Upward Mobility Depends on Where You Live

Research Project Finds Pathways to Economic Prosperity

Children born in a low-income neighborhood whose families then relocate to an area with better opportunities can experience much-improved earning potential in adulthood than had they not relocated.

While this data might encourage disadvantaged people to move to better neighborhoods, it could also help low-opportunity neighborhoods learn how to get better, the researchers say.

Mapping the data about economic potential and providing it to community leaders can help both neighborhoods and the individuals within them to create better opportunities for success.

These findings and conclusions are based on research undertaken by the Equality of Opportunity Project. Its mission is to develop scalable policy solutions that will empower families to rise out of poverty and achieve better life outcomes. According to its website: "We aim to achieve this mission by harnessing the power of big data to learn from areas where the American Dream is still thriving."

The American Dream, which is still the ideal for many, includes upward income mobility: the ability of children to achieve a higher standard of living than their parents. The Equality of Opportunity Project shows that "children's prospects of earning more than their parents have fallen from 90 percent to 50 percent over the past half century. Understanding what has led to this erosion of the American Dream — and how we can revive it for future generations — is the motivation for the Equality of Opportunity Project."

One of the project’s directors, John N. Friedman, is an associate professor of economics and international affairs and public policy at Brown University. Its other directors are Raj Chetty of Stanford and Nathaniel Hendren of Harvard. Friedman presented key findings of their research and its implications at a recent webinar hosted by the Orton Family Foundation and the Daily Yonder. (The Daily Yonder is a website published by the Center for Rural Strategies.)

Friedman said researchers wanted to know if families with upward mobility can improve outcomes for the children of those families. That is, if families living in a low opportunity area with low achieving schools or substandard housing can simply move to an area where studies show kids have better outcomes as adults, and then themselves do better in the future.

Friedman noted the data supports an affirmative answer to that question. Counties (or commuting zones) with less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates tend to produce better outcomes for children in poor families. But they wanted to know why, and to figure out how community leaders could help people reach those outcomes.

The researchers looked at children born in the 1980s and how they were doing economically when they were in their late 20s. Friedman says they used "anonymized data from U.S. Census and tax records covering 20 million children to measure upward mobility based on where children grew up."

Researchers found that when a family moved to a more successful neighborhood, that was a predictor of future earnings. The earlier in life the family moved to a better area, the better. This, he says, proves that upward mobility isn't just based on better parenting or innate qualities of individuals. It can also be an outcome of neighborhood connectedness.

These data have now been mapped and color coded by the Equality Opportunity Project. The maps resemble abstract paintings of summer gardens, with shades of reds, browns and greens. The green areas indicate where people are doing the best, in terms of earnings. These tend to be in the Midwest, Great Plains, Northeast and West Coast regions. Most of the Southeast is in the red or brown areas. There is a correlation between urban counties in the South being higher achieving than their rural neighbors. But in other regions, it is the rural counties who are doing better than their city brethren.

Friedman said that in Iowa, for example, rural counties are the highest opportunity areas, rating over urban and suburban areas. But in the Southeast, the reverse it true, with people doing better in metropolitan than in rural areas.

In general, children who had higher incomes in their 30s had grown up in areas that researchers identified as “high opportunity.” Researchers identified five "neighborhood effects" that produce better outcomes for kids. The first is that the community is not highly segregation, by residential areas, income, or race. Instead, people are living along side neighbors with different life experiences and backgrounds. Second, there is a larger presence of the middle class in the neighborhood. Third, there is a more stable family structure compared to some other areas.

Friedman explained that children who grow up in a two-parent household have, on average, higher outcomes than children who grow up in a one-parent household, but this correlation is not driven by that fact. "Instead, in neighborhoods that broadly have more two-parent households, all kids end up doing better whether or not they grow up in a one-parent or two-parent household. It’s not something about the individual household, it’s something about the community as a whole, which seems to make the difference for mobility."

Another trait of a high opportunity area is greater social capital, where interpersonal relations and trust are at the heart of most transactions. Lastly, these neighborhoods have better quality schools, which may derive from the better-connected neighborhoods where they are located.

Friedman gave a few examples of low opportunity areas, based on the research. Atlanta is a city with major sports teams, transportation hubs, universities, and other major economic drivers. Yet the data show that children who grew up in certain pockets there were making only $25,900 annually on average, in their 30s. Another low opportunity city is Cleveland. Children who grew up in some neighborhoods there were making only $28,700 annually, on average. Friedman pointed out these people are not necessarily living in those cities in their 30s, but they grew up in those cities, with less access to opportunities that predict future economic success.

Examples of high opportunity areas Friedman presented include Dubuque, Iowa, where children who grew up there were making $44,850 annually; and Seattle, where children from there were earning $34,700.

Now that the factors that predict upward mobility have been identified and their presence tracked, Friedman said, community leaders can consider the primary policy approaches that they might take. They could decide whether to invest in people, or to invest in places. Friedman said both of these approaches have their strengths. Leaders are faced with a difficult choice, however. "Do you invest in a low opportunity place and hope it attracts the people?" he asked. "Or do you invest in individual people so they are able to have more choice?"

Friedman used Seattle as an illustration of the argument for investing in people. Residents of some areas of Seattle were doing well but other parts of the metropolitan area were not seeing those traits that would make a neighborhood a high opportunity area. Leaders developed a pilot project that took a "choice based" approach. It provided housing vouchers to people in low opportunity areas. The idea was to give people more money to put toward housing so they could choose their neighborhood to be near better schools and other markers of high opportunity.

But what happened instead is that people tended to use those vouchers to move to a similarly low opportunity area. Friedman wondered why they would do that, and he discovered the answer was fairly basic. Those higher achieving areas were also quite expensive. Housing was costly and the areas were far away from where the adults in the family were employed. But Friedman could see from the data that certain areas of the community, such as Normandy Park, were high opportunity but with reasonable housing prices.

Friedman says this example illustrates a people-based policy that helped individuals go to where the opportunities were better but the cost of living was still affordable. There are pockets of neighborhoods that meet this criteria, but the challenge is to identify them and help people find a way to get there.

On the other side of the coin, Friedman says, a place-based policy approach considers that "we can't literally move everyone away," so instead, we should improve the places where they live.

They are now developing the "Opportunity Atlas," which is an online platform like Google Maps, that will allow searching for areas of opportunity for any group of children by race and gender. The platform should be ready later this year. "It shows what opportunity looks like," Friedman says.

Another important goal the researchers are working toward is to discover whether neighborhood effects can be "replicated" once they are understood, and those qualities implemented elsewhere.

"Reviving the American dream requires local action," Friedman said. "How do we evaluate intervention policies to see if they are long-term solutions."

Friedman and the Equality of Opportunity argue that whatever the specific reasons for a neighborhood being low-opportunity, "there is no reason the fixes shouldn't be the same, wherever they are." Addressing the problem involves working with local stakeholders on intervention. It involves evaluating the impact of those interventions and disseminating lessons. It means keeping in mind that when striving for upward mobility, policies need to be scalable to fit the community.

"It is hard to find solutions when challenges and diagnosis varies across areas," Friedman said. But, policies should be evaluated in a "timely yet thoughtful manner." Leaders should work with stakeholders to define local solutions – and know that data can help.