Next week, in his State of the Union address, President Obama is expected to return to a theme he and many progressives have been hitting hard in recent months: namely, that the American Dream is in trouble and that growing economic inequality is largely to blame. In a speech to the Center for American Progress last month, Obama said: “The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream.” Likewise, New York Times columnist Paul Krugman recently wrote that the nation “claims to reward the best and brightest regardless of family background” but in practice shuts out “children of the middle and working classes.”
Progressives like Obama and Krugman are clearly right to argue that the American Dream is in trouble. Today, poor children have a limited shot at moving up the economic ladder into the middle or upper class. One study found that the nation leaves 70 percent of poor children below the middle class as adults. Equally telling, poor children growing up in countries like Canada and Denmark have a greater chance of moving up the economic ladder than do poor children from the United States. As Obama noted, these trends call into question the “American story” that our nation is exceptionally successful in delivering equal opportunity to its citizens.
But the more difficult question is: Why? What are the factors preventing poor children from getting ahead? An important new Harvard study that looks at the best community data on mobility in America—released this past weekend—suggests a cause progressives may find discomforting, especially if they are interested in reviving the American Dream for the 21st century.
The study, “Where is the Land of Opportunity?: The Geography of Intergenerational Mobility in the United States,” authored by Harvard economist Raj Chetty and colleagues from Harvard and Berkeley, explores the community characteristics most likely to predict mobility for lower-income children. The study specifically focuses on two outcomes: absolute mobility for lower-income children—that is, how far up the income ladder they move as adults; and relative mobility—that is, how far apart children who grew up rich and poor in the same community end up on the economic ladder as adults. When it comes to these measures of upward mobility in America, the new Harvard study asks: Which “factors are the strongest predictors of upward mobility in multiple variable regressions”?
1) Family structure. Of all the factors most predictive of economic mobility in America, one factor clearly stands out in their study: family structure. By their reckoning, when it comes to mobility, “the strongest and most robust predictor is the fraction of children with single parents.” They find that children raised in communities with high percentages of single mothers are significantly less likely to experience absolute and relative mobility. Moreover, “[c]hildren of married parents also have higher rates of upward mobility if they live in communities with fewer single parents.” In other words, as the figure below indicates, it looks like a married village is more likely to raise the economic prospects of a poor child.
What makes this finding particularly significant is that this is the first major study showing that rates of single parenthood at the community level are linked to children’s economic opportunities over the course of their lives. A lot of research—including new research from the Brookings Institution—has shown us that kids are more likely to climb the income ladder when they are raised by two, married parents. But this is the first study to show that lower-income kids from both single- and married-parent families are more likely to succeed if they hail from a community with lots of two-parent families.
2) Racial and economic segregation. According to this new study, economic and racial segregation are also important characteristics of communities that do not foster economic mobility. Children growing up in communities that are racially segregated, or cluster lots of poor kids together, do not have a great shot at the American Dream. In fact, in their study, racial segregation is one of only two key factors—the other is family structure—that is consistently associated with both absolute and relative mobility in America. The figure below illustrates the bivariate association between racial segregation and economic mobility.
3) School quality. Another powerful predictor of absolute mobility for lower-income children is the quality of schools in their communities. Chetty, et al. measure this in the study by looking at high-school dropout rates. Their takeaway: Poor kids are more likely to make it in America when they have access to schools that do a good job of educating them.
4) Social capital. In a finding that is bound to warm the heart of their colleague, Harvard political scientist Robert Putnam, Chetty and his team find that communities with more social capital enjoy significantly higher levels of absolute mobility for poor children. That is, communities across America that have high levels of religiosity, civic engagement, and voter involvement are more likely to lift the fortunes of their poorest members.
5) Income inequality. Finally, consistent with the diagnosis of Messrs. Obama and Krugman, Chetty and his team note that income inequality within communities is correlated with lower levels of mobility. However, its predictive power—measured in their study by a Gini coefficient—is comparatively weak: According to their results, in statistical models with all of the five factors they designated as most important, economic inequality was not a statistically significant predictor of absolute or relative mobility.
Chetty, who recently won the John Bates Clark Medal for his achievements as an economist under the age of 40, has been careful to stress that this research cannot prove causation—that removing or adding these factors will cause mobility in America. The study also acknowledges that many of these key factors are correlated with one another, such as income inequality and the share of single mothers in a community. This means that economic inequality may degrade the two-parent family or that increases in single parenthood may increase economic inequality. But what does seem clear from this study of the “land[s] of opportunity” in America is that communities characterized by a thriving middle class, racial and economic integration, better schools, a vibrant civil society, and, especially, strong two-parent families are more likely to foster the kind of equality of opportunity that has recently drawn the attention of Democrats and Republicans alike.
Throughout his presidency, Barack Obama has stressed his commitment to data-driven decision-making, not ideology. Similarly, progressives like Krugman have stressed their scientific bona fides, as against the “anti-science” right. If progressives like the president and the Nobel laureate are serious about reviving the fortunes of the American Dream in the 21st century in light of the data, this new study suggests they will need to take pages from both left and right playbooks on matters ranging from zoning to education reform. More fundamentally, these new data indicate that any effort to revive opportunity in America must run through two arenas where government has only limited power—civil society and the American family. This is a tall order, to be sure, but unless President Obama, and progressives more generally, can enlist a range of political, civic, business, and cultural leaders—not to mention parents—in this undertaking, this new study suggests they will not succeed in achieving one of their most cherished goals: reviving America as a “land of opportunity.”