Mobility and Income (Inequality part two)

Matthew O’Brien of the Atlantic reviews a recent study by a group of Harvard and UC Berkley economists on intergenerational mobility in the United States.  The core finding from this research is that the ability for someone to move up the social scale in the United States (i.e. moving from the bottom twenty percent of households to the top twenty percent), is geographically limiting (and especially limiting in the South).  Specifically O’Brien summarizes:

“Kids born into the bottom 20 percent of households, for example, have a 12.9 percent chance of reaching the top 20 percent if they live in San Jose. That’s about as high as it is in the highest mobility countries. But kids born in Charlotte only have a 4.4 percent chance of moving from the bottom to the top 20 percent. That’s worse than any developed country we have numbers for.”

Thus, what matters for future income potential is not only where your family lands on the economic spectrum, but also where your family is living.  This may seem obvious due to the varying economic conditions around the country; but, tax differences, schools, labor markets, manufacturing jobs, etc., do not appear to make a significant difference.  So what does matter?

Again, O’Brien highlights several points the researchers find that help explain the geographic mobility differences across states and regions and one point stands out:

Family Structure. Forget race, forget jobs, forget schools, forget churches, forget neighborhoods, and forget the top 1—or maybe 10—percent. Nothing matters more for moving up than who raises you. Or, in econospeak, nothing correlates with upward mobility more than the number of single parents, divorcees, and married couples. The cliché is true: Kids do best in stable, two-parent homes.”

I recently wrote about the economic costs of the changing family structure in North Carolina.  It’s no surprise that kids have the best future possibilities if they remain in traditional two-parent families.  Statewide divorce rates certainly don’t explain all the difference in mobility between San Jose and Charlotte, but North Carolina’s divorce rate is 25% higher than the rate in California.  O’Brien rightly notes that redistribution policies will not solve the economic mobility problem faced by many North Carolinians, but it is also not simply about better schools or more jobs or an increase in the minimum wage.  Policymakers would do well to address issues that impact family structure, like education and incentives for marriage and the importance of raising children in a traditional family structure.  This leads to less crime, less mental illness, and greater academic achievement, which are all key variables in economic mobility.