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Up Front

No room at the top: The stark divide in black and white economic mobility

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Black History MonthThe idea that birth should not be destiny animates the idea of the American Dream. Growing evidence for huge race gaps in intergenerational mobility – both up and down – shows that not only is birth too often destiny, so too is race. (Evidence from us, from Raj Chetty’s Opportunity Insights team, and from Bhashkar Mazumder at the Chicago Fed).

measuring mobility

Intergenerational mobility can be measured in a number of ways, of course: using income, wages, wealth, health, education, just to name a few of the metrics preferred by different scholars. Mobility can also be measured in absolute terms (are you better off than your parents were at the same age) or relative terms (what rung of the ladder are you on compared to your parents).

We focus here on race gaps in relative intergenerational income mobility. But even intergenerational mobility in relative terms can be measured in many different ways, as we have shown here and here.

One common way to measure relative intergenerational mobility is through a “quintile transition matrix”. These figures divide the income distribution into five equal bins—quintiles—and show how likely it is for a child from one quintile to end up in the same or another quintile in adulthood. These are also known as conditional transition probabilities (CTP). If you are a regular on these pages you’ll know what we’re talking about, but just in case:

But these charts are sometimes hard to interpret. Is this good or bad? What should the numbers be? Right now, 34 percent of the children born onto the bottom rung stay there as adults. But what should that number be? You might say (in fact most people do say): “20 percent!” Kids born poor should not be at greater risk of being stuck there than others. But that, of course, would mean more downward mobility, and few folks seem to favor that.

Still, at some level most people looking at this kind of chart are probably using a perfectly mobile society —where everyone has a 20 percent chance to end up in each quintile—as some kind of benchmark. So why not present the data that way?

a new presentation of mobility data

Here then we show how far, and in which direction, real-life CTPs differ from a perfectly random distribution: what we label here a Mobility Utopia. (To be clear, we do not think a society like this would be utopian in practice, given the policies that would likely be required).

Using data from Opportunity Insights (the same as used in the chart above), we first show CTPs for whites. White children from the first quintile are nine percentage points more likely to end up in the first quintile as adults than in the Mobility Utopia (29 percent vs. 20 percent). So poor white children are 45 percent more likely to stay poor than they should be. Conversely, white children from the top income quintile are 21 percentage points more likely to stay in the top quintile as adults compared to random (41 percent v. 20 percent). That is, rich white kids are more than twice as likely to stay rich as adults than they should be.

Black immobility across generations

The results for black children, however, are strikingly different. Black children in the first income quintile are 17 percentage points more likely to stay in the first income quintile as adults compared to random—nearly twice the chance of poor white children. Conversely, rich black children do not have the same advantages as rich white children. Black children from the top income quintile are in fact two percentage points less likely to stay in the top quintile compared to random. While white children at the top have a substantial glass floor to help them stay at the top, the chances of black children staying at the top are less than random.

The race gaps in upward and downward mobility persist then throughout the income distribution. On every rung of the income ladder, black children have worse prospects of the American Dream than white children – including at the very top. Rich white families, it seems, can dream-hoard for their children, while rich black families appear to be less able to do so.

It is now quite clear that improving economic mobility in the U.S. will be virtually impossible without a dramatic alteration in the trajectories of black children, and black boys in particular. “Race-conscious” policies, such as baby bonds, an expanded earned income tax credit, or a fully refundable child tax credit can increase the chances of black children achieving the American Dream.

As we celebrate Black History month, it is important also to focus on black futures – and in particular, on the future prospects in adult life for black children.

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