NEIGHBORHOODS AND THE BLACK-WHITE MOBILITY GAP BY PATRICK SHARKEY ACKNOWLEDGEMENTS Patrick Sharkey is an Assistant Professor of Sociology at New York University and is a Faculty Affiliate at NYU’s Robert F. Wagner Graduate School of Public Service. His research focuses on the persistence of racial inequality in American neighborhoods in the post-civil rights era and the consequences of life in disadvantaged environments as experienced over generations of African-American families. The author gives special thanks to Scott Winship at the Economic Mobility Project who provided thoughtful feedback, edits, ideas, and suggestions throughout this project. Christopher Jencks also provided insightful comments and suggestions, many of which were implemented in the final analysis. Additional thanks go to Erin Currier, Harry Holzer, Ianna Kachoris, Marvin Kosters, Sara McLanahan and Robert Rector for their helpful comments on the research, and to Dalton Conley, Robert Sampson, Florencia Torche, William Julius Wilson, and Christopher Winship for feedback on previous research that is closely related to the work presented here. Lastly, the author also thanks Donna Nordquist at the Institute for Social Research at Michigan for her assistance with the PSID geocode data. Editorial assistance was provided by Ellen Wert, and design expertise by Carole Goodman of Do Good Design. All Economic Mobility Project materials are reviewed by members of the Principals’ Group and guided with input of the project’s Advisory Board (see back cover). The views expressed in this report represent those of the authors and not necessarily of all individuals acknowledged above. www.economicmobility.org © July 2009 NEIGHBORHOODS AND THE BLACK-WHITE MOBILITY GAP BY PATRICK SHARKEY CONTENTS 2 EXECUTIVE SUMMARY 4 INTRODUCTION 8 PART I: NEIGHBORHOOD POVERTY AND THE RACIAL GAP IN RELATIVE ECONOMIC MOBILITY 15 PART II: DECLINES IN NEIGHBORHOOD POVERTY AND CHILDREN’S ECONOMIC PROSPECTS IN ADULTHOOD 20 PART III: POLICY IMPLICATIONS 23 CONCLUSION 24 APPENDIX 36 NOTES 39 REFERENCES 2 Neighborhoods and the Black-White Mobility Gap EXECUTIVE SUMMARY NEIGHBORHOODS AND THE BLACK-WHITE MOBILITY GAP One of the most powerful findings of the Economic Mobility Project’s research to date has been the striking mobility gap between blacks and whites in America. This report explores one potentially important factor behind the black-white mobility gap: the impact of neighborhood poverty rates experienced during childhood. Using the Panel Study of Income Dynamics (PSID), the report focuses on blacks and whites born from 1955-1970, following them from childhood into adulthood. The first section of the paper investigates relative intergenerational mobility; whether neighborhood poverty in childhood impacts the ability of both black and white adults to move up or down the income ladder relative to the position their parents held. The second section investigates whether changes in neighborhood poverty rates experienced by black children affected their adult incomes, earnings, and wealth. Finally, the third section provides an overview of the possible policy implications of the results. Experiencing high neighborhood poverty throughout childhood strongly increases the risk of falling down the income ladder. • For children whose family income is in the top three quintiles, spending childhood in a high-poverty neighborhood versus a low-poverty neighborhood (say, experiencing a poverty rate of 25 percent compared to a rate of 5 percent) raises the chances of downward mobility by 52 percent. Only a very small percentage of white children live in high-poverty neighborhoods throughout childhood while a majority of black children do—a pattern that hasn’t changed in thirty years. • Over the course of childhood, two out of three black children (66 percent) born from 1985 through 2000 were raised in neighborhoods with at least a 20 percent poverty rate, compared to just 6 percent of white children. • Among children born from 1955 through 1970, 62 percent of black children were raised in neighborhoods with at least a 20 percent poverty rate, compared to only 4 percent of white children. And, almost half (49 percent) of black ECONOMIC MOBILITY PROJECT: An Initiative of The Pew Charitable Trusts 3 Neighborhoods and the Black-White Mobility Gap EXECUTIVE SUMMARY children with family income in the top three quintiles lived in high-poverty neighborhoods compared to only one percent of white children. Neighborhood poverty explains One-Quarter to One-Third of the black-white gap in downward mobility. • Four in five black children who started in the top three quintiles experienced downward mobility, compared with just two in five white children. Three in five white children who started in the bottom