In his State of the Union address on Tuesday, President Obama said the gap was widening between corporate profits and employee wages. The top 1% has done well, he said, but many other Americans have been left floundering. “Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better,” the president said. “But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.”
He may have been right about stagnant wages: In the fourth quarter of 2013, the median weekly salary of full-time workers was $786, just 1.4% higher than a year earlier and barely above inflation (1.2%), according to the Bureau of Labor Statistics. But upward mobility is a tale of many cities, according to a recent report analyzing 741 commuting zones—“Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the U.S.”—by the National Bureau of Economic Research in Washington, D.C.
The report rated cities with a percentage, reflecting the chances someone in the bottom 20% reaches the top 20%. Relative mobility is lowest for children who grew up in the southeast, it found, while the west coast and northeast had the highest. The 10 lowest cities for upward mobility: Cleveland, Ohio (5.1%), St. Louis, Mo. (5.1%), Raleigh, N.C. (5%), Jacksonville, Fla. (4.9%), Columbus, Ohio (4.9%), Indianapolis, Ind. (4.9%), Dayton, Ohio (4.9%), Atlanta, Ga. (4.5%), Milwaukee, Wis. (4.5%) and Charlotte, N.C. (4.4%).
To be sure, all kids in the Top 10 cities for upward mobility are doing well relative to their peers in other cities—“absolute mobility”—because those local economies have grown and the cities as a whole have moved up in the national income distribution, says Erin Cumberworth, a sociologist at Stanford University who has studied inequality across American cities. Upwardly mobile cities like San Francisco, Washington, D.C. and New York where the local economies have done well over the past generation, she says.
“The U.S. is better described as a collection of societies, some of which are lands of opportunity with high rates of mobility across generations, and others in which few children escape poverty,” the NBER report found. They used anonymous data of all children born in the U.S. between 1980 and 1982, based on their income in 2011 and 2012 when they were approximately 30 years old, rated the income of an adult child with his or her parents, and also ranked their probability of attending college as it relates to their parents’ income.
Obama’s State of the Union address may add to the public perception that intergenerational upward mobility is on the decline in the U.S., a theory that politicians in both the Democratic and Republican parties have raised in recent months. But the National Bureau of Economic Research report suggests that the rank-based measures of income inequality haven’t changed much over the last 20 years. A decade ago, 20% of children born in the middle income distribution reached the top, broadly the same as today.
There is one obvious exception. Income inequality as measured in dollars has increased over time, the report found. The consequences of the “birth lottery”—the parents to whom a child is born—are larger in 2014 than ever before. The researchers compared this scenario to a ladder where each income percentile represented a different rung: The rungs of the ladder have grown further apart—that is, inequality has increased—even though the chances of children climbing from lower to higher rungs have not changed.
Top 10 cities for upward mobility
Others agree that upward mobility is stagnant. “One of the hallmarks of the American Dream is equal opportunity: The belief that anyone who works hard and plays by the rules can achieve economic success,” says Erin Currier, director of the economic mobility project at The Pew Charitable Trusts. “But the rags-to-riches story is more prevalent in Hollywood than in reality,” she says. In fact, 43% of Americans raised at the bottom of the income ladder remain stuck there as adults, Pew found.
The differences in social mobility among American cities are startling, especially when compared with foreign countries. Some cities—such as Salt Lake City, for instance—have rates of mobility comparable to countries with the highest rates of relative mobility like Denmark. Other cities, such as Atlanta (4.5% chance of reaching the top fifth income quintile from the bottom fifth) and Milwaukee (4.5%), have lower rates of mobility than any developed country for which data are currently available.
Public opinion also appears to contradict recent studies and Obama’s remarks on Tuesday about who can achieve the American dream—and why. More than 80% of Americans identified factors such as hard work, personal ambition, and access to education as key drivers of upward mobility, while less than half viewed growing up in a good neighborhood as an important factor, according to a 2011 public opinion poll carried out by The Pew Charitable Trusts.
Of course, education plays a major role in a child’s ability to surpass their parents on the economic ladder. Having a college degree makes a person three times more likely to rise from the bottom of the income ladder to the top, according to a report last month by The Pew Charitable Trusts, “Mobility and the Metropolis,” and nearly half of Americans who start at the bottom in terms of earnings and do not get a college degree are stuck there a generation later, according to the study of 96 metropolitan areas across the U.S.
Both Pew and the National Bureau of Economic Research agree on one salient point: Where children grow up has a major impact on their education and their mobility. “Metropolitan areas where the wealthy and poor live apart have lower mobility than areas where residents are more economically integrated,” Currier says. “Even reports that use different data and measure economic mobility in different ways, a consistent picture is emerging that should help policy makers: place matters in mobility.”
Another area where Pew and the NBER find common ground: Racial segregation is associated with greater income segregation and, as such, could be another factor in slowing down upward mobility. Black children are 11 times more likely than white children to grow up in high-poverty neighborhoods—a pattern that hasn’t changed much in 30 years, Currier says. The NBER report cites research that says such segregation could affect both low-income blacks and whites.
Ultimately, the geographical differences in upward mobility are strongly correlated with five primary factors: segregation, income inequality, local school quality, social capital (the strength of social networks and community involvement in an area) and family structure (children of married parents have higher rates of upward mobility if they live in communities with fewer single parents). But they stressed all these reasons are “correlational” rather than cause and effect.
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