Born here? You've already struck it rich
The American dream of climbing the income ladder is alive and well, according to new research on income disparity. But a lot these days depends on where you grow up.
Numerous recent studies have sought to explain the widening income gap in the United States, leading many commentators and politicians to bemoan the difficulties facing those at the bottom of the income ladder who aspire to greater wealth.
But in one of the most comprehensive studies to date, a team of Harvard and University of California at Berkeley economists seeks to debunk that notion, arguing that income mobility has changed little in recent decades.
After analyzing millions of anonymous tax records, the researchers found that about 8 percent of children born in the early 1980s to families in the bottom fifth of the income ladder had climbed to the top fifth for their age group today. The study found that rate was nearly identical for children born a decade earlier.
But that average rate masks significant new twists on the path to prosperity for those who start out at the bottom. While the overall level of mobility has remained fairly constant, those who rise from the bottom have further to climb as the rungs of the income ladder have grown further apart.
Much depends on where you grew up. Some cities, including Salt Lake City and San Francisco, provide much better odds of moving up than others, including Atlanta and Charlotte, N.C. And gains were greatest in large swaths of the suburban and rural Midwest.
"Places that have greater mobility tend to be less segregated, have less income inequality, better schools, more social cohesiveness and more stable families," said Harvard economist Raj Chetty, one of the study's co-authors.
Chetty stressed that the research didn't establish those factors cause greater mobility—only that they were common in those places where people had the best the odds of income gains. But, whatever the cause, the research demonstrates that factors influencing upward mobility happen early in life.
"A lot of these differences (in mobility) we already see by the time kids are 18—in terms of teenage pregnancy rates or college attendance rates," he said. "What that said is we really need to find ways to intervene while kids are in school."
The importance of a quality primary and secondary education was underscored by the study. After controlling for income levels, upward mobility was higher in areas with higher test scores, lower dropout rates and smaller class sizes. Areas with greater local tax revenues, the main source of public school financing, also fostered more income gains.
The study also found that children born to the highest-income families in 1984 were 75 percentage points more likely to attend college than those from the lowest-income families, while the college gap for children born in 1993 shrank to 69 percentage points.
The researchers said that suggests that income mobility may have even increased slightly for college-aged Americans.