We All Win by Helping Kids Escape Poverty and the Ghetto

Poverty

A new working paper from the National Bureau of Economic Research (NBER) by three Harvard economists provides conclusive evidence that the Moving to Opportunity experiment worked. Prior research failed to document any significant economic gains for older children and adults who moved into lower poverty neighborhoods, but findings for younger children shows significant improvements. Data are now available to analyze their outcomes as adults.

Children in the program who moved before they were 13 years old (eight years old on average) were more likely to attend college, have substantially higher earnings as adults, and females were less likely to become single parents. They also wound up living in better neighborhoods and paying more taxes. These findings were consistent across race and gender.

The Moving to Opportunity experiment was conducted between 1994 and 1998 in Baltimore, Boston, Chicago, Los Angeles and New York City with a sample of 4,604 families who were randomly assigned to one of three conditions. The experimental voucher group received a subsidized housing voucher and was required to move to a census tract with a poverty rate of less than 10 percent.

A second group received a Section 8 voucher that provided standard subsidized housing, a third group was not offered a housing voucher and remained in public housing. Raj Chetty, Nathaniel Hendren and Lawrence F. Katz, the study’s authors, restricted their analysis to the 8,603 children born in or before 1991 who would be 21 years old in 2012—the latest year that they had tax.

Prior research by Jens Ludwig found little or no impact on the economic outcomes of adults in the MTO experiment although he did find improvements in mental health, physical health, and subjective well-being of adults as well as family safety. His analyses found statistically insignificant differences among older children in the experiment—those 13 to 18 years of age.

In fact, moving to a lower poverty neighborhood had a slightly negative effect on older children in the experimental group which was explained by a disruption effect on social networks and other child development. However, this latest research found younger children in the experimental cohort were expected to increase their lifetime earnings by around $302,000. Researchers did not find a “critical” age a child had to be moved from a high poverty area, but they did find that every extra year living in a low poverty area had benefits.

Their findings complement previous research by Jeanne Brooks-Gunn, Greg Duncan and others that documented significant correlations between exposure to high-poverty neighborhoods and later poor outcomes. Some studies found that exposure to negative environments in the earliest years of childhood produced larger negative outcomes. These results cry out for social engineering. Unfortunately the free market will not sort this out.

While it is obvious that all poor families cannot benefit from such an experiment, perhaps there can be a lottery system that can move as many poor families as possible out of the ghetto into lower poverty neighborhoods. There are never enough vouchers to go around. Back in October 58,000 people signed up for a lottery when the City of Baltimore re-opened its waitlist after more than a decade. Less than half—25,000—would make the waitlist and just 6,000 to 9,000 of them would actually receive a Section 8 voucher. Something is very wrong with this picture.

Similar conditions will continue in many municipalities if no changes are made in the FY2016 Transportation, Housing and Urban Development bill released two weeks ago by the House Appropriations Committee which—according to the National Low-Income Housing Coalition—underfunds tenant-based rental assistance by $665 million denying thousands of young children a chance to escape high-poverty environments.

Perhaps today’s Republican leaders should be reminded of the words of President Dwight D. Eisenhower who said: “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”

Children in the South Face Steepest Slope in Escaping Poverty

New Research, analyzing census data and other quantitative data sources, shows that children in the south face the steepest climb when attempting to escape poverty. The ability to move up the income ladder, otherwise known as income mobility, is a reliable measure of economic mobility or the ability to change one’s overall economic status. New research by Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, sponsored by the University of California Berkeley and Harvard, looked at how tax expenditures affect inter-generational income mobility.

The main part of their research involved looking at the income of adults (30 or older)  in comparison to the income of their parents. The research paints a startling picture of trying to escape poverty and climbing the income ladder. When it comes to economic mobility, being born in the right part of the country definitely helps.

The study — based on millions of anonymous earnings records and being released this week by a team of top academic economists — is the first with enough data to compare upward mobility across metropolitan areas. These comparisons provide some of the most powerful evidence so far about the factors that seem to drive people’s chances of rising beyond the station of their birth, including education, family structure and the economic layout of metropolitan areas. Read full New York Times article

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In southern Cities like Atlanta, a child born into a family in the 20th percentile ($25 K) or lower will on average will only climb to the 35th (42 K), and only 8 % of children at this level will ever be considered a top earner at $107 K or more. Atlanta though isn’t the worst place for income mobility, in the greater Eufaula area of Georgia a child only has a 2.7% of climbing from the bottom fifth to the top fifth of the income distribution. Georgia, Louisiana, and the Carolina’s have the lowest rates of income mobility.

The New York Times article includes interactive maps where you can view the income mobility rates for different areas and starting income levels, to see what the average earnings a child from that background will have by the time they reach 30.

So what does all this mean? It means that economically disadvantaged families in the south are less likely to escape the cycle of poverty than families in the midwest, northeast, or western parts of the country. Notable exceptions to this include the areas near:

  • Detroit, Grand Rapids, and Kalamazoo Michigan
  • Cleveland, Columbus, Ohio
  • Indianapolis, Indiana
  • Chicago, Illinois
  • Milwaukee, Wisconsin
  • Nome and Bethel, Alaska
  • Mission, South Dakota

View the Truth and Hope Poverty Tour of North Carolina video for more information.

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