Family Structure, Geography, and Income Mobility

Lyndon Baines Johnson, Thirty-sixth President (1963-1969)

This is from my article published by the Oklahoma Council of Public Affairs in their March Issue of the Perspective Magazine.

Politicians and economists from the left and the right have been decrying the lack of economic mobility in the United States and offering different solutions to solve the problem. In a recent interview on CNBC, Arthur Brooks, president of the American Enterprise Institute, said that although we should be proud of providing a safety net for Americans in need, we have failed to create an opportunity society.

Brooks says the government has gotten in the way of creating opportunities for personal transformation that are the precursors of success—like faith, family, happiness, and work—for those at the bottom of the economic ladder. Educational reforms that allow school choice are the key inputs needed to achieve this transformation, but these reforms often are not embraced by advocates for the poor, who overwhelmingly attend failing schools.

Another component to creating opportunity for those at the bottom is exposure to entrepreneurship. Brooks says that we’re good at helping the rich with regards to entrepreneurship but we’ve done a terrible job helping those at the bottom become entrepreneurs. Given all the regulatory barriers, it is just too difficult to start a business.

So, with all this focus on the income gap and President Obama’s claim that we live in a continuous state of income inequality where the rich are getting richer and the poor are getting poorer, let’s see what the data have to say.

A January 2014 National Bureau of Economic Research (NBER) study from the Equality of Opportunity Project by Harvard economists Raj Chetty and Nathaniel Hendren and UC Berkley economists Patrick Kline and Emmanuel Saez (pdf) concludes that children born into poverty today are just as likely as their counterparts born 50 years earlier to be poor adults. So, despite President Johnson’s efforts to increase the government’s role in education and health care in 1964, $20 trillion later we haven’t moved the needle with regards to income mobility. Although the poor suffer less today, the odds that a poor child will rise out of poverty are the same as they were 50 years ago.

So, what else can this study tell us about income mobility? There seem to be two important findings. First, these economists find that family structure has the greatest impact on upward mobility. Second, they find that geography matters. More specifically, when ranking the 100 cities (commuting zones) with the largest populations, they find that Salt Lake City has the greatest overall upward mobility and that commuting zones that have more two-parent families exhibit more upward mobility.

According to an analysis by New York Times author David Leonhardt, “Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati, and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains, and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle, and large swaths of California and Minnesota.”

So, where does Oklahoma fit into this analysis? Of the 100 largest commuting zones, Oklahoma City ranks 41st and Tulsa ranks 44th with regard to upward mobility. There are a total of 741 commuting zones. Of the 16 commuting zones within Oklahoma, the top four are Woodward, Elk City, Guymon, and Enid. Rounding out the bottom are Oklahoma City, Okmulgee, Tulsa, and Muskogee.

Let’s examine a potential scenario to compare income mobility in Oklahoma with regard to its neighboring states. Consider a child born to parents making $31,000 in Oklahoma City. According to the data in this study, that child will, on average, climb the economic ladder and earn $50,000 in adulthood. In Dallas, that same child would end up grossing $48,000 as an adult. In Wichita, the child ends up earning $49,000, and, finally, in Little Rock the child would bring in $45,000.

Overall, Oklahoma is performing well amongst its neighbors when it comes to upward mobility. However, when ranked across the country, Oklahoma’s biggest city is in the middle of the pack. What the Equality of Opportunity study does show us above and beyond anything else is that an emphasis on creating and maintaining two-parent families is not a supplemental prescription to a healthy economy, but a necessary one.