doing a bit worse than they were in the past. Less likely to be working, less likely to be in the middle class, and so on. And so, the shrinking of the race gap is coming from both of those forces, black kids doing better and low-income white kids not doing as well. Now, what is driving those trends? It turns out that a lot of the explanation originates in the communities in which these kids are growing up. Black kids are increasingly growing up in thriving communities where you have more parents who are working, higher levels of stability, more opportunities to rise up, more exposure to people who can connect you to an internship for a pathway to success. White kids, particularly white kids with less educated parents, unfortunately, are growing up in communities that are not thriving as much, and that’s driving the decline in economic mobility for white children.

SREENIVASAN: So, even when you look either at race or class, is this a zero-sum? I mean, this doesn’t seem like it’s one community getting better when the other gets worse or vice versa.

CHETTY: That’s exactly right. And I think that’s an extremely important point. We find that in the places where black kids are doing best, and we can look at this data, but the audience can look it up in their own community. If you go to a website called The Opportunity Atlas, you can look up data for your own county. And what you’ll see is there are some parts of America, like parts of the southeast, a city like Charlotte, North Carolina, for example, where black kids are doing much better than they were before. But those same places where we see black kids doing better, we also see white kids doing relatively better. So, it’s absolutely not a zero-sum game, it’s not that one group is benefiting at the expense of the other, both groups are doing better in some places and worse in other places. And so, you know, I think what this shows us is that economic mobility is really something we can all benefit from and make progress in together.

SREENIVASAN: You mentioned Charlotte, North Carolina. That was a place 10 years ago in your report that did not fare too well. So, how were you able to kind of look at that data over this time? Are they improving? How so? And who are they compared to?

CHETTY: Yes. So, Charlotte, I think, is a very interesting case. So, when we put out that data I mentioned earlier, the study in 2014, we ranked the 50 largest cities in America in terms of kids chances of rising up. And it turns out Charlotte ranked 50th out of the 50 largest cities. It was the lowest in terms of your chances of rising up if you were a poor kid growing up there. Now, that shocked and surprised many people in Charlotte because many people view Charlotte as a vibrant city, which it absolutely is. You know, if you drive around Charlotte today, relative to 20 or 30 years ago, you’d see that there are many more tall towers and prospering businesses and people who are doing well. But it turns out when you take a deeper look at the data, and you follow kids over time using tax records who are growing up in Charlotte, particularly kids born in the late 1970s, early 1980s, if you were growing up in a low-income family, you are not benefiting from that prosperity. You are not getting jobs at firms like Bank of America, you know, high paying financial company headquartered in Charlotte. Now, when we put out that study, you know, folks in Charlotte, I think, responded in a really constructive way. They said, this is not something we want the label of 50 out of 50. We believe in prosperity for everyone. What can we do to try to make a change? There were many initiatives launched, a task force, more than $200 million spent by nonprofits to try to implement mentoring programs, other kinds of investments in the city, early childhood education, to try to give kids better pathways to jobs at firms like Bank of America. And what we see now, when we look at the new data, we can’t describe it directly to those efforts, but, you know, more generally, it’s actually a very positive story where Charlotte now ranks among the most improved cities in terms of economic mobility in the past 15 years. At the top of the list. It’s not overall the best place in terms of rising up, but it’s no longer 50 out of 50. It’s something like 38 out of 50. It’s on a very positive trajectory. Now, let me contrast that, Hari, with Atlanta, which ranked 49th out of 50 on our list in 2014. And now, unfortunately, ranks 50th out of 50. In Atlanta, there’s been no progress in terms of economic mobility. And so, what that shows you is there’s no guarantee here that things are going to get better. We have to take a deliberative approach to improving things. But it also shows, I think, encouragingly that change is possible and we can make the American dream a reality for everyone.

SREENIVASAN: Look, someone might look at the kind of headlines from your study and say, well, this is just about money. I mean, is his class a different way to say a wealthy or affluent community? Are there places where you can point to a city that might not be the richest or the neighborhood that might not be the richest, but where kids are still getting these better outcomes because of the community of support that they have and the access to internships or whose parents are working?

CHETTY: That’s exactly right, Hari. So, you know, no doubt money matters. We see that kids who grow up in higher income families do better on many dimensions, not just in how much money they make themselves, but their health, the education they get and numerous different life outcomes that we might all care about. But as you’re stressing, and I think this is a key message from the data, what matters really above and beyond that is the strength of the community in which you’re growing up, even holding fixed your parents income. So, we give you a concrete example, take Dubuque, Iowa, or much of rural Iowa, you wouldn’t think of rural Iowa as sort of a powerhouse in terms of high paying jobs and so on. It turns out, if you want to pick a place to rise up and achieve the American dream, that’s the sort of place where your odds are the best. You have the best chances of rising up in many places in the rural Midwest, not because you’re going to get that high paying job or find success in that community itself, but we see that those communities, which often have a lot of social capital, meaning connections between low and high income, people who help you out, show you a path, have great educational systems and so on, they launch kids on careers that then, you know, lead them to high paying positions in a place like Chicago or New York, find success in various domains and so on. So, that community unit is really crucial we think for restoring the American dream.

SREENIVASAN: Since you have this large snapshot, and you can even zoom down into almost a ZIP code level here, I wonder what is it that’s driving less positive or more negative outcomes for white children? I mean, by your data, it would show that something is happening to those communities, that there is less economic opportunity for the parents of your friends to have jobs, if I’m reading that right.