two quintiles experienced upward mobility, versus just one in four black children. • If black and white children had grown up in neighborhoods with similar poverty rates (i.e., if whites had grown up where blacks did or blacks had grown up where whites did), the gap in downward mobility between them would be smaller by one-fourth to one-third. • Neighborhood poverty alone accounts for a greater portion of the black-white downward mobility gap than the effects of parental education, occupation, labor force participation, and a range of other family characteristics combined. The report’s analysis also suggests that black children who experience a reduction in their neighborhood’s poverty rate have greater economic success in adulthood than black children who experience poverty rates that increase or are stable. • Black children who lived in neighborhoods that saw a decline in poverty of 10 percentage points in the 1980s had annual adult incomes almost $7,000 greater than those who grew up in neighborhoods where the poverty rate was stable. Reducing the concentration of poverty in their neighborhoods could strongly impact children’s economic mobility. • These data suggest that public policy efforts which focus on investing in disadvantaged neighborhoods and reducing the concentration of poverty could enhance upward economic mobility for the children in such neighborhoods. By forging a broad and nonpartisan agreement on the facts, figures and trends in mobility, the Economic Mobility Project is generating an active policy debate about how best to improve economic opportunity in the United States and to ensure that the American Dream is kept alive for generations that follow. ECONOMIC MOBILITY PROJECT: An Initiative of The Pew Charitable Trusts 4 Neighborhoods and the Black-White Mobility Gap NEIGHBORHOODS AND THE BLACK-WHITE MOBILITY GAP INTRODUCTION In 1968 sociologist Otis Dudley Duncan imagined what a future American society would look like if all forms of racial discrimination were eliminated, so that the only differences in the life chances of black and white children stemmed from the lingering influence of inequalities that existed in the previous generation. Duncan’s research indicated that family background factors, such as parents’ education and occupations, did not explain black-white inequality, leaving racial discrimination as the likely culprit. If discrimination were eliminated, he reasoned, racial inequality would wither away over time. He wrote: “if we could eliminate the inheritance of race, in the sense of the exposure to discrimination experienced by Negroes, the inheritance of poverty in this group would take care of itself.” 1 Given that lawful discrimination was nearing an end, one might have guessed, at the time, that Duncan’s vision would come to fruition with these societal changes. Four decades later, the evidence suggests it has not. Recent studies for the Economic Mobility Project and by others have updated Duncan’s work by examining race and intergenerational economic mobility since 1968, tracking the economic fortunes of children who were raised during or after the civil rights era. 2 Analyzing the economic status of consecutive generations of family members, these studies have found that blacks today have much lower family income than do whites, even after accounting for their parents’ income. Put differently, even comparing black and white children raised in similar families, black children typically have lower incomes as adults. Moreover, blacks continue to be much less likely than whites to rise out of the bottom of the income distribution. This research represents an important update of Duncan’s work and takes a major step toward documenting the continuing racial gap in economic mobility. But it leaves unanswered the question of why, in the generation following the civil rights movement, the opportunity for blacks and whites to advance in economic status from one generation ECONOMIC MOBILITY PROJECT: An Initiative of The Pew Charitable Trusts 5 Neighborhoods and the Black-White Mobility Gap to the next remains unequal. This report is designed to help answer this question. It does so by focusing attention on another dimension of racial inequality that has persisted even in the post-civil rights era: inequality in children’s neighborhood environments. In particular, this report assesses whether neighborhood poverty experienced during childhood helps to explain the “mobility gap” between black and white Americans that recent studies have uncovered; that is, the difference in adult economic status between whites and blacks from families with similar income. 3 It also develops a new approach to examine whether declines in neighborhood poverty that occur during childhood and young adulthood