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How Does Place Impact Opportunity?

We’ve known for a while now that neighborhoods matter. Jane Jacobs, in the 1960s, showed us the value of a well-planned street. William Julius Wilson brought inner-city housing to the forefront of the civil rights conversation in the 1980s. Beginning in 1990, the U.S. Department of Housing and Urban Development began to overhaul public housing legislation in an attempt to reinvest in residents with falling income levels.

Earlier this week, the Brookings Institution hosted a new, major voice in the conversation on welfare and neighborhoods: Raj Chetty, professor of economics at Harvard University. Chetty’s most recent work studies the relationship between geography and intergenerational income mobility. Analysis of over five million families’ earnings over time and space, alongside a re-examination of the famous Moving To Opportunity study (1996), yield shockingly strong correlations between neighborhood characteristics and resident children’s upward income mobility over time.

The probability that an American child in the bottom quintile of income will make it to the top quintile is only 7.2 percent. That number is 13.5 in Canada. In other words, said Chetty, “Your chances of achieving the American Dream are two times higher in Canada than in the U.S.”  That’s a harrowing national average, but when one looks closer at the distribution of mobility, says Chetty, effective policy-making becomes a more feasible prospect.

[pq]Income inequality and mobility vary across geographical regions of the United States.[/pq]

Conversation surrounding the Great Gatsby Curve has distracted many Americans from the simple fact that income inequality and mobility vary across geographical regions of the United States. Chetty’s analysis allows him to predict a child’s gain or loss in earnings (from his or her parents’ income) based on the metro or rural area in which that child grew up. Raise a child in DuPage, IL, and his or her earning gains in adulthood will be 15.2 percent higher than the national average gain. Move the child to Baltimore, MD, and expect his or her earnings to decrease 17.2 percent more than the national average.

Controlling for parent income across time and residence area enabled Chetty to trace a child’s upward mobility at different ages and in different neighborhoods. The result? The earlier a child moves to a better neighborhood, the greater his or her chances of rising to the top quintile of income in America. Every year until age 13 has a significant impact on a child’s earning ability in adulthood.

Chetty identifies five characteristics of neighborhoods that appear to have causal effects on income mobility: racial segregation, income inequality, social capital (think of Robert Putnam’s correlation between bowling leagues and mobility), school quality, and family structure.

Marriage structure appears to have especially interesting effects on mobility. We know that a child with two parents is expected to have greater mobility than a child in a single parent home. But one who grows up in a neighborhood with high marriage rates—whether or not his or her own parents are married—will have more upward mobility than a child living in a neighborhood with lower marriage rates. Family appears to be foundational to community.

Alongside Chetty, Brookings hosted a panel of five housing experts in a conversation on policy. Discussion focused on two ideas:

1. Future policy must combine efforts to enable families to move to better neighborhoods (e.g. Housing Choice Vouchers) and to reinvest in struggling neighborhoods. Chetty’s championing of voucher programs brought immediate response from the panel and audience: clearly, policy cannot hope to move every low-mobility family into a better neighborhood. “I can assure you that my 20,000 families who live in public housing will not be moving to Fairfax,” said a representative from DC HUD during Q&A. In many cases, noted Margery Turner from the Urban Institute, tackling disinvestment in poor neighborhoods means de-regulating private investment in housing.

2. Racial discrimination has roots in housing policy and continues to present major barriers to mobility for black and Hispanic families. “Desegregating our cities is something we haven’t done anything about in a very long time, and it’s something we’ve known about for a long time,” noted panel member Emily Badger from The Washington Post.

So, what’s stopping us from creating economic integration in neighborhoods? Two things, concluded the panel. First, discrimination by individuals still exists (consider this). Second, people of all kinds experience fear and inertia when it comes to housing. And as Dr. Chetty noted, “Tackling fear takes more than a fair housing enforcement.”

What “more” means depends, of course, on the neighborhood and the people. This is where you and I enter the story, with a calling to be the newest investors in fractured neighborhoods. Whatever that “more” is (building relationships and social capital, training high-quality teachers, relocating), it will be an integral part of restoring community to residents who have been deprived of it and, as Chetty believes, giving back the American dream to the next generation.

You can check out Chetty’s data in more detail here: http://www.equality-of-opportunity.org/.