New studies from economist Raj Chetty and his collaborators are looking at the relationship between where we live and how those places affect our ability to achieve the American Dream. The research has revealed that our ability to move up the economic ladder varies substantially across cities and within them as well, writes CityLab's Richard Florida.
Florida explains:
Most Americans—and most policy-makers and economists—see education and schools as a key factor, if not the key factor in economic mobility. But a new study by economist Jesse Rothstein of the University of California, Berkeley suggests that education alone isn’t enough to overcome other geographic impediments to upward mobility. The working paper by Rothstein takes a close look at a broad range of factors that affect economic mobility, including the vibrancy of local job markets, the social structure of families, and the quality of local schools and the skills they provide. Rothstein mines a wide array of longitudinal data sources across commuting zones (metro areas) to trace the effects of these factors on economic mobility for kids born in the early 1980s—specifically, the connection between their income as adults and their parents’ income when they were children.
What, then, are the factors that really drive our ability to move up the ladder? Two in particular stand out.
The first is the job opportunities afforded by the local labor market. Many high-skill occupations are much more concentrated in some places than others, and some places simply offer more and better prospects for career mobility, whether it’s through stronger unions or local minimum-wage laws. Variable access to more vibrant labor markets, or what the study calls the “earnings gap with fixed skills,” accounts for 33 percent of the difference in economic mobility across cities.
The second factor, which plays an even bigger role, is marriage. Spousal and unearned income, including income from investments, accounts for a whopping 40 percent of the difference in economic mobility across places. (While income from investments might be significant for the very wealthiest people within the study age range, Rothstein believes it is not a significant factor in economic mobility for the entire cohort.) Married people are better off because their income is more likely to be supplemented by that of another person.
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