The pernicious, lifelong effects of concentrated wealth and concentrated poverty.
Economic mobility – the ability to work hard and get ahead – has long been the cornerstone of the American Dream. But it's becoming harder and harder for Americans to pull themselves up the economic ladder.
An influential report this past summer from Harvard and Berkeley economists at The Equality of Opportunity Project found economic mobility varied widely across the country. Summarizing the key results of the study, the New York Times headline neatly explained: "In climbing income ladder, location matters." Children from post-industrial metros like San Jose, Seattle, or Boston were twice as likely jump from the bottom income quintile to the top as kids growing up in Sunbelt or Midwestern manufacturing cities.
But what accounts for the geographical variation? A new Pew Charitable Trusts study sheds some light. "Mobility and the Metropolis: How Communities Factor into Economic Mobility" by the University of California, Berkeley economist Bryan Graham and my New York University colleague Patrick Sharkey finds that the amount of economic integration – the degree to which poor, middle-class, and rich residents live in the same areas – was highly linked to levels of economic mobility.
The study uses information from three key data sets: the National Longitudinal Survey of Youth 1979, the National Longitudinal Survey of Youth 1997, and the Panel Study of Income Dynamics. These each collect information on individuals over time, allowing for measurement of family income during an individual's childhood and tracking them into adulthood. The Pew study focuses on 34 metro areas covered in the National Longitudinal Survey of Youth 1979 because of its larger sample size and longer time period. The authors note that the 34 are all among the nation's 50 largest metros, and provide statistically reliable data.
To explore the relationship between income mobility and the extent to which a city's poor and rich residents remain residentially isolated, the study developed and compared two basic metrics. The first, known as Intergenerational Elasticity of Family Income, captures economic mobility. This is a figure between 0 and 1 that represents how strong the relationship is between the socioeconomic stratum a child grows up in and his future income level. The lower the IGE, the less one's family background plays a role in future earning potential. An IGE of 1 would mean a child would have no chance of moving out of the economic stratum into which they were born. The U.S. metro average is around 0.4, about on par with the U.K. but far above other Western European nations and Canada.
The below table from the report shows the IGE for some of America's major metro areas. Atlanta, Cleveland, New York ,and D.C. have below average mobility levels; L.A., Chicago, Miami, and Detroit have average levels of mobility; and Boston, Minneapolis, Houston, and San Diego have above average mobility. (Note that these metro rankings differ slightly from the findings of the Harvard-Berkeley Equality of Opportunity Project, largely due to differences in data sets and the way that mobility was defined).
The second metric, the Neighborhood Sorting Index, captures income segregation across metro area neighborhoods. This measures whether there is greater income variation within neighborhoods – the hallmark of an integrated city – or between neighborhoods – as in a city with total segregation of classes by neighborhood.
Metros with higher levels of concentrated advantage and disadvantage have higher Neighborhood Sorting Indices. According to the study, just above 30 percent of the total variation in income occurs between neighborhoods in the most stratified metro area, while the Neighborhood Sorting Index is below 10 percent in the least segregated one.
The above table shows how metros rank on the Neighborhood Sorting Index. New York tops the list with the highest level of economic segregation among its neighborhoods. The study notes that neighborhood sorting has increased in many of these metros over the past several decades, as overall economic growth has also meant that "the gap between the rich and poor has grown as has the degree to which they live in separate communities."
What's especially interesting is the study's main finding: that there is a strong, positive relationship between economic segregation and economic mobility. In other words, the more segregated a metro is, the lower the chances for economic mobility across generations. As the authors note:
The relationship between neighborhood stratification and economic mobility is statistically meaningful, suggesting that the IGE is about 0.07 higher in a very stratified metropolitan area, such as New York, than a less stratified one, such as San Francisco. This difference translates into real income differences between people who live in these places.
All in all, the study finds the metropolitan areas where different economic groups live largely in separate neighborhoods also tend to have the lowest levels of economic mobility. Children raised in overwhelmingly affluent neighborhoods, with little exposure to poorer families, grow up to be affluent adults; children raised in poor neighborhoods, isolated from the more successful, don't. "American metro areas with distinct pockets of concentrated wealth and concentrated poverty have lower economic mobility than places in which the wealthy and the poor are more integrated," they write.
The study notes that public policies aimed at addressing economic segregation and mobility fall into two categories – housing assistance and education and skill upgrading. Both must be a part of any successful fix to this pernicious problem.
On the housing front, the study notes the need for more affordable housing. But the authors also point to the need for more innovative mixed-income development, inclusionary zoning, and metro-wide transportation and economic development.
The authors also echo calls for greater skill development and education, especially interventions in early childhood.
The authors aptly point out that we must move beyond national one-size-fits-all policies. Instead, we need to develop approaches that recognize the considerable local difference brought on by spiky and uneven economic geography. Solutions like requiring developers to include affordable housing units in new projects and developing metropolitan-wide transportation are politically unpopular. But they are a necessary part of any effort to restore economic mobility and the American Dream.
The forces limiting economic mobility are quintessentially geographic in nature. It is not just a split job market and growing economic inequality that confront us, but the deepening geographic separation, segregation and isolation of people and communities. Our emerging geography is increasingly one of concentrated advantage juxtaposed with concentrated disadvantage.
Top Image: Graffiti covers a sign welcoming visitors to the Robert Taylor Homes on Chicago's South Side in a photo from June 1987. Before it was demolished, Robert Taylor was once the country's largest public housing project. Chicago remains a city with high economic segregation and only average economic mobility (AP/John Swart).