The Secret to Reclaiming the American Dream
Look to friends and parents.
Sign up for Derek’s newsletter here.
In 1940, a child born into an American household had a 92 percent chance of making more money than their parents. But a child born in the 1980s has just a 50 percent chance of surpassing their parents’ income. In 40 years, the American dream went from being a widespread reality to essentially a coin toss.
No economist has done more to explain why than Raj Chetty. His team at Harvard University has spent much of the past decade mapping inequality of opportunity across the country. They’ve shown that in some parts of the country, such as Minneapolis, the American dream is very much alive, while in other parts, the poor are trapped in poverty for generations. Why are some neighborhoods in America like Miracle-Gro for opportunity? Is it parenting, social connections, pure economics, the presence of high-quality schools, or something else entirely?
In an episode for my podcast, Plain English, Chetty and I talked about how elite colleges aren’t doing enough to help America’s poor, why moving to the right neighborhood is one of the most important decisions that parents can make for their child, and how the “friending bias” of rich Americans puts the American dream out of reach for everyone. This conversation has been edited for clarity and brevity.
Derek Thompson: One of your early papers showed that children who move from neighborhoods with historically low social mobility to neighborhoods with high social mobility reap huge returns over their lives. This says something both optimistic and pessimistic about America. The optimistic story is that opportunity exists. Families can move to a different city and change the trajectory of their kids’ life. The dark side is it suggests that talent in America is widespread but opportunity isn’t evenly distributed. So children have to either win the lottery by being born into the right family or move to where lottery winners already exist.
Raj Chetty: When we saw that there’s tremendous variation in rates of upward mobility across different places and for different groups, the next question for us was: What is causing that? We tracked millions of families that moved across different neighborhoods in America, and, in a nutshell, we found that the earlier you moved to a place with high levels of upward mobility—say, from the Bronx to Queens, within New York City—every extra year that you spend growing up in one of these high-opportunity places, the better your outcomes look as an adult. You have higher earnings, higher likelihood of going to college, lower chance of teenage birth, and lower chance of incarceration. You could say there are “dosage effects.” Every extra year spent in one of these favorable environments seems to systematically improve kids’ outcomes in the long run.
Thompson: This makes me think about the question “How much does parenting actually matter?” It’s very difficult to prove that lots of things that parents obsess about, like playing Mozart for their children when they’re 18 months old, have much effect. But where parents decide to live and raise their children seems to have extraordinary effects.
Chetty: My takeaway in the context of parenting is yes, where you live or where you move is one of many important decisions that parents can make. Other decisions, like enrolling your child in music lessons, might have smaller benefits that accrue over time. But clearly, a big choice that parents make is where to live. It encompasses where kids go to school and who their friends end up being.
Thompson: In your latest paper, you described what you said might be the single most important ingredient that you’ve identified in all of your work on this subject. It has to do with friendship.
Chetty: We knew that it’s harder to rise up in more racially segregated neighborhoods. But there was always a sense that we hadn’t fully captured the picture. Social scientists have been thinking about the idea of social capital for a hundred years—including my colleague, Bob Putnam, in famous books, including Bowling Alone. We wanted to measure social capital systematically. So we teamed up with Facebook to use their data on friendships to measure what we call “economic connectiveness”— the extent to which low- and high-income folks are interacting with each other in a given place. These cross-class interactions turn out to be one of the strongest predictors of economic mobility to date. If you grow up in a place where low- and high-income folks are interacting more, you as a person growing up in a low-income family are much more likely to rise up in the next generation.
Thompson: But you found that these cross-class friendships don’t form as often as we’d think, even when rich and poor people live near each other. You call this “friendship bias.” How does it work?
Chetty: There are some places where, if you look at the lower-income folks on Facebook, they have many high-income friends. But in other places, they don’t. Two things are driving that variation. One is what we call “exposure,” which is just a simple idea that if low- and high-income folks go to different schools, attend different churches, live in different neighborhoods, they’re not going to be friends with each other.
