Whether at the neighborhood or metropolitan level, more job growth doesn’t seem to improve economic mobility
There’s a seemingly un-questioned (and unquestionable) truth among economic development practitioners that more job creation is the universal answer to problems of economic opportunity. If our neighborhood (or city or region) could just grow more jobs, or grow them at a faster rate, there’d be lots more opportunity for the poor and disadvantaged to lead a better life. We support job creation efforts because we believe that the benefits will help those, especially at the bottom of the income spectrum.
The “proximity to jobs and job growth” argument is more than just a widely repeated shibboleth of economic development practitioners. For decades its been encapsulated in something called the “spatial mismatch” hypothesis, propounded by economist John Kain in 1968; he argued that the suburbanization of jobs meant that low skilled urban workers left in segregated low income urban neighborhoods were progressively further from jobs. As jobs moved away from cities, these workers suffered accordingly. The implication of this hypothesis is that if we could just get more jobs closer to these disadvantaged populations, they’d have more opportunity.
In the past few years, we’ve gotten a much clearer and more detailed picture of who’s flourishing (and where) thanks to the research of Raj Chetty, Nate Hendren, and their colleagues at the Equality of Opportunity Project. Using de-identified tax records, they’ve calculated the intergenerational economic mobility of Americans, identifying who has moved up. A core indicator is the extent to which children born to the poorest families move up in the income distribution and have higher relative incomes that their parents. It turns out that some cities and some neighborhoods do a much better job of enabling children to succeed as adults.
Their latest– The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility–examines data at the neighborhood level to judge the correlates of economic mobility. We highlighted the on-line Atlas they’ve created, which enables you to see which places do the best job of giving kids a chance to succeed economically. The accompanying research paper steps back and asks what we can learn from these patterns about the characteristics of local communities that seem to underlie economic mobility.
On specific point of inquiry is using data from the Atlas to test the connection between job growth and intergenerational economic mobility. Does living in a neighborhood that has a wealth of jobs nearby improve the lifetime economic prospects of kids growing up there? The short answer is “no.”
The authors use data from the Census Bureau’s Local Employment and Housing Dynamics (LEHD) report to estimate the number of jobs within five miles of every census tract (neighborhood) in the US and then compare variations in job proximity to their measures of intergenerational economic mobility. They find that the density and growth of jobs bears no statistically significant relationship to lifetime earnings prospects of kids growing up nearby.
[The number of jobs within five miles] is slightly negatively associated with upward mobility, with a correlation of -0.175 (s.e. = 0.004). The number of “high-paying” (annual pre-tax wages above $40,000) jobs exhibits a similar pattern. We also find small correlations with the rate of job growth between 2004-2013, the period when children in our sample were entering the labor market. In short, there is little evidence of a positive association between local availability of jobs and upward mobility, challenging spatial mismatch theories of economic opportunity (Kain 1968).
The same finding holds at the metropolitan level. Kids who grow up in regions or metropolitan areas where job growth is strong don’t tend to exhibit greater intergenerational economic mobility as adults than kids growing up in weaker labor markets. Here’s a scatter diagram of data for the 50 largest commuting areas (major metropolitan areas and their surrounding commuting zones), showing intergenerational economic mobility on the vertical axis and job growth on the horizontal axis. As the report notes, there is essentially no correlation between the two measures.
The upshot of these findings is that a booming labor market does not automatically translate into greater upward mobility for local residents. Hence, policies targeted based on job growth rates would reach quite different areas from the places where upward mobility is lowest. More broadly, the factors that lead to highly productive labor markets with high rates of job, wage, and productivity growth apparently differ from the factors that promote human capital development and result in high levels of upward income mobility across generations
. . . we find a strong positive correlation of 0.349 (s.e. 0.004) between the employment rates of the local residents in a neighborhood and the outcomes of children who grow up there. Evidently, what predicts upward mobility is not proximity to jobs, but growing up around people who have jobs.