Low-Income Children Can Move Up If They Grow Up in a Good Place

June 11, 2015

We know you’ve got to choose the right parents if you want to wind up higher on the income scale — or so the research tells us. Now we’ve got a massive data analysis telling us they’ve got to choose the right zip code. And they’ve got to do it while you’re young, preferably before you turn ten.

The analysis was the focal point of a recent “conversation” about place, opportunity and policy hosted by the Brookings Institution. Featured speaker was the lead analyst, Harvard economics professor Raj Chetty.

Some mind-opening data, a handful of policy recommendations and a striking (to me) focus on race discrimination. Summary, brief as I could make it, follows.

Place Matters for Children’s Future, With Caveats

Children born in the bottom fifth of the income scale have a much better chance of moving to the top fifth as adults if they grow up in a community that gives them and their families advantages like decent schools, safe homes and streets, ready access to jobs and beneficial networks. No surprise here. But new numbers, some surprising.

Chances for low-income children raised in Washington, D.C. are 10.5%. This is better than the national average — 7.5%. And it’s a whole lot better than their counterparts’ chances in most of the deep South. But their chances would be better if they’d grown up in San Jose, California, hub of the Silicon Valley.

Shifting the income level, as the breakouts do, children whose families have incomes in the bottom quarter of the income scale will earn 5.8% more as young adults if they grow up in D.C. than if they’d grown up in “an average place.” But if they’d grown up in nearby Fairfax County, they could look forward to more than double that relative income gain.

In short, place matters, as another recent study also showed. This one, also co-authored by Chetty, reevaluated results of the U.S. Department of Housing and Urban Development’s Moving to Opportunity pilot.

Families got housing vouchers, but only if they moved to lower-poverty neighborhoods. An earlier evaluation measured increases in parents’ employment and income. Basically, zip.

But when Chetty and his colleagues looked at how preteens fared as adults, they found a 31% boost in earnings, compared to peers whose families didn’t get the MTO vouchers. This, I would guess, is at least partly because the young MTO beneficiaries had a higher college attendance rate.

For older children, however, moves to opportunity had negative effects on earnings, as well as other measures. The disruption of the move outweighed the advantages of living in a higher-income neighborhood, the researchers say.

What Public Policies Could Do

At the highest plane, these findings support two policy thrusts. The first is to help more families move out of high-poverty neighborhoods — and to do so while their children are very young. That would seem to require more housing vouchers, perhaps with subsidies scaled to encourage use in mixed-income neighborhoods.

But there’d have to be more relatively low-cost housing in those neighborhoods too. Several panelists at the Brookings event had quite a bit to say about exclusionary zoning, e.g., density limits that cap building height and/or prohibit multi-unit housing.

At the same time, it’s both practically and theoretically infeasible to move all poor and near-poor families out of high-poverty neighborhoods. And not all families want to move, fearing loss of “social capital,” e.g., connection to a local congregation, supportive friends nearby.

So the second major policy thrust is to improve those neighborhoods. Oddly, Chetty and panelists didn’t delve into the how issue, though one recommended diversifying public housing locations so as to dilute the poverty concentration.

Discussion focused mostly on affording families in high-poverty neighborhoods access to opportunities elsewhere — better schools especially. Recurrent, favorable references to vouchers, lotteries and charter schools. One panelist also mentioned redrawn public school attendance zones.

Chetty himself believes we need more “big data” analyses to pinpoint initiatives that would make economically-disadvantaged neighborhoods less disadvantageous for the children growing up in them.

But he did cite possibilities, based on his research to date — specifically, neighborhood characteristics correlated to better (and worse) outcomes for kids. Big news here is that the race in the place matters a lot.

Race Matters for All Children

We all know now, if we didn’t before that our public safety and criminal justice systems often make life worse — if they don’t end it — for residents in predominantly black neighborhoods. The victims are usually blacks.

What Chetty’s research tells us is that the racial makeup of a neighborhood affects economic mobility for whites, as well as blacks. Outcomes worsen as black density increases for both, he said.

We don’t need his research, though we’ve got it now to identify major factors — under-funded schools with over-crowded classrooms, less experienced teachers and insufficient resources to mitigate disadvantages that impair children’s ability to learn, lack of convenient public transportation, etc.

