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Economic Mobility: Communities Matter


Thursday, November 8, 2018

economic mobility
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What role, if any, does community play in influencing an individual’s economic mobility?

A publication edited by the Federal Reserve Bank of St. Louis and the Fed’s Board of Governors examined this and other questions related to economic mobility.

In their introduction to Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy, Ray Boshara and David Buchholz summarized contributing essayists’ findings on the role of place—“the neighborhood, community, schools, employers, places of worship, unions, and other institutions an individual encounters in youth and adulthood.”

Boshara serves as director of the St. Louis Fed’s Center for Household Financial Stability; Buchholz is deputy associate director for the Federal Reserve Board. Here are some of their observations on economic mobility and location-related nexus points.

Metropolitan Areas

Boshara and Buchholz said that among the more striking findings from contributing essayists Raj Chetty Chetty, Raj. “Improving Opportunities for Economic Mobility: New Evidence and Policy Lessons.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016., Katherine Newman Newman, Katherine S. “The Subjective Meaning of Mobility and Its Implications for Policy Solutions.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016. and others is the extent to which place or context is associated with economic mobility.

They highlighted Chetty’s examination of the likelihood of a child raised in the bottom 20 percent of the income distribution making it to the top quintile as an adult:   

  • In some U.S. metropolitan areas, the odds were more than 17 percent.
  • Those same odds in other metro areas were below 5 percent.

Just as remarkable, said Boshara and Buchholz, is how much economic mobility rates vary within individual metropolitan areas. For instance, while the Washington, D.C., metro area had a relatively high overall upward mobility rate (11 percent), this masks intraregional variation:

  • In the District of Columbia proper, the upward mobility rate reached just 4.7 percent.
  • In Charles County, Md., it soared to 14.2 percent.

Economic Segregation

Boshara and Buchholz mentioned an argument by Economic Mobility essayists Reuben Finighan and Robert Putnam Finighan, Rueben; and Putnam, Robert. “A Country Divided: The Growing Opportunity Gap in America.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016. that growing economic segregation magnifies inequality by concentrating poor families in places with fewer:

  • Job opportunities
  • Trusting neighbors
  • Community institutions

Boshara and Buchholz went on to say that “perhaps most troubling” in efforts to revitalize struggling communi­ties are trends in concentrated poverty—which research by Robert Sampson and Patrick Sharkey has shown is significantly associated with crime, social mobility and other outcomes. Sampson, Robert J.; and Sharkey, Patrick. “Neighborhood Selection and the Social Reproduction of Concentrated Racial Inequality.” Demography

Boshara and Buchholz cited U.S. Census Bureau findings that the number of people living in concentrated poverty rose by about 56 percent between 2000 and 2010, a period during which the overall population rose by only about 10 percent. This reversed prior trends and returned the country to previous peak levels of concentrated poverty, according to research by Alemayehu Bishaw. Bishaw, Alemayehu. “Changes in Areas with Concentrated Poverty: 2000 to 2010.” American Community Survey Reports, Washington, D.C.: U.S. Census Bureau, 2014.

Other Considerations

Additional place-related factors include:

Resource-rich locales and related dynamics. If better neighborhoods matter for mobility, Boshara and Buchholz said, then families living in areas with relatively few resources could presumably increase their lot in one of two ways:

  • If an area improves
  • If a family moves to a better neighborhood

“Evidence presented here suggests that both routes can work, though there are no simple policy prescriptions for either place-based or people-based interventions, including the fact that there are limits on how many people can be moved to higher-income areas or better schools,” they noted.

Education availability and quality, and related class dynamics. Boshara and Buchholz said that racial wealth gaps were large, with nonwhites having, on average, 10 percent of the wealth of whites, based on a 2015 paper by Boshara and co-authors William Emmons and Bryan Noeth. Boshara, Ray; Emmons, William R.; and Noeth, Bryan J. “Race, Ethnicity and Wealth.” Essay in The Demographics of Wealth: How Age, Education and Race Separate Thrivers from Strugglers in Today’s Economy. Federal Reserve Bank of St. Louis, February 2015 Even when comparing nonwhites and whites with similar education levels, they said, this gap remained wide—suggesting that education alone may not erase it.

Labor unions. The authors called workplace labor unions another institution that may affect economic mobility. They said that Economic Mobility contributors Richard Freeman, Eunice Han, David Madland and Brendan Duke found positive associations between union affiliation and incomes of workers and their offspring. Freeman, Richard; Han, Eunice; Madland, David; and Duke, Brendan V. “How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016.

However, the contributors concluded that the recent decline in union mem­bership implies a decrease in the size of the middle class and of the ability of workers to convey economic benefits to their offspring.

Notes and References

1 Chetty, Raj. “Improving Opportunities for Economic Mobility: New Evidence and Policy Lessons.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016.

2 Newman, Katherine S. “The Subjective Meaning of Mobility and Its Implications for Policy Solutions.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016.

3 Finighan, Rueben; and Putnam, Robert. “A Country Divided: The Growing Opportunity Gap in America.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016.

4 Sampson, Robert J.; and Sharkey, Patrick. “Neighborhood Selection and the Social Reproduction of Concentrated Racial Inequality.” Demography, February 2008. Vol. 45, Issue 1, pp. 1-29.

5 Bishaw, Alemayehu. “Changes in Areas with Concentrated Poverty: 2000 to 2010.” American Community Survey Reports, Washington, D.C.: U.S. Census Bureau, 2014.

6 Boshara, Ray; Emmons, William R.; and Noeth, Bryan J. “Race, Ethnicity and Wealth.” Essay in The Demographics of Wealth: How Age, Education and Race Separate Thrivers from Strugglers in Today’s Economy. Federal Reserve Bank of St. Louis, February 2015.

7 Freeman, Richard; Han, Eunice; Madland, David; and Duke, Brendan V. “How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility.” Paper in Economic Mobility: Research & Ideas on Strengthening Families, Communities & The Economy, Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System, 2016.

Additional Resources


Posted In FinancialCommunity DevelopmentLabor  |  Tagged ray bosharadavid buchholzeconomic mobilitycommunity developmenthfswealth gapwealth inequality
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