Normative Narratives

Economic Outlook: The “Neighborhood Effect” on Social Mobility

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The 2014 Education Choice and Competition Index Map

The “Neighborhood Effect” on Personal Development:

In a recent blog, we examined Harvard economist Raj Chetty’s study on the “Neighborhood Effect” on social mobility–how where a child grows up impacts the life he or she comes to live. The neighborhood one grows up in affects ones prospects later in life primarily in two ways:

1) Experiences: The people one meets and interacts with outside of family (friends, role-models, mentors, etc.). I would like to highlight President Obama’s “My Brother’s Keeper” initiative–which matches underprivileged minority youths with positive role-models–as a powerful tool in promoting social mobility.

2) Quality of schools and other public services: These institutions enable children to pursue interests that keep them “off the streets”, and if cultivated can lead to very marketable skills. Good public schooling and extracurricular programs are important for everyone, but even more so for lower-income children, whose families otherwise likely could not provide such opportunities.

The neighborhood one grows up in can either mitigate or exacerbate the affect a person’s family has on their personal development; a “good” neighborhood will benefit a child, while a “bad” neighborhood (we will use median income as a proxy) can hinder them. The combination of “bad” parenting and a “bad” neighborhood can create a nearly inescapable poverty trap; just because there are one-in-a-million stories of rags-to-riches with no help doesn’t mean we should accept leaving the vast majority of poor minority youths behind.   

Unfortunately, the data shows that–even holding income constant–minority families tend to live in poorer neighborhoods than their white and Asian-American counterparts. The findings are especially notable because they come shortly after a separate research project, by two Harvard economists, that we’ve covered in detail at The Upshot. That project has tracked several million children since the 1980s to analyze how the area where they grew up affected their lives. Children who grew up in better neighborhoods — which tended to have less poverty, less crime, more two-parent families and schools with higher test scores — fared much better as adults than otherwise similar children from worse neighborhoods.

The new paper, being published in The Annals of the American Academy of Political and Social Science, suggests that these neighborhood effects are helping to widen racial disparities, including disparities in upward mobility.

Consider these numbers: A typical black child living in a household with $100,000 in annual income lives in a neighborhood with a median income of $54,400. And a black child in a household making $50,000 typically lives in a neighborhood with a median income of $42,200.

White and Asian children are much more likely to live in neighborhoods where median income is similar to — or higher than — that of their own family. Latino children fall in the middle, less likely than white and Asian children to live in middle-class or affluent neighborhoods but more likely than black children to do so.

Of course, the neighborhood gap arises in part from voluntary choices. Many Americans, of all races, prefer to live among people who are similar to them, note Mr. Reardon and his colleagues Lindsay Fox and Joseph Townsend. For African-Americans, such a choice often means living in lower-income areas, given the racial disparity in incomes.

Taken together, the research shows that neighborhoods matter enormously to a child’s life chances — and play a big role in the nation’s racial inequalities. Some of the gaps will persist as long as the white-black income gap does. But some of the problems are more easily addressed through housing policy.

Housing developments that allow low-income families to move into higher-income neighborhoods appear to be a cost-effective antipoverty strategy. Vouchers that help lower-income families move into better neighborhoods may be even more so.

The fact that the neighborhood gap arises partially from choice cannot be ignored. And as the article points out, incomes are not the only consideration when choosing where to live. Wealth also matters–in America White people’s median wealth is much greater than their Latino and Black counterparts.

Whatever the reason, financial or social, minority families tend to live in poorer neighborhoods, perpetuating racial economic disparities across generations.

Desegregating America: Rethinking The Fair Housing Act and Promoting School Choice

Lost in the mix of two landmark Supreme Court rulings on gay marriage and healthcare subsidies, the Supreme Court recently made an important ruling with regards to federal housing policy that could help chip away at racial isolation:

The Supreme Court on Thursday endorsed a broad interpretation of the Fair Housing Act of 1968, allowing suits under a legal theory that civil rights groups say is a crucial tool to fight housing discrimination. “Much progress remains to be made in our nation’s continuing struggle against racial isolation,” Justice Anthony M. Kennedy wrote for the majority in the 5-to-4 ruling. “The court acknowledges the Fair Housing Act’s continuing role in moving the nation toward a more integrated society.” The question in the case was whether plaintiffs suing under the housing law must prove intentional discrimination or merely that the challenged practice had produced a “disparate impact.” Drawing on decisions concerning other kinds of discrimination, Justice Kennedy said the housing law allowed suits relying on both kinds of evidence.

The first kind of proof can be hard to come by, as agencies and businesses seldom announce that they are engaging in purposeful discrimination. “Disparate impact,” on the other hand, can be proved using statistics.

