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IS the AMERICAN DREAM ALIVE OR DEAD? IT DEPENDS on WHERE YOU LOOK Economic Innovation Group | 2

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IS the AMERICAN DREAM ALIVE OR DEAD? IT DEPENDS on WHERE YOU LOOK Economic Innovation Group | 2 Economic Innovation Group | 1 IS THE AMERICAN DREAM ALIVE OR DEAD? IT DEPENDS ON WHERE YOU LOOK Economic Innovation Group | 2 Summary The 2016 election exposed deep social, However, exceptions abound: Numerous geographic, and economic rifts crossing the ostensibly prosperous counties fail to boost United States. Since November, a flurry of economic opportunity for young people from new research into economic mobility and poor backgrounds, just as a handful of income inequality has added to our economically distressed counties still understanding of these divides. Now, EIG manage to endow their children with the hard offers its latest contribution to the discussion. and soft skills needed to climb the ladder. We have joined county-level data from our With more than half of all U.S. counties Distressed Communities Index (DCI) with the exerting a negative impact on children’s economic mobility estimates created by future earnings, this analysis finds an Raj Chetty’s team at the Equality of American Dream unequivocally at risk. Opportunity Project (EOP) to examine the Whether it goes on to further retreat or future relationship between economic well-being renewal will depend on whether the recipe (as measured by the DCI) and economic offered by places where it is alive and well opportunity (as measured by the EOP) in proves replicable in the country’s less hopeful communities across the United States. corners. With more than half of all U.S. counties exerting a negative impact on children’s future earnings, this analysis finds an American Dream unequivocally at risk Our analysis finds a clear correlation between the degree of prosperity or distress in a county and the extent to which it boosts or hinders the future earnings potential of the children who grow up there. Economic Innovation Group | 3 Key findings • Three out of five Americans under the age of 18 • Prosperous rural areas predominantly in the are growing up in counties that struggle to foster Upper Midwest and Northern Plains are the economic mobility for children from low- country’s most powerful engines of upward income backgrounds. mobility. The American Dream has also proven relatively resilient in high-immigration • Prospering counties are generally more likely to communities in the Southwest. foster economic mobility, although exceptions abound especially in the Southeast. • In the face of considerable challenges, 10 percent of economically distressed counties • Economic distress weighs on children from poor still manage to foster upward mobility for poor backgrounds more than it does children from children. In contrast, more than a quarter of all wealthier ones, who appear better able to rise prosperous counties nevertheless fail to above their surrounding circumstances. positively impact the future earnings potential of the poor children in their communities. Economic Innovation Group | 4 Introduction Place matters. While many like to think of Some counties have positive exposure effects the United States as a country where anyone (boosting incomes), some negative willing to work hard can succeed, the reality (reducing them). Counties with positive for many is more complicated. exposure effects enhance economic mobility, meaning they help individuals The American Dream lies far out of reach for climb the income ladder. young people across much of the country not due to any individual shortcomings, but due EIG merged EOP’s data on economic mobility to the unique mix of social, cultural, and with its own Distressed Communities Index economic forces at work in their (DCI) data on economic well-being to produce communities—forces that condition and a dynamic analysis of how the economic affect, if not always determine, lifetime situation in a place today may impact the outcomes. economic opportunities of its residents tomorrow.1 Of course, we cannot see the Raj Chetty, Nathaniel Hendren, and their future, and this piece only extrapolates the colleagues at the Equality of Opportunity childhood exposure effects documented in Project (EOP) set out to measure these effects EOP’s work (based on the incomes at age 26 of of place on children’s earnings as adults (so children born from 1980 to 1986) by called neighborhood effects). They controlled associating them with the prevailing for a large number of individual and family economic conditions in counties from 2010 to characteristics in order to isolate the effect of 2014. The results are therefore best place alone, which they call the “childhood interpreted as whether, for example, a county exposure effect.” It measures the percent that is prospering today has a history (or not) increase or decrease in income at age 26 of boosting economic mobility. Whether the relative to the national mean that a child can county continues to deliver on or defy past expect by spending one additional year in performance remains to be seen. any given county. 