The Alarming State of Income Mobility

According to a new report by the Federal Reserve Bank of Cleveland, Americans’ income mobility has declined after reaching an all-time high just before the Great Recession in 2007. Worse, this is a long-term trend that shows no signs of slowing down.

Who is more likely to become upwardly mobile?

That’s a great question, and if you are young and have well-off parents then you are more likely to improve your economic status. Over the last 45 years, the data suggest that income mobility among people aged 18-30 were consistently higher than people older than 31. Additionally, only 25% of children born into households among the lowest economic status have managed to improve their economic condition. Contrast that with an upward swing for 60% of children born in the richest of families.

“Beyond just inheritable traits which may affect income, intergenerational mobility embeds factors such as parents’ input to education (both pecuniary and nonpecuniary), residential choice (which affects public school quality and crime), social connections, and income from inherited wealth,” say the researchers.

So what can be done?

Opinions vary widely on the subject. For urban planners, another layer of income mobility data suggests possible localized solutions. According to a study conducted by the Pew Charitable Trust, neighborhoods also play an important role in income mobility. American metro areas with distinct pockets of concentrated wealth and concentrated poverty have lower economic mobility than places in which the wealthy and the poor are more integrated.

The study’s authors conclude that based on these localized distributions, two policy-based solutions emerge as focal points: expanding residential options (and locations) for low-income families and making sustained investments in human capital.

In regards to expanding low income housing, zoning based solutions that desegregate land uses (such as decreasing exclusionary zoning restrictions) and comprehensive transportation planning policies and implementation (increasing access for all residents to health care facilities, schools and jobs) are suggested as ways to promote access and economic integration. In order to increase investments in human capital, the authors advocate for an expansion of early childhood development and education programs in low-income neighborhoods.