Good News and Bad News About America’s Kids

The yawning gap between the mobility of white children and Black children growing up in low-income families has narrowed sharply, according to a major new study released today, based on tens of millions of anonymized census and tax records. Yet the findings are not entirely comforting. Inequality narrowed not just because poor Black kids have grown up to earn more as adults but also because poor white kids are earning less.

Children born in lower-income white families did not fall behind just relative to the gains made by their higher-income white peers or their peers in Black families across the income spectrum. They fell behind in absolute terms. Poor white kids born in 1992 were earning $1,530 less at age 27 than poor white kids born in 1978, after accounting for inflation. Fewer were married, fewer had graduated from college, and more were incarcerated too. Poor Black kids born in 1992, on the other hand, were making $1,607 more than those born in ’78. As a result of these simultaneous shifts, the chance of Black and white kids leaving the lowest-earning income quintile and reaching the middle class converged.

[From the August 2019 issue: The economist who would fix the American dream]

The rising inequality among white families and the entrenchment of poverty in low-income white communities is sobering. Yet the gains among Black families are remarkable, given how deep-rooted and long-standing racial inequality is in American life. The study’s takeaway is that opportunity is “malleable” in a short time frame, Raj Chetty, an economist and one of the paper’s authors, told me. “The reason the U.S. has had such persistent gaps by race in terms of income, wealth, health—whatever disparity you’re interested in—is because we basically have had no change in terms of rates of mobility,” he told me. But if the trends in this paper continue, within a few generations, Black families “will see a catch-up phenomenon.”

There is a lot of catching up to do: The United States is an intensely unequal place, and as a result, its rates of intergenerational mobility are low. Americans in the top 1 percent of the earnings spectrum make 22 times as much as those in the bottom 10 percent. The disparity is even greater in terms of wealth: The top decile of households accounts for 67 percent of the country’s net worth, and the bottom 50 percent just 2.5 percent.

Class is strongly heritable: A kid born in the bottom quintile of the earnings distribution has a 43 percent chance of remaining there; a kid born in the top quintile has a 40 percent chance of staying there. The top of the income distribution remained ossified in the new study: Rich white kids are overwhelmingly likely to remain rich, and rich Black kids somewhat less so.

“Change in these sorts of fundamental, structural problems is glacial,” David Grusky of Stanford, who was not involved in the study but reviewed the findings, told me. The change found in this study—both the “important” narrowing of the racial gap and the “horrible” expansion of the class gap—“is not glacial. It’s quite prominent.”

Earlier studies by Chetty and others have shown that upward mobility is much likelier for Hispanic and white kids than for Black and Native American kids, and downward mobility much likelier for Black and Native kids than for white and Hispanic kids. Inequality on class and racial lines remains a central feature of American economic life, the new paper finds: “Black children born in 1992 in counties with the highest levels of upward mobility for Black children still have poorer outcomes in adulthood on average than white children born in counties with the lowest levels of upward mobility for white children.”  

Still, some large and persistent gaps are closing, and fast. The new study—by Chetty, Sonya Porter of the Census Bureau, and Will Dobbie, Benjamin Goldman, and Crystal Yang, all of Harvard—finds that kids born in low-income Black families in 1978 were 14.7 percentage points likelier to remain low-income than their white peers. In the 1992 cohort, they were just 4.1 percentage points likelier to do so.

Neither governmental programs nor labor-market conditions precipitated the mobility changes among low-income households, the paper finds. The changes seemed to have little to do with choices made by families themselves, either. Much of the data “can be explained by a single variable,” Chetty told me. “White kids were increasingly growing up in communities where low-income parents were not working.” That was not true of Black kids, who in both cohorts were growing up in neighborhoods where parents might not be earning much but were likely to be employed.

[Read: The secret to reclaiming the American dream]

The paper shows the employment rate of low-income white parents dropped from 66.2 percent to 55.8 percent between the 1978 and 1992 cohorts; for low-income Black parents, it declined a far smaller amount, from 74.9 percent to 71.3 percent. (The study finds that it was not just kids whose parents were unemployed who had lower earnings at age 27; kids with employed parents did as well. In other words, the issue was the neighborhood, not the specific family circumstances.) The authors also found a sharp increase in the rate at which poor white parents were dying, from 4.2 percent in the 1978 cohort to 5.8 percent in the 1992 cohort. The mortality rate remained stable for poor Black parents, moving from 4.8 to 5 percent.

The study does not emphasize broad geographic trends; this is not about the decline of the Rust Belt, or poverty in Appalachia, or increasing inequality in superstar cities. Rather, it shows that race gaps grew smaller and class gaps grew wider across metro areas, neighborhood by neighborhood. The lesson for policy makers is that communities matter—not just in terms of wealth or public resources but in terms of social capital and societal expectations.

“I describe place-based policies as one of the most important early-childhood interventions,” John Lettieri, the president of the Economic Innovation Group, a Washington-based think tank, told me. “Neighborhood conditions are an early-childhood intervention, positive or negative, shaping what a child is going to become. Think of those early impressions: What is an adult? What does an adult do? How do adults behave? What kind of opportunities are people engaging in? That all happens silently,” he said. “But kids pick up on it.”