A new study of income distribution based on data from millions of people across the U.S. found several factors, including family structure, that correlate with income mobility and at several that do not, including higher taxes on the rich.
The NY Times describes the new study as “the first with enough data to compare upward mobility across metropolitan areas.” The study found that income mobility varies widely across different parts of the United States. Cities like Atlanta and Charlotte have the least mobility for those at the bottom while cities across the west and in California fare much better.
What the study’s authors found surprising was that taxing the rich had only a slight correlation with improving income mobility:
The team of researchers initially analyzed an enormous database of earnings records to study tax policy, hypothesizing that different local
and state tax breaks might affect intergenerational mobility.
What they found surprised them, said Raj Chetty, one of the authors and the most recent winner of the John Bates Clark Medal, which the American Economic Association awards to the country’s best academic economist under the age of 40. The researchers concluded that larger tax credits for the poor and higher taxes on the affluent seemed to improve income mobility only slightly. The economists also found only modest or no correlation between mobility and the number of local colleges and their tuition rates or between mobility and the amount of extreme wealth in a region.
But there were four factors that did matter:
All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.
Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.
The study found that overall the Unites States does less well in income mobility than other nations, however that is a result of the low end of the range dragging the average down. The cities with the best income mobility “like Pittsburgh, Seattle and Salt Lake City — have rates roughly as high
as those in Denmark and Norway, two countries at the top of the
international mobility rankings.”
The Times reports that it is not clear what causes the differences among regions. Whatever it is seems to be set by the time a child becomes a teenager.
Especially intriguing is the fact that children who moved at a young age from a low-mobility area to a high-mobility area did almost as well as
those who spent their entire childhoods in a higher-mobility area. But children who moved as teenagers did less well.
This seems to be at odds with an opinion expressed throughout the article that geography and poor public transportation play a major role in outcomes. If that were so, why would teenagers from a low mobility area moving to a high mobility area continue to show poorer results?
Rather this suggests that the quality of public education must be playing a role over time. It may not be a coincidence that Atlanta, which ranks at the very bottom of the income mobility list, recently had a school corruption and cheating scandal which landed the superintendent of schools and dozens of principals in jail.