AYESHA RASCOE, HOST:
Is the American dream - the ability to move from low income to the middle class - still alive? And for whom? New research from Harvard University and the Census Bureau takes aim at these questions.
RAJ CHETTY: If you started out poor, race matters a bit less in determining where you end up than it did previously in America.
RASCOE: Raj Chetty is a professor of economics at Harvard. He and his team of researchers examined how much poor kids were able to climb the income ladder as they age. They found key differences between millennials and their older counterparts, Gen X.
CHETTY: What is very different is what happened for Black kids growing up in low-income families versus white kids growing up in low-income families. Basically, Black kids growing up in low-income families - when they were around 27- or 30-years-old, they were making about $22,000 a year. That went up at the same time white kids who were starting out in low-income families - when they were in their late 20s, around age 30, they were making around $34,000 a year. That fell. And so those two changes going in opposite directions are what have led to the narrowing of the Black-white gap in terms of your chances of rising up.
RASCOE: Black kids in poor families are doing better - white kids in poor families are doing worse?
CHETTY: So it's a bit of both, actually. So when we look at why the Black-white gap among kids raised in low-income families has narrowed, about half of it is Black kids are doing better. If we look at the fraction that are working or the fraction that have escaped poverty and are now in the middle class. Those numbers all look much better for Black children who are just entering the labor market, who are turning 30 around now, than they did for previous generations of Black children raised in comparable circumstances. So there is genuine progress. The other half of it is white kids born to lower-income parents, parents with lower levels of education - they are doing worse. So the gap is narrowing. But it certainly is still there, and it's still quite large.
RASCOE: Do you have any sense of why this is happening? Like, why has this changed?
CHETTY: It's really about the environments in which children are growing up and specifically, community-level employment rates. Importantly, what really seems to matter is the level of employment in their community, not necessarily what's happening in their own family. Even if your own parents have a job, you grew up in a community with declining employment rates, then you end up having worse outcomes yourself. We think it's because kids tend to follow the pathways that they see in the previous generation. If you grew up in a community where lots of people are working, have successful careers, have gone to college, they can kind of show you the path, connect you to an internship, get you a job referral. What we're finding is that for white kids, particularly in lower-income families, that sort of social capital is slipping away. Whereas for Black kids, fortunately, it's increasing as more Black folks are employed, they're more connected to jobs, and so on.
RASCOE: When you talk about the effect of the community employment rates, where are poor white communities that are having this issue with low employment, and therefore having an issue with children rising up to a higher income bracket?
CHETTY: Yeah, so if you look at white kids born in 1970s in America, it used to be the case that there were large parts of America, like the Great Plains and parts of the coast, for example, Boston where I am, much of the Northeast, parts of California, where even if you grew up in a low-income family, you'd have a pretty good shot of reaching the middle class or beyond. Historically, there were large swaths of America, like much of Appalachia, parts of the Industrial Midwest, the rust belt, parts of Florida, where white kids had much poorer chances of succeeding. When we now fast-forward to the next generation and look at millennials, look at kids born in the 1990s, the places that used to be pretty good in terms of offering a chance to rise up no longer are. And so the American dream is receded for white children in places where it used to be alive, and now looks like parts of the U.S. where you didn't have a great chance of making it to the middle class or beyond.
RASCOE: Obviously, any children, you know, regardless of race, being worse off, is not good. What can be done to help address these challenges and kind of the entrenchment maybe of this class gap?
CHETTY: I think this is a core challenge for America going forward - how can we distribute opportunity more widely, by race, by class, across areas? And specifically, a key implication of the work is that I think interventions that provide social capital, giving them access to networks, connecting them to different resources, to jobs, to people who can refer them to housing in a better neighborhood, help them better use job referral and things like that. And I think that way of thinking about social capital, in addition to educational and financial capital is something we've not done enough in economic policy, and I think it could really make a difference in creating more opportunity going forward in America.
RASCOE: That's Raj Chetty, professor of economics at Harvard University. Thank you so much for joining us today.
CHETTY: My pleasure. Thank you, Ayesha. Transcript provided by NPR, Copyright NPR.
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