New study challenges assumptions about poverty

By Andy Brack, Publisher of the State House Report

JULY 26, 2013 – For Americans trying to escape poverty, location matters – just like in real estate. And if you live in the Deep South, it’s harder to escape than about anywhere else in the country, just as generations of us have known.

Throughout every area of South Carolina, jumping from the bottom quintile of income to the middle class or beyond is tough, according to a new Harvard study making waves in policy circles.

In the Columbia area, for example, a child has a 36.6 percent chance of rising out of the bottom quintile of income and a 4.2 percent chance of leaping from the bottom to the top quintile. Those probabilities are among the lowest in the nation and not much different from the number for Greenville, where kids have a 37.7 percent chance to escape poverty and a 4.9 percent chance to be among the nation’s highest earners. Researchers found similar low numbers for Memphis, Charlotte, Atlanta and Raleigh.

“Where you grow up matters,” Harvard economist and researcher Nathaniel Hendren told The New York Times. “There is tremendous variation across the U.S. in the extent to which kids can rise out of poverty.”

The new study is drawing attention for what it found, but also for what it didn’t find. Researchers crafted the study by analyzing millions of anonymous earnings records to measure intergenerational mobility, or how children move across income levels compared to their parents.

The research team was interested in whether tax breaks and credits, such as the Earned Income Tax Credit, were correlated to high mobility, or the ability of kids to move out of poverty. They found some correlation between local tax rates and mobility, but a weaker correlation between state EITC policies and mobility.

So they looked for other factors to explain why some areas had high mobility out of poverty and others, like Southern states, had low mobility. They identified four correlations, but emphasized they were not causes:

  • Family structure. “The share of households with kids that are headed by a single mother is a very strong predictor of mobility,” research associate Alex Olssen told Statehouse Report. The study indicated income mobility was higher in areas with more two-parent households.
  • Local middle class. The density that poor families are dispersed among mixed-income neighborhoods appear to be correlated. “Areas in which low income individuals were residentially segregated from middle-income individuals were also particularly likely to have low rates of upward mobility,” according to the study.
  • Better schools. Income mobility is higher when a metro area has better primary and secondary schools. Having an array of colleges and their tuition rates don’t appear to be as significant, according to study’s results.
  • Civic engagement. The more chances for civic engagement, including with religious and community groups, the better the upward mobility.

While these factors appear to contribute to upward mobility, the study also found geography didn’t impact income mobility in children born in richer households. In other words, richer children tended to remain richer, regardless of where they grow up.

From a public policy perspective, the study includes notions that fly in the face of traditional thought. First, it suggests that engineering tax policies to help people in poverty might help, but not as much as anticipated. Keep in mind, however, that Southern states tend to not have full earned income tax credits similar to the federal credit. Other implications:

  • Zoning. Perhaps sticking housing projects in separate areas of a community instead of blending them in (as is done increasingly in Charleston) is not the best public policy.
  • Schools. Instead of giving tax credits, it might be better to spend more tax dollars on creating better schools throughout school districts. Also, lift up all schools instead of pouring resources into specialty schools (charters, magnets and more).
  • Family. Figure out ways to craft public policy so there are fewer single-parent households.
  • Involvement. Perhaps more community organizations should get involved in local schools to engage children in their communities at earlier age. More quality after-school programs?

Location matters. We need to remember this when crafting public policy.

Andy Brack is publisher of Statehouse Report.  You can reach Brack at brack@statehousereport.com.

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