Pethokoukis, Economics, U.S. Economy

Income mobility study shows the value of families, schools, and innovation

Credit: The New York Times

Credit: The New York Times

With income mobility, as with real estate, location matters a lot. According to a New York Times analysis of new research, a lower-income kid in the bottom 20% growing up in Atlanta has a 4% chance of making it to the top 20% vs. an 11% chance for a lower-income kid growing up in San Francisco or San Jose. In other words, depending on where you live in America, upward mobility could be at Scandinavian levels or at the lowest levels found among advanced economies.

But why does location matter? The researchers offer four reasons:

All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods. Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.

That intact families, good schools, and a healthy civic society are pretty important is hardly surprising to conservatives. (And especially in the case of Atlanta, effective mass transit in less concentrated cities is also important). By contrast, there was little or no correlation between mobility and the sort of stuff that left-liberals might prefer to focus on: taxes (tax credits for the poor or higher taxes for the rich), college tuition rates, or the amount of extreme wealth in a region.

The study effectively outlines what an effective pro-mobility, anti-poverty agenda might look like: a) discouraging regulations that limit urban density (reporter Ryan Avent calculates that various urban land-use regulations cost US GDP growth as much as half a percentage point per year), b) a pro-family tax code, c) education reform, d) unemployment insurance that aids mobility. Reihan Salam adds that “effective crime control is an effective policy lever for reducing the concentration of poverty and improving cognitive outcomes among poor children.”

It should also be noted that the cites with the highest levels of mobility — San Jose, San Francisco, Seattle, Boston, New York — are ones economist Enrico Moretti has identified as innovation hubs whereas many of the low mobility cities — Detroit, Cleveland, Chicago — are the industrial cities of old. As Moretti wrote in the Wall Street Journal:

Today the economic performance of American cities is more uneven than ever before. Some cities are growing fast, attracting innovative employers and adding well-paying jobs. Other cities are falling behind, shedding jobs and losing population. As the economic fortunes of American communities keep growing apart, the financial return for geographic mobility keeps increasing, but only some Americans exploit this opportunity. Unfortunately, government seems to have little idea about how to directly create an innovation hub.

Unfortunately, as Moretti points out, government has a poor record of directly trying to turn cities into innovation centers — which involves attracting high-skill workers and entrepreneurs.

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