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The Geography of Success

Ilana Novick

Location, location, location. It’s a real estate cliché, but also, according to a new study by a team of experts from Harvard and the University of California at Berkeley, one of the most important factors for predicting intergenerational economic mobility in America. When it comes to the whether a poor child born in America can climb up from the lowest rungs on the economic ladder, place matters.

The report, one of a series that tracks income inequality in the United States, evaluated the effectiveness of income supports and tax expenditures like the Earned Income Tax Credits, asking whether differences in tax expenditures across areas of the U.S. are correlated with the economic outcomes of children from poor families.

Researcher Nathaniel Hedren told NBC News that the research team was surprised by how much of a role location plays in future economic success and the “extent to which people from poor backgrounds in different areas earn different amounts and have different economic outcomes.”

In a post about the study yesterday, my colleague David Callahan noted how its new findings lend support to an old idea -- namely, working to better integrate America's communities by race and class. 

Yet that strategy will only get us so far, given the wide geographic variation in mobility. The problem is often less living on the wrong side of the tracks than living in the wrong region of the country. The areas with the greatest success rates in terms of economic mobility are concentrated in the Northeast and the West, with parts of the upper Midwest and much of Texas. New York, Boston, Seattle, Salt Lake City and Houston also showing better outcomes. The odds of children from poor families moving into the middle class are significantly lower in the Southeast and industrial Midwest.

So what accounts for these differences between locations? Why do some areas have better outcomes for economic mobility than others? These differences are partly due to tax policy and investment in anti-poverty programs. Researchers found a significant correlation between both measures of mobility and local tax rates – which are also tax expenditures for the federal government because they are deductible from federal income taxes. Researchers found a weaker correlation between state EITC policies and rates of intergenerational mobility.

Other success factors for economic mobility include a large and geographically dispersed middle class; good schools; a high share of two-parent households; and active and engaged community and religious organizations.

Hedren was quick to note that the study does not present a magic formula, but rather data and guidelines for future studies to refine and pinpoint not only the factors for success, but more importantly, determine how to cultivate those qualities so more places can take advantage of their benefits. Those future studies will answer the question of how to create a geographically dispersed middle class, more two-parent households, or better schools.

While it's useful to know that those qualities are more prevalent in the locations with better economic mobility, the mere knowledge of their existence won’t do much for families in the Southeast and industrial Midwest who don’t have the resources to move to someplace with better outcomes like the Northeast and upper Midwest. And simply moving, even for the people that can afford to, won’t be the perfect solution either.

The government can't magically manufacture stable families, good schools, or effective religious and community-based social service organizations. What they can do is set the groundwork for future success by supporting anti-poverty tax policies such as the EITC that have already been proven to improve economic mobility.