What Policies Have Done and Could

Plowing more money into the schools, transportation systems and the like would seem a solution to the drag on upward mobility that living in a predominantly black neighborhood exerts. And indeed, it is, but not the only one. Nor sufficient because it would address symptoms, but not root causes.

Several panelists zeroed in on the latter. Predominantly black neighborhoods —  and their attendant disadvantages — didn’t just happen, they stressed. The neighborhoods reflect housing segregation policies dating back to the 1920s.

And we’ve still got policies that perpetuate segregation. More widespread private-sector practices, however, e.g., selective treatment by real estate agents, egregiously unequal mortgage loan terms.

The 1968 Fair Housing Act was supposed to dismantle segregation and prevent further discrimination on various bases, including race.

But weak and/or co-opted local agencies let business go on as usual. And HUD has never had to resources to effectively enforce the law. Nor has it always been allowed to do what it could, as a ProPublica report indicates.

HUD has proposed new rules that would put teeth into the Fair Housing Act’s requirement that it — and thus state and local agencies — “affirmatively further” the purposes of the law. The final rules — assuming they’re issued and enforced — could make place matter less for low-income children’s chances of moving up the income scale. Make life better for their parents too.

But they won’t make every place a launching pad for upward mobility. For that, we need a broader range of policy initiatives. Bigger investments in equalizing opportunities too.

 

 


Income Ladder Hard to Climb If You’re Born at the Bottom, New Report Shows

July 26, 2012

Many news stories and opinion pieces on the latest report from the Pew Center’s Economic Mobility Project — as well there might be.

Because “pursuing the American dream,” as the report is entitled, could be as rewarding as chasing a will o’ the wisp — especially for those born to low-income parents and most especially of all if they’re black.

At the very least, the report gives the lie to our “rags to riches” story. It’s “more of a Hollywood fairytale than an actual reality,” says Ethan Gelling at the Corporation for Economic Development, echoing the Pew project manager.

I think we need to parse the data into two separate issues, as the Pew analysts also do.

One is economic mobility as measured by movement up or down the quintiles into which income is commonly divided.

As the Pew analysts say, economic growth — especially at the top — puts the major rungs on the income ladder further apart. Obviously harder then to climb from one to another.

That’s how we can have what, at first blush, seem two contradictory findings. On the one hand, 93% of adults in the bottom fifth have family incomes higher than their parents did. On the other hand, only 57% move up into a higher fifth — and only 13% into one of the top two fifths.

Some argue that the root cause, i.e., the grossly disproportionate distribution of the wealth our economy generates, is bad in and of itself.

Rakim Brooks at Demos, for example, warns that the public as a whole loses trust in institutions “when it begins to associate the rich with the fortunes of the country.”

Others have said that income inequality is partly responsible for the credit crunch so many households now find themselves in.

People, they say, often define their wants upward, based on what they see richer folks have. They buy — or rather, make down payments on — houses they can’t afford. They put all sorts of “status-defining” goods on credits cards — enormous flat-screened TVs, designer accessories, etc.

I’m rather more preoccupied with the second issue. Do people in the bottom fifth have enough to live on, plus a modicum of what the Pew analysts call wealth and some others refer to as assets?

Do they, in other words, have a reserve for costly emergencies? A cushion against plain old hard times? Some resources to give their children a good start in life?

The answer from the Pew project is a resounding No.

The median income of families in the bottom fifth was a paltry $19,202 in 2009 — nearly $2,850 below the federal poverty line for a family of four.

And their median wealth, i.e., assets like home equity, money in the bank, a car, was just $2,748 — about $4,690 less than the bottom fifth had a generation ago.

The two figures are, I assume, closely related. If you’re, at best, making barely enough for basic needs, you’re not squirreling away money for a rainy day — let alone investing in mutual funds and the like that will, in the long run, make your nest egg grow.

Why families in the bottom fifth are in such bad straits is a much more complex question. Panelists at a recent all-day conference co-hosted by Demos and partners went at it from many angles.

I’ll mention here only what seemed one broad consensus. A college education — at the very least, enough to earn an associate’s degree or certificate — is a big part of the solution.

