How to Find More of the American Dream

During 1931, we would have first heard about the American Dream. Although economic growth was evaporating and unemployment was heading toward almost 25 percent, in The Epic of America, author James Truslow Adams told us that the American Dream is…

“…that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement…It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position…”

Thoughts about the American Dream took me to a new study on the importance of where you live.

Neighborhood Matters

At age 26, someone in the 25th percentile of income distribution who was born and raised in Cincinnati can expect to be earning an annual average income of $23,000. For Pittsburgh, the number is $28,000. But if you moved from Cincinnati to Pittsburgh at age 9, then, 17 years later, you would have earned $25,500. In other words, moving enabled you to make up 50 percent or so of the difference.

From: “The Impacts of Neighborhoods on Intergenerational Mobility”

Our basic story is that researchers were able to gather huge data that let them follow low income families that moved to new neighborhoods. The data indicated that the younger the child, the higher the income boost from the move. And, you need not be low income. Even the top one percent got that nudge upward.

You can see how big the boost is for different U.S. counties:

From: “The Impacts of Neighborhoods on Intergenerational Mobility”

Asked why living in certain counties increased future income, the researchers said they were not sure of specific causation. Instead they identified five variables that they assumed made a difference:

• less violent crime
• more two parent households
• less segregation based on income and race
• better schools
• less income inequality

Our Bottom Line: Income Mobility

In a 1990s Congressional anti-poverty program called Moving to Opportunity, poor families received vouchers that they could use to move to better neighborhoods. At first considered a failure, the program is now considered a success because researchers have begun to focus on the income impact of a child’s age. As they expressed it, “Where children grow up affects their outcomes in adulthood in proportion to the time they spend in the place.”

Knowing more about income mobility, federal policy makers can better enable more of us to achieve the American Dream.