Reaching for the American dream? Your best chances are probably in New York, New Jersey or Maryland.
Those states are best at helping Americans move up the income ladder, both in absolute terms and relative to their peers, according to a groundbreaking new study from the Economic Mobility Project at the Pew Center on the States.
Generally speaking, states in New England and the mid-Atlantic had the most upwardly mobile residents, whereas states in the South had the least mobile populations.
The study, which appears to be the first to try to measure economic mobility at the state level, looked at the incomes of Americans in each state over a 10-year period using data from the Census Bureau and the Social Security Administration. Researchers tracked a group of nationally representative Americans who were age 35 to 39 at any point from 1978 to 1997.
They then examined how each individual’s earnings had changed exactly one decade after the initial income number was collected.
Across the country, the income of the typical American rose by about 17 percent in inflation-adjusted terms during that time. There was great variation among the states, though.
In a handful of states, including New York, Utah and Massachusetts, residents’ incomes rose at least 20 percent over the course of a decade. On the other hand, in Alabama and South Carolina, average incomes rose only 12 percent after adjusting for inflation.
The study, by Erin Currier and Diana Elliott, also considered whether people were able to move up the income ladder relative to their peers — that is, how common is the modern-day Horatio Alger hero, the upstart who displaces people who are more privileged?
To measure this “relative upward mobility,” the authors focused on people in the bottom half of the income distribution and tracked whether those individuals were able to move up at least 10 percentiles.
For example, a person who started out in the 20th percentile would have to climb to at least the 30th percentile after a decade in order to be considered “upwardly mobile” in this study.
Across the country, about a third of Americans who started in the bottom half in income were able to move up that much.
At the more upwardly mobile end, in Connecticut, 40 percent of the state’s residents who started in the bottom half moved up at least 10 percentiles over the course of a decade.
At the other extreme, in North and South Carolina only about a quarter — 26 percent — of people who started at the bottom were able to lift themselves up that much.
The report had similar measures looking at downward mobility — that is, whether people in the top half of the income distribution dropped by at least 10 percentiles over the course of a decade.
Using all three metrics together — absolute income gains, relative upward mobility and relative downward mobility — the researchers determined that New York, New Jersey and Maryland performed best in the country. They were, in fact, the only three states that outperformed the country as a whole on all three measures.
And the Worst Performing States?
Louisiana, Oklahoma and South Carolina were the only states that performed worse than the rest of the country on all three measures.
The states with more upwardly mobile populations were more likely to be liberal-leaning states, and those with more stagnant populations were more likely to be conservative-leaning states. But it is not clear if that correlation is causal; the report does not explain how public policy or other factors may have affected people’s chances of evolving from rags to riches.
“It was beyond the scope of the study to look at why states performed the way they did,” Ms. Currier said. “What I can say is that our previous research has found some particular drivers of economic mobility at the individual level, including education, savings and assets, and neighborhood poverty during childhood.”
The researchers found at least one other factor that correlated with higher income mobility: the willingness to move to another state. People who moved to another state were more likely to get a big income increase, presumably because higher-income opportunities were part of the reason for migrating in the first place.
The report did not find that high turnover — having a lot of people move in, or a lot of people move out — affected how states performed.
“We thought there might be some sort of a brain drain effect, that maybe the best and the brightest move out,” Ms. Currier said. “Our sample — and other data — showed that in general people are unlikely to move out of birth state. As a result, the aggregate level of moving out or moving in or staying put didn’t actually affect any state as whole.”