Yet, as we know, college is getting very expensive. Pell grants, which the lowest fifth could qualify for, rarelyt cover the costs — and now have new restrictions that tend to rule out self-supporting work during enrollment.

I don’t suppose I need to say anything about loan burdens — except perhaps to note that they surely seem especially formidable for potential students in the bottom fifth, whose prospects for moving up the income scale are iffy, at best.

Yet the Pew figures indicate that their families can’t help them.

Nor, indeed, will the parents all have the resources to provide what their infants and toddlers need to do well when they start school, e.g., a healthful diet, high-quality child care, time to read to them, take them to the zoo, etc.

Fewer than half of poor children are “school ready” when they start kindergarten, according to a study from the Brookings Institution. Three-quarters of children in families with moderate and high incomes are.

And when you start behind, you tend to stay behind, as some Pew figures on reading skills show.

Not surprising then that the dropout rate for low-income students is five times the rate for students from high-income families.

This is one way that income inequality passes from generation to generation. Not just inequality, but poverty too.


What Is Poverty In America?

October 16, 2011

Mercedes Diane Griffin Forbes, civil rights columnist for the Washington DC Examiner, takes on the Heritage Foundation’s dismissive report on poverty in America.

“No matter how extreme some may think the idea of poverty is,” she writes, “for millions, it is not merely an idea born out of media hype, it is in fact a reality.”

The evidence is surely on her side. But her own idea of poverty seems to me warped by what I guess I’d call a middle-class bias.

She starts from an hypothesis ventured by the head of the Census Bureau’s Poverty Statistics Branch. To wit, the recession-driven jobs crisis may be the single largest factor in the increased poverty rate.

Key figure here: Nearly 1.8 million more poor working-age people had gainful employment for, at most, one week last year.

Griffin Forbes adds some of the dismal figures coming out of the Bureau of Labor Statistics.

Persistently high unemployment rates — over 9% for all but two months since May 2009.

Near-record rates for those who’ve been actively looking for work for at least 27 weeks — more than 2 million of them so long that they’ve exhausted even the maximum extended unemployment insurance benefits the federal government has been funding.

Disproportionately high unemployment rates for blacks and Hispanics. Even higher rates for teenagers.

And look, says Griffin Forbes, at the results of the Heldrich Center’s latest work trends survey.

These show not only “the sting” of unemployment and underemployment, but lower pay for those who do find jobs. Specifically:

  • More than half of those who found work settled for less pay and nearly a third took a cut in job-related benefits.
  • The median starting salary for new college graduates dropped by 10% between 2006-8 and 2009-10.

So what’s her big takeway?

” Poverty in America … is about the ‘American Dream’ becoming increasingly unattainable for millions, who by all accounts have done everything they were supposed to do to ‘make it.'”

Who are these millions?

“Middle class [families] finding that they can no longer meet their basic needs and relying on credit cards to keep the lights on and pay the rent … the college educated finding that they cannot pay their student loan debt.”

These people are indeed suffering from the impacts of the recession. Also from longer-term economic trends that have dramatically shifted income growth to the wealthiest fraction of Americans.

But they aren’t, to my mind, what poverty in America is.

Poverty has a whole lot more to do with not being able to meet your basic needs at all. Painful tradeoffs between food, rent, health care, clothes for the kids, etc. Or so little money that even tradeoffs are impossible.

It’s about not having the education or the resources to go to college, even with financial aid.

It’s about growing up in communities where the American Dream has long been out of reach for all but a few extraordinarily fortunate individuals.

A pre-recession study for the Center on American Progress found that upward mobility was more a myth than a reality for large numbers of poor children — especially black children.

Nearly 63% of those who were born to families in the bottom fifth of the income scale remained there as adults. The percent was higher than for white children, even when factors like parents’ education levels, working hours and assets were accounted for.

I’m as concerned as Griffin Forbes about hard-working Americans who had a purchase on middle-class life and now find themselves at the brink of homelessness — or worse.

But their plight isn’t, as she claims, a “dirty little secret.” We read about it all the time.

And it certainly isn’t, “in a nutshell,” what poverty in America is.