CHETTY: That’s exactly right. And, you know, if we just think about the history of the U.S. and a lot of what we hear in the public discourse, there have been many changes in terms of global competition, outsourcing, technological change, the decline in manufacturing, where lots of folks have lost jobs, right? The local steel plant closes. The auto industry declines in certain places. And many workers, and it’s often been white workers who had those high paying jobs, they ended up losing employment. And we’ve seen an earlier work that they haven’t necessarily come back to work and haven’t found jobs. Now, what we’re seeing in these new data is that has an impact, not just on that generation of workers who were displaced, but on the next generation of kids, in particular white kids who are growing up in these communities where now, you know, you knew many people who worked at the local steel plant or auto plan and kind of have that pathway planned out and kind of had a sense of how you might follow that track, that option is no longer available. You might have thought people will naturally go in some different direction, but that’s not happening. Unfortunately, we’re seeing a decline in those communities where there are health issues that emerge. People get more disconnected, not graduating from high school, a broader decline that is leading to this decline in economic mobility, unfortunately, for many white Americans.

SREENIVASAN: We’re all going to see for the next a couple of months, Harris and Walz and Trump and Vance go out on stump speeches after some speeches and trying to reach these people who feel like that the economy has left them behind, right? And I wonder if you were to be able to advise both of these campaigns, economic policy advisers, what would the suggestions be? How do we craft policies that target not just individuals, but entire communities?

CHETTY: Yes, it’s a great question. My view is these issues of declining economic opportunity are absolutely central to what we’re hearing in the public debate and the campaigns and so on. And the key question, of course, is what we can do to address these issues going forward, both for the communities that are declining and to increase opportunity for black Americans. We’re making some progress, but still have a long way to go to catch up in terms of their chances of rising up. And my sense is, while there’s no silver bullet, I think there’s been an excess focus and economic policy on things like financial capital, giving people money or simply giving people education. Those things matter no doubt. But what we’re seeing these new data and other related research is that social capital matters as well in addition to financial capital and educational investment. So, what do I mean by that? What I mean is that who you’re connected to, who you’re inspired by, what your networks look like, the social infrastructure of society seems to be extremely important in addition to the bread and butter, how many dollars do you have, what schools do you have access to and so on. And often what we’re seeing, Hari, is the programs that are most effective in a wide variety of domains. From affordable housing policy to job training programs to educational policies, the interventions that are most effective pair, giving people resources with social support to use those resources more effectively. To give you a concrete example, take the housing voucher program on which we spend more than $20 billion a year in the U.S., giving families rental assistance that is intended to help them move to higher opportunity neighborhoods. It turns out when you look at the data, families get this money often worth, like, $1,500 a month, in many places, not a small sum, but they don’t end up using that money to actually move to better neighborhoods, better ZIP codes, where we see in our data, their kids are more likely to break the cycle of poverty. And so, what we’ve done is — in that context, an intervention in Seattle where we essentially provided social support to families, connected them with a counselor who found housing for them in higher opportunity areas if they wanted to move there, negotiated with them with landlords on their behalf, basically help them through the housing search process. And that relatively inexpensive intervention dramatically changed the fraction of families who moved to high opportunity areas from 15 percent in the control group, this was run as a randomized experiment, to 60 percent in the treatment group. Basically making the billions of dollars that we’re already spending far more effective in terms of helping kids rise out of poverty. And we estimate that tweak to the program will help kids over their lifetimes earn about $200,000 more because they’re now going to better schools, growing up in more thriving communities and so on. So, that’s just one small example. That theme, I think of using the resources we’re already spending in tandem with this social capital sort of intervention can be applied in many different settings. And I think can make our country much more effective in helping people rise up.

SREENIVASAN: What do we do with all of the areas in America that lack the social capital today, whether they’ve been, you know, marginalized already, whether they’re already impoverished economically, where there isn’t that access to someone’s parents who might have a connection to a job that they could work at?

CHETTY: Yes, absolutely. So, you know, I’ve been giving moving to opportunity as an example, bringing people to opportunity, that can be part of the solution, but obviously, it’s not completely scalable. What we really need to do is bring opportunity to people where they currently live in places where it’s lacking. And so, there are many different strategies one can take. Let me give you another concrete example. I think there’s a new set of job training programs that can connect people to opportunities and have shown tremendous success in randomized trials that, again, combine traditional skills training, you know, teaching people I.T. or some other skill that’s in demand. But now, combining that with support from a network. So, I’m thinking of programs like GEAR UP or Personal Us (ph), where what they do is bring in for something like a one-year internship, and they say, look, you know, Bank of America is looking to hire a thousand people. This actually happened coming back to Charlotte. When (INAUDIBLE) our study. Bank of America made a commitment to hire 1,000 kids from disadvantaged backgrounds who grew up in Charlotte itself. And so, the way they did that, is they teamed up with this group GEAR UP and a local community college to say, we want to hire people who can fill these specific jobs. Let’s provide them the training they need to be able to get those jobs, but also tell them that there’s an internship waiting for them, provide them the wraparound social support needed to be able to succeed in these careers and so on. And it turns out if you do a randomized trial, you know, flip of a coin, some people get access to this program, some people don’t. Those who get access to it, we see a 40 percent earnings gain sustained over many, many years. And they are now, because of that social contact, on a trajectory where, you know, they’re providing for themselves, providing for their families. That’s again one concrete example of things we can do in communities where opportunity is currently lacking.

SREENIVASAN: All right. Raj Chetty, professor of Economics at Harvard and Director of Opportunity Insights, thanks so much for joining us.

CHETTY: Thank you, Hari. My pleasure.