Friday, December 12, 2014

The Growing Threat of Economic Immobility

By Ryan Regan, Project Associate. 

I recently finished reading the book Place Matters: Metropolitics for the Twenty-first Century, which as the name suggests, looks at how our quality of life can be significantly impacted by the place we live. Even though the book was written a decade ago, I couldn’t help but think that it could have been written yesterday. The book covers a number of topics that all center on the issue of economic segregation in major metropolitan areas. Put simply, economic segregation is the degree to which people of similar social class and financial well-being live amongst people like them, while disassociating themselves from all others. The authors highlight that where we live shapes our lives and future outcomes in ways that often go unnoticed. The very neighborhood that we live in can determine our access to job opportunities, access to public services (especially education), air quality, public transportation options, and a host of other basic life necessities. Urban sprawl has only exacerbated the opposite realities that face urban and suburban families when it comes to access to these aspects of everyday life. The book draws attention to the growing disparity between the rich and the poor and the resulting contraction of the middle class in the United States. Sound familiar?

Fast forward ten years later and income inequality and the associated threat to the “American Dream” are still public policy issues that command the attention of economists, urban planners, and politicians alike. There is plenty of research on the topic of economic mobility (that is, the ability to move up the income ladder), but little quantitative research in the way of comparing economic mobility across metro areas. A group of researchers from Harvard and UC-Berkeley changed that with a new study released earlier this year, and the results of their research are sobering for many major metropolitan areas. The joint Equality of Opportunity Project looks at the geographic dispersion of economic mobility in the United States, especially as it relates to children. Researchers looked at the income records of millions of children and their parents over time in order to project the likelihood that a child born into a family in the bottom quintile of the national income distribution would eventually be able to rise to the top quintile in their adult years. Their key findings show significant geographic variance in intergenerational economic mobility. The factors that were cited as positively correlating to upward mobility were 1) less income inequality, 2) better primary schools, 3) greater social capital, 4) greater stability in the family structure, and 5) less residential segregation.

The “Bottom 10” list of metros that were singled out as having the lowest chances of upward mobility are concentrated in the Midwest or Southeast. While that by itself may not be that surprising, the composition of the list did stick out to me. Half of the metros are ranked in the top 50 of the Milken Institute’s 2013 List of Best-Performing Cities, so it’s not like these are all floundering cities with stagnant economies. Nevertheless, the list should serve as an eye-opener for these communities. Economic immobility and the disparity between upper and lower income classes are serious issues that threaten the competitiveness of these major metro areas.

The need to address the issue of economic mobility in the Southern metros in the Bottom 10 is only further heightened when you consider just how rapidly these metros are growing. Between 2003 and 2013, the Raleigh MSA grew by 36.6%, the Charlotte MSA grew by 29.9%, the Atlanta MSA grew by 17.8%, and the Jacksonville MSA grew by 16.7%. These rates are well above the 8.9% national growth that occurred over the same time period. In fact, population growth projections from the United Nations Population Division estimate that Charlotte and Raleigh will be the two fastest growing urban areas in the country over the next fifteen years. Rapid population growth rates and low rates of economic mobility aren’t a good mix. Improving economic mobility, while still accommodating population growth, is a challenge that Southern metros are collectively confronting and will continue to do so for the foreseeable future.

Durham, NC-based Manpower Development Corporation, Inc. (MDC) is a non-profit organization that does a lot of research on the topics of educational attainment and economic opportunity in the South. Since 1996, they have published their “State of the South” report to draw attention to some of the issues that Southern cities still face as the region adapts to a shifting economy and workforce. Their most recent State of the South report was released just last month, and it focuses almost entirely on the growing threat of economic mobility in the region, including a case study of Charlotte, NC. As the MDC folks put it, Southern communities need to create an “infrastructure of opportunity that consists of a clear and deliberate set of pathways and supports that connect youth and young adults to educational credentials and economic opportunity.” We at Market Street Services couldn’t agree more. The link between educational attainment and economic opportunity is undeniable. According to a report by the Milken Institute on the effect of educational attainment on regional economic prosperity, adding just one extra year of schooling to the average educational attainment among employed workers with at least a high school diploma can result in an increase in real wages per worker of 17.8 percent. [i] Any effort to improve educational outcomes also needs to embrace the impact that early childhood education has on lifelong learning goals and economic mobility. A growing body of research demonstrates the link between household income and cognitive and non-cognitive skills in children and adolescents across various age groups. Children from households in the top income quintile are far more likely to score in the top third on key cognitive ability tests than their peers from less affluent backgrounds. The gap between the two is overwhelming with almost half of the children in the most well off households scoring in the top third on cognitive skills tests, while only 1 in 7 children from the poorest families are able to accomplish the same feat. [ii]

Improving the economic mobility of residents in major Southern metro areas (and elsewhere) will be the preeminent challenge that these places face when competing for jobs and talent. It is clear that there is no quick fix to this problem, but like most things related to community economic development, the road to future prosperity for these metro areas will go through the classrooms of young people who will help shape the region’s future.

[i] DelVol, Ross C. et al. “A Matter of Degrees: The Effect of Educational Attainment on Regional Economic Prosperity.” The Milken Institute. February 2013.
[ii] Reeves, Richard V. “Early Childhood Achievement Gaps and Social Mobility.” The Brookings Institution. September 2013.