The economic mobility of children in America has remained relatively flat in the last three decades and varies widely by geographic area, according to two new studies that disrupt President Barack Obama’s message that income inequality has increased ahead of his State of the Union address.
One study found that the ability of the poorest children to move up the economic ladder has slightly increased. Children born in 1971 to parents in the bottom fifth of the income distribution had an 8.4 percent chance of reaching the top fifth of the income distribution, while that percentage ticked up to 9 percent for children born in 1986.
The other study found that both the absolute mobility of children and their relative mobility based on the income status of others largely depends on where they live. Family structure, racial and economic segregation, school quality, social capital, and income inequality were the main factors correlated with mobility in different areas, according to the study.
Harvard University economist Raj Chetty and others conducted the research as part of the "Equality of Opportunity Project," funded by the National Science Foundation and other university programs.
The recent findings complicate Obama’s narrative about the pitfalls of rising income inequality as he prepares to deliver his annual speech on Tuesday. The president called inequality "the defining challenge of our time" during a speech last month, saying "The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream."
However, the studies indicate that mobility has not changed that much in the last few decades. And income disparities among the top 1 percent of earners, the kind of inequality that has risen most dramatically in recent decades, is less important than "middle-class inequality," the studies’ authors note.
That suggests mobility is the more important problem, not the rising fortunes of the top 1 percent of the population, said Brad Wilcox, a visiting scholar at the American Enterprise Institute and an expert on the ties between family structure and economic growth, in an interview.
"The overall spread of the income isn’t in and of itself all that important," he said.
Wilcox said the studies show that the most predictable factors of mobility are racial segregation and family structure. Children raised in areas with large African-American populations or high concentrations of single-parent families, for example, tend to find it difficult to improve their wellbeing.
Mobility in communities such as San Jose, Calif.—which have more racial integration and stable two-parent families—ranks favorably with other countries around the world, while cities with opposite conditions, such as Charlotte, N.C., rank poorly.
One thing to watch for in Obama’s speech is whether he addresses the studies, Wilcox said. The president has committed himself to "data-driven public policy," he added.
"We’re seeing that family structure is the biggest factor—I’m curious to see if President Obama will address that and anything that will help strengthen the two-parent family," he said.
Obama has so far proposed measures such as hiking the minimum wage and financing universal preschool for all children to combat income inequality. However, critics say raising the minimum wage would largely benefit young part-time workers not living in poverty and that existing pre-K programs do not significantly improve the educational outcomes of children who attend.
"Redistributing income per se is not a major factor when it comes to reviving the American dream," Wilcox said. "Judging by this new study from Chetty [and others], it looks to me like education reform, neighborhood integration, and reviving civil society and the family are the key things."
Proposals such as the one advanced by Sen. Mike Lee (R., Utah) that would expand the child tax credit for families and help them defray both income and payroll taxes are promising, Wilcox said. He also suggested both parties should consider eliminating marriage disincentives in welfare programs and criminal justice reform for young men.
Still, the government’s reach is limited in matters of mobility, Wilcox said.
"There’s only so much the government can do to strengthen the two-parent family and civil society—those are fundamentally voluntary institutions," he said.
The studies note that "high upward mobility areas," such as Salt Lake City, Utah, "tend to have higher fractions of religious individuals and greater participation in local civic organizations."
Additionally, a recent analysis by the Tax Foundation found that both income inequality and the progressive nature of the tax code have increased in the last few decades despite the president’s claim that tax cuts have exacerbated inequality.