Restoring the American Dream through Economic Connectedness

THE FADING AMERICAN DREAM

A central feature of the American Dream is the idea that through hard work, any child, particularly children born into low-income families, should have a chance to move up the economic ladder. Certainly, it was that aspiration that drew my own parents to come to this country, and countless other immigrants.  However, data shows that there's an enormous amount of variation in children's chances of rising up across different parts of America.

At Opportunity Insights, we analyze the geography of economic opportunity in America using information from anonymized tax returns to map children back to the county in which they grew up. We constructed a very simple measure of upward mobility by asking: suppose you grew up in a low-income family as a child. How much do you, yourself, earn when we look at your tax returns at 35 years old?

There's some parts of the country like the rural Midwest—for example Dubuque, IA—where kids growing up in families making $27,000 are making $50,000 a year on average. That's a substantial amount of upward mobility in a single generation. Yet there are other places like the Southeast, where kids growing up in families at that exact same income level, one generation later are not doing any better than their parents were. Or in some cases even have lower incomes on average than their parents did.  

This data had two important impacts on our field:

1. From a scientific perspective, it gave us a tool to study the science of economic opportunity that we've never had in the past.  

2. With better understanding, we now know how to make changes to improve economic mobility in other places, thereby expanding access to opportunity and restoring the American dream for everyone.

Now it's interesting to ask, how has this changed over the past 10 years? If we look at kids born more recently, how are patterns changing in this region? How are they changing elsewhere in the country? What can we learn from that? In a study my colleagues and I put out last year called Changing Opportunity, we explored exactly that.

WE RISE AND FALL TOGETHER

There used to be parts of the United States, like much of California and the Northeast, where you had a pretty good chance of reaching the middle class if you were a white kid growing up in a low-income family. But, beginning with children born in 1992, that's no longer the case. There's a very real sense in which economic opportunity or a shot at achieving the American dream is slipping away for a wide swath of Americans.

For Black children growing up in low-income families, it turns out that economic opportunity is improving, which is encouraging progress. But I want to emphasis something here: while we're making progress in terms of narrowing racial disparities, we should not by any means mistake that for thinking that we've closed racial disparities. There are still completely different set of opportunities for Black kids and white kids in America.  

Black children growing up in the very best places in terms of upward mobility can expect to have incomes of about $26,000 a year. That is worse than the very worst places for economic opportunities for white children, where they can expect to earn about $30,000 a year. On the one hand, it is true that economic opportunity is slipping away for white Americans. On the other hand, racial disparities remain extremely wide in the United States.  

People may have in their minds that if one group gains, it comes at the expense of the other. When we look at the data, that is absolutely not the case. In places where Black children are gaining the most, that's exactly where white children are losing the least. This underscores the fact that everyone either rises or falls together. Economic mobility is not a zero sum game.  

NEIGHBORHOODS ARE WHERE THE NEXT GENERATION IS SHAPED

If you look at economic mobility in Winston-Salem, you will see a pattern that I suspect is familiar to many of you, and if you compare that to 1930's redlining maps, you'll notice an incredible resemblance. It's a pattern we see in cities across America. The exact neighborhoods that were denied access to credit nearly 100 years ago tend to have the lowest levels of economic mobility today. Now, why is that? It's obviously not a direct consequence of redlining at this point, but it reflects the long legacy of historical factors. For example, you can go a few miles down the road in Winston-Salem, or pretty much any city in America, and it's like you're going from Alabama to Iowa in terms of rates of economic mobility.  

Data shows that differences in economic mobility can play out at a hyper local level. It's not about what's happening nationally—it's about what's happening in one neighborhood versus another neighborhood, one side of the street versus another side of the street, one school versus another school.  

When we look at millions of kids who move across different neighborhoods we found that the earlier you move to one of these high opportunity areas in your childhood, the better you do as an adult. So, there's sort of a dosage effect of exposure to higher opportunity. Now what is different about these higher opportunity areas? We have correlated these differences in economic mobility with a wide variety of factors.

Here are the four strongest predictors of economic mobility:

1. Mixed income—places that have higher levels of economic mobility, where kids are more likely to rise up out of poverty, they tend to be places that are more mixed income, areas that have less concentrated poverty, lower poverty rates.

2. Stable families—they tend to have more stable family structures. So a strong pattern in the data is that communities with more two parent families tend to have higher levels of economic mobility.

3. Strong schools—as you might expect intuitively, places with better access to schools, both at the K through 12 level and in terms of access to higher education tend to have higher levels of economic mobility.

4. Social connectedness—places with greater social capital tend to have higher levels of economic mobility.  

CONNECTEDNESS CREATES UPWARD MOBILITY

Now, this term social capital is one that social scientists have used for more than a century, and there are lots of different definitions. Some people mean the strength of a community, what your networks and relationships look like, how many friends you have, or how trusting people are of each other. Modern data now allows us to understand this concept more clearly. We set up a partnership with Meta, the company that operates the Facebook social network platform, to create new measures of social capital.  

One particular measure of social capital turns out to be really important—what we're calling economic connectedness. We asked: suppose you're a Facebook user and you have below median income. What fraction of your Facebook friends have above median income? So it's just a simple measure of the extent to which low income folks in a given county are interacting with high income folks.

It turns out that economic connectedness is the single strongest predictor of economic mobility that we or anybody else has identified to date. Moreover, this relationship between economic connectedness and economic mobility holds true at the national level and local level.

For instance, in areas of Winston-Salem where there are low levels of economic mobility, there are also incredibly low levels of economic connectedness. If you're a low-income person in Winston-Salem, you tend to have very few high-income contacts. In fact, this notion of economic connectedness appears to have a causal effect. It's not just a correlate or a predictor of economic mobility, but when you look at changes and how connected people are, it tends to affect their long-term prospects.

Why exactly is that? We don't know for sure yet. It might be things like if you're more connected to higher income people, you're more likely to get an internship or a referral to a job that gives you a pathway to success. But at an even deeper level, I suspect that the more important mechanism is that a child’s aspirations are shaped by who they're around. If you've never met anyone who's gone to college or pursued a particular career path in science or business, that's just not on your radar, and you don't end up going down that pathway.  

CHANGE IS POSSIBLE  

In response to all of this data, people often comment: this is all great that we can see evidence of ways to make a difference, but in this current polarized climate, can we actually create change?

I want to give you a concrete example from your own area—Charlotte, NC—one of the cities in America with the lowest levels of economic mobility 10 years ago. When we put that data out publicly, they reacted by wanting to make a difference. It's been really inspiring to see how they have really come together to make significant corporate investments and workforce training, to raise a significant amount of money for early childhood interventions, and to monitor local progress. Now, Charlotte is one of the places in America where economic opportunity is improving the most.  

So, the main message I want you to take away is that change is possible. I think economic opportunity—while it has long standing historical roots to practices of the past like redlining—nevertheless is something that we can change through a multisector collaborative effort.  

RESOURCES FOR CONTINUED ACTION:
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• Explore local data on economic mobility (including Dr. Chetty’s slides), read stories of impact, and connect with organizations driving change.

• Learn more about our past exhibit, Undesign the Redline, which highlights federal discriminatory redlining practices starting in the 1930’s.

• Explore local history of school integration through the interactive website, Rooted in Race, curated by Triad Cultural Arts.

• Donate to the Foundation’s Economic Mobility Fund to support nonprofits working to build a more inclusive local economy.