What’s Really Behind Economic Mobility?

Children growing up in America today are likely to end up less well-off than their parents. And those of us living in the self-proclaimed land of opportunity are also less likely than most Europeans to move up the economic ladder.

Thanks largely to the pioneering studies of economist Raj Chetty and his collaborators, there is a large and growing body of research on how the places where we live affect our ability to achieve the American Dream. Chetty and company’s research shows that our ability to move up the economic ladder varies substantially across cities and within them as well.

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.

The following chart, from a condensed version of the paper, summarizes its key findings, visualizing the percentage effect of each of the key factors on economic mobility.

(Jesse Rothstein/Washington Center for Equitable Growth)

Education matters far less than most people, and most experts, would think. Individuals’ skills, measured by performance on high-school standardized tests and the amount of time spent in higher education, account for just 11 percent of economic mobility. While it is true that some cities do much better than others at improving outcomes—or equalizing them for kids from richer and poorer families—that difference is not principally driven by the quality of schools. Or, as Rothstein puts it: “There is little evidence that differences in the quality of primary, secondary, or postsecondary schools, or in the distribution of access to good schools, are a key mechanism driving variation in intergenerational mobility.”

Furthermore, the earnings premium on skills—or how much more an individual with a certain level of education can make in one places versus another—accounts for only another 11 percent of the difference in economic mobility across places.

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.

The study finds no evidence of difference among places in “assortative matching”—the tendency of high-income people to marry other high-income people—but it does find that low-income people in high-mobility areas are more likely to marry than low-income people in low-opportunity areas. Thus, the labor-market advantages of these places are compounded by a higher likelihood of marriage and access to a second income.

No one is saying that education does not matter to economic mobility. For individuals, it makes great sense to get a good education, and as much of it as you can. The study’s conclusion is more nuanced: When it comes to the prospects for economic mobility across cities, education is a necessary but insufficient condition. What really matters is the nature of local job markets and the ability of not just individuals, but married couples to use their education and skills in those labor markets to actually make a living.

It is insufficient, the study implies, to hope that better schools will fix the problem of sagging economic mobility. The key to bolstering the American Dream lies in creating better, more dynamic job markets with higher-paying economic opportunities for individuals and families.

The study sheds light on vexing dimensions of spatial inequality in America. Even if we go to schools of equal quality, some of us will have advantages over others based on where we live. In our increasingly spiky, clustered, and concentrated economy, the children of those who live in larger, more dynamic cities and tech hubs will have better access to the job markets, economic opportunities, and partners that propel their long-term economic prospects. Children who grow up in places with less dynamic job markets will have far lower prospects for economic mobility, regardless of the quality of their schools.

The ability to achieve the American Dream is inextricably connected to the increasingly unequal geography of opportunity. Our ZIP codes really are our destinies.