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Study Uncovers Keys to Economic Mobility

With Democrats placing inequality at the top of their 2014 agenda and a raft of conservative proposals directed at those in need, a new study on mobility and opportunity by Raj Chetty, et al., comes at a key moment. Through it, we gain a thorough look at the makeup and geography of the American Dream, and why policymakers should care. We also enjoy the handiwork of one of economics’ bright young stars in Chetty—the youngest tenured economist in Harvard’s history, a MacArthur Genius and winner of the John Bates Clark medal.

Their new report finds five factors strongly correlated with upward mobility (in rough order):

1) Family structure: Being raised by two, married parents. Also, growing up in communities with intact families.

2) Segregation: Growing up in racially and economically diverse communities.

3) School quality: Having schools with high test scores, low dropout rates and small class sizes.

4) Social capital: Being in communities with high religiosity, civic engagement and voter involvement.

5) Inequality: Enjoying low inequality among the 99 percent (growth in the 1 percent is not correlated with immobility). Note: this was not a strong predictor of mobility when placed beside all five factors.

They then looked for the places that enjoyed the most (and least) upward mobility. At the top: San Jose and Salt Lake City. The average child in Salt Lake City is born at the 25th percentile in the national income distribution; he or she grows up to be in the 46th percentile in national income, a huge leap by any measure. A child raised in the bottom fifth of income distribution in San Jose has a 13 percent chance of reaching the top fifth. Contrast that with the national average of 8 percent and, say, Memphis at 3 percent.

Mobility GraphSource: Chetty, et al., 2014

At the bottom: Charlotte and Atlanta. Both suffer from a lower likelihood of upward mobility than any other developed country. Segregation and suburban sprawl are the two main culprits for those cities marked by poor mobility.

Thankfully, children today have the same chance at upward mobility as their parents enjoyed. In fact, economic mobility hasn’t changed in two decades. Nevertheless, the authors make clear that we should desire yet more mobility, particularly for the poorest Americans. The chances of escaping poverty in America are half that of the most mobile countries. And the authors note that increased trade and advanced technology are, at least in the short term, impacting the sort of middle-class job creation that would enable greater mobility.

These findings should help us focus on the real problems facing America: from fractured families to hollow communities to the policies that undermine hope for a better future. Nothing less than the American Dream is at stake.