Tuesday, August 20, 2013

An interactive version of the above map is available from NY Times

By Derek Thomas

A recent study by economists from Harvard University and University of California at Berkeley caught the eye of many for its first-of-a-kind examination of factors relating to upward economic mobility. Armed with a massive database consisting of 6.3 million children born in 1980 or 1981 - spanning across more than 700 regions, or "commuting zones" in the U.S. - the authors examined the extent to which these children's parents income determined their own income at the age of 30. With this study in hand, states and regions can now evaluate their policies against hard evidence of what works, and what doesn't, to restore the American Dream.

Speaking of what doesn't work; that shows up clearly in an interactive color-coded map above. Six southern states make up the largest concentration of low mobility regions in the United States but significant concentrations of low mobility also extends into portions of the Midwest - and right into the heart of Indiana. Of the 50 largest cities in the U.S., Indianapolis ranks 48th - meaning that only in Charlotte, NC and Atlanta, GA do children from low-income families have less of a chance at escaping poverty. 

The authors of The Equality of Opportunity Project found four common sense factors associated with greater upward mobility: quality K-12 education; a large middle class and a lack of economic segregation by income; the number of two-parent families; and citizen engagement. The mobility barriers common to the southern region include a failure to invest in quality K-12 education especially for low-income families, a struggling middle class (all six of the southern states have right-to-work laws and low union density), high economic segregation, and a history of voter suppression. 

What’s the current status of mobility in Indiana as whole? Using the author's measures, Table 1 measures upward mobility in eleven Indiana regions and comparison regions. In only one (Vincennes) of eleven Indiana "commuting zones" featured in the study did low-income children have more than a 10% chance of escaping poverty. Table 2 (bottom of post) lists additional mobility measures and characteristics of eleven Indiana regions and comparison regions.

Characteristic of Indiana, positive relationships are also found between intergenerational mobility and the extent of a state's income tax progressivity and income inequality – ultimately extending to our children in a very real way. In another recent study on the lack of upward mobility in the U.S compared to other rich nations, the authors found that the average annual spending per child varies dramatically for “enrichment expenditures” (books, technology, childcare, etc.). Families from the lowest 20th percentile spent $1,300 per child, while families in the highest 20th percentile spent $9,000 per child. In Indiana - just one of eleven states without a state-run preschool program - the cost for childcare as a percent of income is 10th highest in the U.S., sometimes nearly half of a family's income. 

Given our research on the immediate barriers that Hoosier families face from the perverse incentives found in the design of childcare subsidies - known as the "cliff effect", the study caught our eye as well. Smoothing-out this benefit cliff by expanding access to high quality child-care would not only ensure that we are providing Hoosier children with the same advantages and opportunities to succeed as the rest of the developed world, it would also provide a path towards economic self-sufficiency and encourage two-income families by ensuring that marriage (and the resulting combination of incomes) makes financial sense. 

While the Equality of Opportunity Project isn't the first study to point towards similar findings, it is the most comprehensive look at intergenerational mobility to-date and should be considered by policymakers in attempts at restoring upward economic mobility for Hoosier families.

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