Economic Opportunity Will Be Born Locally

The American Dream is harder to find in some neighborhoods. That line is truer today than it has been in the past as economic mobility in the US has been declining over the past several decades.

Children born today have no better than a coin flip’s chance on average of earning more than their parents. The causes of this decline are numerous and debatable, but the absolute trend is quite clear.

This is despite the recent rebound in economic growth since the 2008 recession and generally rosy picture today as wage growth is starting to pick up with tightening labor markets.

Separating short term vs. long term trends in the economy is incredibly important to understand this fact. While short term trends are positive, over the longer term there is increasing inequality that at least on the surface is correlated with decreasing economic mobility and potentially also a cause of it.

The labor market is increasingly polarized with a rise in occupations at the ends of the wage distribution. Middle class occupations are disappearing, and there is a rise in the requirement for a college degree to access these high paying jobs, but the path to a college degree is not widely accessible.

Furthermore, access to quality schooling does not appear sufficient to create paths to opportunity even though it is becoming increasingly necessary. Research shows that educational attainment, while at a national level correlating highly with economic mobility, does not explain much of the variation across geography within the US.

How do we tackle economic mobility then and ensure accessible paths exist for every child regardless of where they grow up?

Unfortunately, there is likely no single federal policy that solve things. Some national level policies can probably help on the margin such as increasing safety nets through things like wage insurance, but they don’t systematically tackle the wide heterogeneity we see on a local basis.

Given how tied economic mobility is to geography, we will need to change local policies to promote equality because so much of economic opportunity is shaped by neighborhood factors, which are driven by local politics at the state and county levels.

As education itself doesn’t seem sufficient, these policies will need to go beyond just school quality and attainment, helping foster the connections that help people find jobs and build the social capital that can lead to positive employment outcomes.

Indeed, looking at local communities that have been able to build strong economic climates, high educational attainment is only one component. Most of these places also push partnerships between government and the private sector to help create access to financial capital for emerging startups and spurring innovation.

When we think about what the US needs to do to reverse its decades long decline in economic mobility, it may be captivating to focus on what the next presidential candidate can do, but in reality the truly transformative effects are going to come from local policies and decisions. Remember in the US states are the laboratories of Democracy.