Canadians have best chance of achieving the American dream

June 3, 2015

Want your children to achieve the American dream? Raise them in Canada. That’s the conclusion of Raj Chetty of Harvard University at a Center on Children and Families (CCF) event held at Brookings this week. He noted that the probability of a child born to parents in the bottom quintile of the income distribution reaching the top quintile as an adult is only 7.5% in the U.S. That figure reaches 13.5% for children raised in Canada.

If Canada is not an option, you could consider different regions in the U.S. San Jose offers the best chance of moving from the bottom fifth to top fifth at 12.9%; Charlotte is one of the lower scoring metropolitan areas at 4.4%. Moving short distances within regions makes a difference, too. In the Washington, DC, area, children from low-income families raised in Fairfax County experience much more upward mobility than children in raised in Dorchester County.

Chetty cites two explanations for the differences in upward mobility: heterogeneity (different people live in different places) and neighborhood effects (places have a causal effect on upward mobility). To help sort this out, he followed 5 million families who moved to different areas, taking into account the age of children at the time of the move. He found that a child moving from Chicago to Boston at age 9 will experience 54% of the gain the child would have received having been raised in Boston from birth.

He offered two recommendations: help people move to better areas, or invest in areas with low levels of opportunity. He noted that children who move to better areas when young do much better as adults, although the moves don’t have any effect on parents’ earnings. He added that the increased tax revenue from children’s higher earnings when they grow up would more than offset the cost of moving their families to better areas.

He offered three policy lessons:

  • Tackle social mobility at the local as well as national level.
  • Improve childhood environments.
  • Harness big data to measure local progress.

Chetty is concerned with moving children out of poverty, which is certainly a worthy goal. But it would be interesting to know too how locations affect movement between other income quintiles. One possibility is that higher income families in cities like Charlotte that score poorly in Chetty’s study can already avoid the worst performing schools, so moving to San Jose might not offer much advantage.

You can watch a video and download his presentation at Brookings.

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