But there’s a second force we introduce in this paper, called “friending bias.” That’s the idea that even if you and I go to the same school, even if you and I live across the street from each other, we still might not interact with each other because we might go our own separate ways and hang out with people who look like us and spend time with people who have similar interests or similar backgrounds and so forth. What we end up finding is that about half of the social disconnection in America between low- and high-income folks is coming from the lack of exposure. But the remaining half is explained by friending bias. That means even if we were to perfectly integrate every neighborhood, every college, every school, and every recreational group, we would still have half of the social disconnection between low- and high-income folks left in the United States.
Thompson: Another significant variable that you’ve identified in your research is “father presence.” You found that upward mobility was most strongly correlated with the presence of two-parent families in a neighborhood, but not necessarily in a home. I’m not sure I fully understand what’s going on here.
Chetty: We’ve found that Black kids, and Black boys especially, have much lower chances of rising up in the income distribution than white boys. And yet Black boys have pretty good outcomes if they’re born in some places, like Silver Spring, Maryland. One of the predictors that comes up is that Black boys who grow up in neighborhoods where there are more fathers present—and Black fathers, specifically—have better chances of rising up. One possibility is that this is about role-model effects. When you see a set of folks from your own community, people who you can relate to, who work in stable jobs, you have a different sense of the path before you than if those adults had constant contact with the criminal-justice system and have been incarcerated. It connects back to friending bias. These things matter by shaping kids’ aspirations and by giving them information about opportunities they might not otherwise have thought of.
Thompson: Let’s look at college for a second. I think a lot of optimists look to higher education as our engine of opportunity. But you’ve found that the most elite schools bring in very, very few poor students. At the most prestigious schools—Harvard, Yale, Stanford, MIT—a child from the richest 1 percent of families is 77 times more likely to attend than a child from a family in the poorest quintile. More kids in these schools are from the top 1 percent than the bottom 60 percent. What does this tell us about the state of elite education in America?
Chetty: These colleges have terrific outcomes for low-income students on average. But a school’s contribution to upward mobility is not just how well those kids do, conditional on getting there, but how many of those kids are there to begin with. On that front, I think the U.S. higher-education system unfortunately suffers a great deal. The colleges graduating the richest students—along with the leading politicians, business leaders, scientists—tend to have very, very few kids from low-income families. We want our education system to be an engine of opportunity. But instead, it’s an engine of stratification, because if you only have the richest kids attending the colleges that provide those pathways to those top jobs, then you end up calcifying society. It means if your parents happen to be wealthy, then you have access to a set of opportunities that are going to make you wealthy in the next generation. That puts the American dream out of reach for many kids.
Thompson: Your paper found that several mid-tier schools—such as State University of New York at Stony Brook, California State University at Los Angeles, and Pace University, also in New York—do seem to be pretty successful at bringing in students who are lower- and middle-class, and graduating them into the upper-middle class. Do we know what they’re doing right?
Chetty: This is where we are in terms of the frontier of understanding how everything works. When we started doing this work, I had the intuition that maybe it would be the state flagships—such as the University of Michigan in Ann Arbor, UC Berkeley, and the big public schools that lots of folks associate with good outcomes—that would deliver the highest levels of upward mobility. But many of those colleges have very few low-income kids as well. There’s something about these mid-tier public institutions that are both serving many low-income kids and having pretty good outcomes. Now, I don’t think we quite know exactly what they’re doing. And some of this is probably about selection. The types of kids who are attending a place like CUNY or State University of New York at Stony Brook are often from immigrant families. But our sense is there is important value added by these institutions, and we haven’t quite figured out yet what it is.
Thompson: What’s the most interesting question that you don’t know the answer to yet?
Chetty: There are dramatic differences in upward-mobility rates between Black and white men—and, interestingly, not so much between Black and white women. Something I found quite shocking in our earlier work is I thought that past a high level of income, race would become less important. But what we find is even if you grow up in the most affluent families, go to the best schools, and so on, Black boys have a much higher chance of falling down the income ladder in the next generation than white boys do. I feel like I do not have a good answer to what exactly is driving those sharp disparities and outcomes for Black and white kids who grow up in the same neighborhoods.