Study: Children born to lower-income parents in South have less chance of getting ahead financially

Children who grow up in families with modest incomes have much smaller odds of economic success if they are raised in the South, regardless of their race, an extensive study by economists at Harvard University and University of California at Berkeley has concluded. Education, racial and economic segregation, tax policies and family structure were cited as possible reasons. Buy this photo

Children born to lower-income families in the South have far less chance of getting ahead financially than their counterparts in most parts of the United States, a ground-breaking study has found.

Even children raised in struggling areas such as Youngstown, Ohio, and Scranton, Pa., earn more as adults and have greater odds of becoming top earners than children raised anywhere in South Carolina, the research project concluded.

While the study did not identify exactly why the disparities exist, it did find one thing that clearly improved the chances for poor children in areas with low income mobility: moving somewhere else while the children were still young.

“You do absolutely see outcomes improve,” said Nathaniel Hendren, assistant professor of economics at Harvard University and one of the four principal investigators. “The earlier you do that for your kids, the more likely they are to have a better outcome.”

The economists and their research team at Harvard and the University of California-Berkeley aren’t suggesting that poor families in the South should pack up their children and move to Scranton. Children who grow up in Scranton may earn more as adults because they leave that city, which has lost nearly half of its population since its coal-mining heyday, for jobs in New York and Philadelphia.

“The way we’ve measured mobility here is the place kids grew up,” Hendren said. “If they grew up in Scranton and went to New York and did well, Scranton gets the credit.”

The research raises important questions about why financial outcomes appear to depend so much on where someone spent their childhood.

“It is disturbing — almost shocking — to look at that map (from the study) and see how much harder it is, statistically, to make it if you’re growing up in a poor household in the South,” said Donald Sparks, an economist at The Citadel.

The American dream


The researchers focused on inter-generational income mobility, which is the ability to achieve a higher place on the income spectrum than your parents. