Chetty: Social mobility is a local problem

Thursday, February 13, 2014

Raj Chetty, Harvard University economist and Winter Institute keynote speaker

Raj Chetty, Harvard University economist and Winter Institute keynote speaker.

Harvard University's Raj Chetty says America's income inequality and upward mobility problems are localized and should be addressed not with national initiatives, but place-based government intervention.

"There are some parts of the U.S. that actually end up looking quite a bit like Denmark," said Chetty, referring to a nation known for social mobility. "And, there are other parts of the U.S. which look worse than any developed nation for which we currently have data."

Among the solutions, he told a Feb. 12 Winter Institute audience, would be to improve teacher quality in the regions blighted by lack of opportunity.

The award-winning economist and his colleagues at the Equality of Opportunity Project argue improving teacher quality -- at any level -- would yield more benefits than reducing class size. The research is grounded in public records of every American born between 1980-82 and the records of their parents.

Salt Lake City, San Jose and St. Cloud are among the metropolitan areas that afford greater opportunity. Charlotte, Atlanta and Memphis are among the metropolitan areas where income inequality is higher and opportunities to move into higher-income brackets are limited. View a national map that details variations in social mobility (PDF).

According to Chetty, a St. Cloud area child born to parents who earn in the bottom tenth of America's income distribution ends up, on average, in the 48th percentile -- a considerable improvement in socio-economic status.

The odds of a St. Cloud area child escaping the bottom fifth to the top fifth of the nation's income distribution is calculated at 12.7 percent.

"St. Cloud, the number 12.7, it ranks at the 90th percentile of all areas of the U.S., in terms of upward mobility," Chetty said. "This is an incredible, highly upward mobile area."

By comparison, the calculation for a child in the Silicon Valley metropolis of San Jose is 12.9 percent.

Conversely, the calculation for a child in Charlotte, the largest metropolitan area in North Carolina, is 4.4 percent. The southeast U.S. and rust-belt metro areas such as Chicago and Cleveland are among the areas with lower rates of social mobility, according to Chetty.

Areas with less upward mobility, Chetty said, typically have a smaller middle class and more racial and income segregation.

"Income segregation just means how far apart are richer and poorer people living in a city," said Chetty. "Again, you see that areas with more income segregation have less upward mobility.

Chetty added: "Places with larger African American populations tend to be more segregated. And that, potentially, has more detrimental impacts on all low-income individuals." 

Chetty is the William Bloomberg Professor of Economics at Harvard University in Cambridge, Mass. He is the 2013 recipient of the John Bates Clark Medal, which is awarded annually to an American economist under the age of 40. It is known colloquially as the "baby Nobel" because past winners include Nobel laureates Paul Krugman, Paul Samuelson, Milton Friedman, Larry Summers, Steven Levitt, Joseph Stiglitz and Chetty's mentor, Martin Feldstein. View Chetty's curriculum vitae (PDF).In its  

For more than 50 years, Winter Institute has brought world-class economists to Central Minnesota. The summit is organized by hosted by the Department of Economics, School of Public Affairs and St. Cloud State University.  

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