Invest in people, not real estate, and stop conflating the two

Thomas Day
5 min readMay 21, 2024

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Historians will soon reach the point where we have enough distance from Barack Obama’s presidency to begin assessing it. One act of his administration I hope they don’t overlook: Making available a vast file of anonymized income tax data with critical demographic characteristics, dating back to the 1940s.

This single act allowed a select few economists the opportunity to examine the incomes of Americans across generations and understand how upward mobility — meaning who earned more over their lifetimes than their parents — has been best supported. One especially curious and insightful researcher who has examined this data file is Raj Chetty, an economist at Harvard.

Chetty’s work is especially valuable as Chicagoans wrestle with a foundational question that guides conversations around public investment, housing policy, and education. That question: Do we try to move prosperity to the people or people to the prosperity? Chetty’s work strongly suggests a more effective approach is the latter.

To understand Chetty’s insights, visit Opportunity Insights, a platform with clear visuals that measure and map out how social connectedness across income demographics. In addition to the IRS data made available by the Obama Administration, Chetty layers on Facebook friendships —Facebook data on 72 million users, all privacy protected, of course — to understand how social relationships and geography shapes our ability to earn more than our parents.

What Chetty has found should be at the foundation of almost every conversation I can think of regarding housing policy, public transit, and especially public schools in Chicago.

Chetty’s findings are clear: Geographies with high “social capital” — a metric that combines economic connectedness (friendships across class lines, tracked by Facebook), social cohesiveness (depth of social engagement across classes), and civic engagement — were better at facilitating upward mobility.

Through Chetty’s work, we are now beginning to understand more deeply that there are geographic locations that better facilitate interaction between residents across income demographics and support upward mobility. His insight provides a critical resource as Chicagoans search for a sensible approach to supporting low-income families and kids.

It is enticing to respond to Chetty’s work by advocating that we invest in low-income neighborhoods to make them better at facilitating interactions between residents of different economic circumstances, and I don’t reject that analysis. Mayor Brandon Johnson won election as mayor of Chicago by emphasizing that he would invest public resources in low-income neighborhoods. I understand that many in Chicago share his concern that too little public investment is going into the South and West sides.

Yet I would urge Mayor Johnson and his allies to reflect on evidence that upward mobility for lower-income Americans has been accelerated by greater connectedness with higher-income people, and that those connections are more likely to be facilitated within existing high-income neighborhoods.

Please look at this graph closely and reflect on it. What we see here is that a child ranking at the 25th income percentile is far more likely to be upwardly mobile if that child resides in a zip code with higher a higher median household income.

In other words, instead of simply continuing to accept segregation in our city and channeling resources — regardless of their success — into low-income neighborhoods, let’s also find ways to integrate communities where people most want to live and that have proven effective in supporting economic achievement.

Let me be clear that these concerns cannot be removed from conversations around housing policy. Nearly 80 percent of Chicago is zoned for single-family homes, acting to push out lower-income residents from neighborhoods that best facilitate upward mobility. To close the radius of our city and facilitate the kind of social cohesiveness Chetty advocates for, we need zoning reform to dramatically increase urban density.

But we also need schools that integrate communities from otherwise unfamiliar backgrounds. To the greatest extent possible, Chicago Public Schools should be a platform to spark and grow economic connectedness, or friendships across class lines. We have a long way to go on that front, Chetty finds. Here is a screen shot from Chetty’s data on Opportunity Insights:

And even more work to do to enhance the depth of interactions across income demographics:

And on volunteering:

These three factors — low economic connectedness, low cohesiveness between residents of different economic strata, and low volunteering rates — have collectively served to make Chicago not a very good place to climb the income ladder:

We need to build and grow a common civic culture in Chicago. I appreciate the history and richness of our 77 different neighborhoods, and the last thing I would want to do is destroy communities that have been built over decades to make way for a new luxury real estate development. Yet any rhetoric that pits communities against one another is not helpful for the residents we wish to support.

We should be “investing in people” by finding ways to facilitate greater economic connectedness and cohesiveness. That, it appears clear to me, would mean allowing people, families, and kids to live and go to school in the places that have proven most capable of supporting upward mobility — and places are very frequently close to downtowns.

And Chicago Public Schools should be where low-income students find pathways toward economic connectedness with higher-income communities.

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