The latest case, Texas Department of Housing and Community Affairs v. Inclusive Communities Project, No. 13-1371, was brought by a Texas group that favors integrated housing. The group helps its clients, who are mostly lower-income black families, find housing in the Dallas suburbs, which are mostly white.

The families use housing vouchers, but not all landlords accept them. Landlords receiving federal low-income tax credits, however, are required to accept the vouchers.

The fair housing group argued that state officials had violated the Fair Housing Act by giving a disproportionate share of the tax credits to landlords in minority neighborhoods.

The Supreme Court returned the case to the lower court for further proceedings, cautioning that allowing disparate-impact suits did not mean that they should always succeed. Indeed, Justice Kennedy expressed concern about “abusive disparate-impact claims” and suggested that the case before the court would face headwinds.

Not surprisingly, racially segregated neighborhoods have led to racially segregated schools, an issue brought up by presidential hopeful Hillary Clinton. While a broad interpretation of the Fair Housing Act enables communities to chip away at the neighborhood gap, all levels of government should also promote efforts to desegregate schools through policies that enable greater choice in schooling:

School districts across America are transitioning from the traditional model of assigning students to a school based on their residential address to a system that allows families a choice of schools. Depending on the district, families can choose public charter schools, affordable private schools, magnet schools, virtual schools, and regular public schools in which enrollment is based on parental preference rather than zip code.  Districts differ in which of these options is available, the ease with which parents can exercise the choices available to them, and the degree to which the choice system results in greater access to quality schools.

Like a child’s parents, the neighborhood he or she grows up in is outside his or her control. The purpose of social mobility policies should be to ensure that children that “lose” the “parenting / neighborhood lotteries” still realize some developmental floor, enabling them to realize their full potential.

Making children pay for the questionable choices of their parents is not only socially unjust, it is economically shortsighted. 

The First Step Towards Recovery is Admitting There is a Problem:

In the wake of the recent massacre at the Charleston S.C. Emanuel African Methodist Episcopal Church, there has been a lot of soul-searching amongst Americans. The question on many peoples minds’ being “is America a post-racial country?”–it would appear not. Taking down Confederate flags, while itself a positive step, can have at best a marginal impact on race relations.

The best way to overcome racial divisions is to have people of different races interact with one another. This puts a human face to stereotypes, and exposes the false anecdotes on which they are based (SPOILER: every culture and race has industrious, innovative, good people, as well as lazy, stupid, evil people–it is not a racial thing).

Integration efforts have their greatest impact at a young age, when people’s world views are being formed, another reason why primary school integration is such an important avenue for overcoming racial divides. I know this from first hand experience–attending public schools K-12 with classmates from diverse racial and socioeconomic backgrounds undoubtedly impacted my personal beliefs. This highlights another important point–desegregating neighborhoods and schools is not only beneficial to low income people, it benefits the children of current wealthier residents as well.

The ability to interact with people of diverse backgrounds will only become more important as globalization continues to make the world “smaller”. Children who are not exposed to different types of people will find themselves shut out of many opportunities in the global economy.

The SCOTUS Fair Housing Act decision and expanding school choice are important policy tools in the fight to promote equality of opportunity, meritocracy, and social mobility, while also addressing the very real remnants of America’s lingering racially charged history.

This multi-pronged approach, utilizing both affordable housing policy and school choice policies, are also the cornerstones of Raj Chetty’s policy mix for addressing social mobility–I fully support this prescribed policy mix as an important piece of the social mobility puzzle. “My Brother’s Keeper” type mentor programs are another important tool.

Of course there are other “poverty traps” (which tend to disproportionately affect racial minorities), many of which I have discussed in past blogs, such as the America’s current criminal justice system and predatory payday loans. Addressing each of these poverty traps requires its own nuanced policy mix.

Update (7/9): The Obama administration today announced stricter plans for holding localities accountable for how they dispense federal low income housing credits:

The Obama administration announced an aggressive effort on Wednesday to reduce the racial segregation of residential neighborhoods. It unveiled a new requirement that cities and localities account for how they will use federal housing funds to reduce racial disparities, or face penalties if they fail.

“This rule makes it clear that the fair housing obligation isn’t just being able to say, ‘I didn’t discriminate,’ ” Mr. Breymaier said. “It’s also saying, ‘I’m doing something proactively to promote an integrated or inclusive community.’ ”

Ed Gramlich, a senior adviser at the National Low Income Housing Coalition, cautioned that change was likely to come slowly. Local governments that receive federal funding are required to draw up plans once every five years. For some jurisdictions, the new rules may not need to be addressed until 2020.

Still, he described the new requirement as “tremendous.” Until now, he said, local governments have basically had the freedom to decide for themselves whether they were complying with the 1968 law.

“Jurisdictions would say, ‘We put up a fair housing poster during Fair Housing Month,’ and that was it,” he said. “The whole concept was unenforceable and therefore meaningless.”

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