The economist Raj Chetty has spent much of the last decade trying to answer a very big question: What happened to the American dream? In 1940, a child born into the average American household had a 92 percent chance of making more money than his or her parents. But in the last half century, something has gone wrong. A child born in 1980 had just a 50 percent chance of surpassing her parents’ income. So, in 40 years, earning more than your parents went from being a near certainty to no better than a coin flip.
Marshaling enormous data sets in extremely creative ways, Chetty has shown that our chances of moving up in the world are exquisitely sensitive to where we grow up. In some cities, like Minneapolis, the American dream seems to be very much alive. In other places, people are trapped in poverty for generations. So, the trillion-dollar question here is: If some neighborhoods in America are like Miracle-Gro for opportunity, what are the active ingredients? What makes a place special? In today’s episode, Chetty gives listeners a new vocabulary to think about success and inequality in America, with ideas like “father presence,” “friending bias,” and “Lost Einsteins.” If you’d like to see a literal map of American inequality built with Chetty’s data, I would encourage you for this episode alone to go multi-media and visit www.socialcapital.org to see how your neighborhood fares as an engine of upward mobility. That way, you’ll have a fuller sense of where the American dream is dying—and what we have to do to bring it back.
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Raj reviews his recent research on the American dream, which suggests that upward mobility levels vary greatly depending on location.
Derek Thompson: I want to get into your research because it’s just so unbelievably interesting and it gets to this really profound question of the American dream and the state of the American dream. So one of the first papers that you published in this suite of research on upward mobility was about children who changed cities. What did you find in that paper that you published with Nathan Hendren?
Raj Chetty: Yeah, so in some of our early work, we began by using large data sets—anonymized tax returns covering millions of Americans—to look at how where you grew up might affect your prospects of achieving the American dream, moving up in the income distribution. And so we started by looking at a set of kids who were born in the early 1980s, essentially all kids born in America in the early 1980s. We mapped them back to where they grew up. And we asked, if we took a set of kids who started out in low-income families, families making, say, around $30,000 a year, where would these kids end up on average themselves if we track them forward 30 years and measure their incomes when they’re around 30 or 35 years old?
And what we found is that in some places, like much of the center of the country, places like Dubuque, Iowa, parts of North Dakota, kids who grew up in low-income families had great chances of rising up. Many of them were earning $45,000, $50,000 a year on average, well beyond where their parents were a generation ago. But then there were other parts of the country—much of the Southeast, cities like Charlotte and Atlanta, cities like Detroit—where kids who grew up in families with the exact same levels of income starting out ended up in very different situations on average. On average, in some cases, having lower levels of income than their parents did a generation ago, despite the fact that there’s been enormous amounts of economic growth in the U.S. over the past 30 years.
And so that was the first jumping-off point for a lot of what I’ve been thinking about over the past few years, which is that children’s chances for rising up really vary a lot across places within the United States.
Thompson: And that first piece of research was so interesting to me I think for two reasons. No. 1, it was published with this beautiful map that was color-coded so people could zoom in on their zip code, on their neighborhood and say, “Is my neighborhood a place where the American dream lives or a place where the American dream is struggling and falling behind?”
But that leads to the second point, which is that there is no one American dream. There is no one upward mobility rate for the entire country. Instead, you have this extraordinary constellation of neighborhoods, some of which have the upward mobility of the most successful countries in the world when it comes to this sort of thing, like Denmark, and others in which upward mobility was basically utterly stalled.
So when I look at this, I see an optimistic story and a pessimistic one. The optimistic story is that opportunity exists. Families can move to a different city and completely change the opportunity of their children. But the dark side to that is that it suggests that talent in America is widespread but opportunity itself is unevenly distributed. And so you have to either win the lottery by being born into a place like Dubuque or Salt Lake City or move to where lottery winners already exist.
Tell me a little bit about this aspect of it that you found, that children who move, especially when they’re young, tend to benefit from those moves by moving into places that have higher upward mobility.
Chetty: Yeah. That’s right, Derek. So once we saw this basic pattern, that there’s this real tremendous variation in rates of upward mobility across different places—and I should note, it’s not just across neighborhoods, right? As you put it, there’s a constellation of rates of upward mobility across different types of subgroups, as well. So Black Americans versus white Americans, Native Americans, Asian folks. You know, even within a given neighborhood, you see tremendously different opportunities for different folks. And so I think exactly as you said, is the American dream alive? Well, the answer to that question depends greatly, not just on where you grew up, but the color of your skin and what type of family you were born into and so forth.
And so motivated by that variation, naturally the next question for us is, what is causing that? Is it just about different types of people living in different places or is it something that’s actually different about what one place is doing relative to another? And so one first step to starting to understand that was to look at families that move between neighborhoods. And the idea is, if I look at kids who, let’s say, were randomly placed in one neighborhood versus another, would I see very different outcomes for them? And if I did, then that would suggest that the environment in which you grow up really matters quite a bit.
Now, what we did in practice was a series of studies where we basically tracked millions of families that moved across different neighborhoods in America. And what we found in a nutshell was that the earlier you moved to a place where we see high levels of upward mobility, a place like Dubuque or, within New York City, a place like Queens as opposed to the Bronx, where we see much higher rates of upward mobility in Queens relative to the Bronx, we find that every extra year that you spend growing up in one of these high-opportunity places, the better your outcomes look as an adult—the higher your level of earnings, the higher the likelihood you go to college, the lower the chance you have a teenage birth, the lower the chance you’re incarcerated.
So on a spectrum of outcomes you might care about, you find what we call dosage effects. Every extra year spent in one of these favorable environments seems to systematically improve kids’ outcomes in the long run.
This excerpt was lightly edited for clarity.
Host: Derek Thompson
Guest: Raj Chetty
Producer: Devon Manze