1. The DCI incorporates seven equally-weighted metrics: of a county’s median income to its state’s, and the rate of the share of the adult population without a high school growth in both employment and the number of business degree, the share of the adult population not currently in establishments. work, the poverty rate, the housing vacancy rate, the ratio Economic Innovation Group | 5 What is the state of the American Dream? Nationwide, across the 2,869 counties for which we have data, economic prosperity In concrete terms, the American Dream and economic mobility are positively and can be summed up as a two-fold promise of meaningfully correlated. The correlation is prosperity and mobility. Neither is in good stronger for children from poor backgrounds health. Figure 1 draws from the DCI to show than it is for children from better-off ones. the immense gap in well-being that separates This means that prosperous locales give poor the country’s most prosperous and most children a disproportionate boost, on the one distressed communities. Throughout this hand, but also that growing up in a distressed analysis, prosperous counties are defined as community disadvantages them relatively those that score in the best quintile nationally more, as well. Kids from wealthier on the DCI and distressed places are defined backgrounds, by contrast, appear to have a as those that score in the worst quintile. stronger bulwark against negative effects of Research from The Hamilton Project place. Poor children are more vulnerable. meanwhile finds that a child born into a family in the bottom 20 percent of the income Overall, the majority (51 percent) of counties distribution has only a 4 percent chance of in the United States exert a negative impact rising into the top 20 percent of the on the economic mobility of low-income distribution as an adult. The EOP extended children, and these 1,660 counties are home these insights to show that mobility rates vary to 60 percent of Americans under the age of immensely across counties and metro areas. 18. Three out of five of today’s children are growing up in a county that has historically So how do these dual components of the failed to provide their most disadvantaged American Dream relate to one another? youth a leg up. Do prosperity and mobility go hand-in-hand at the local level? 1. Comparing well-being across U.S. zip codes NO HIGH POVERTY ADULTS HOUSING MEDIAN CHANGE CHANGE SCHOOL RATE NOT VACANCY INCOME IN EMP. IN EST. DEGREE WORKING RATIO United 14% 16% 42% 9% 100% 5.6% 1.2% States Average Distressed 23% 27% 55% 14% 68% -6.7% -8.3% Zip Code Average Prosperous 6% 6% 35% 5% 146% 17.4% 8.8% Zip Code Economic Innovation Group | 6 2. County causal effect on income mobility for children from poor backgrounds from the Equality of Opportunity Project Very Positive (0.25 or greater) Somewhat Negative (between 0 and -0.25) No Data Somewhat Positive (between 0 and 0.25) Very Negative (-0.25 or greater) Adding population data to EOP’s county mobility may not be the urban melting pots estimates, we find that prosperity and of Horatio Alger-style myth, but rather the mobility (as well as distress and small town communities of the Upper immobility) are most strongly correlated in Midwest. Cities, however, are more rural areas—counties with under 100,000 consistent: 50 percent of large urban counties people. Prosperous rural areas can provide (those with more than 500,000 people) a significantly greater boost to children than provide an income boost to poor kids, even prosperous urban areas, suggesting that compared to only 43 percent of rural counties the quintessential engine of economic for which we have data. of large urban counties of rural counties 50% provide an income boost 43% provide an income boost to poor kids to poor kids Economic Innovation Group | 7 The many different realities of the What emerges is a mosaic of places—an American Dream American reality in which the dual promises of prosperity and mobility fall into four Next we zoom in on the ends of the categories depending on where one looks and spectrum of American experiences by where one lives: alive and well, within reach examining economic mobility in the against the odds, fenced off, or a distant country’s most prosperous and most prospect. Here we’ll explore each reality in distressed counties (the top and bottom turn: quintiles of well-being on the DCI). PLACES WHERE THE AMERICAN DREAM IS... MOBILE IMMOBILE ALIVE FENCED PROSPEROUS & WELL OFF WITHIN A DISTANT DISTRESSED REACH PROSPECT 3. Categorizing the United States’ most prosperous and distressed counties by their impact on the future income mobility of poor children Prosperous and Mobile Distressed and Mobile Neither Prosperous nor Distressed Prosperous and Immobile Distressed and Immobile Economic Innovation Group | 8 Alive and Well because southern counties largely fail to foster mobility.
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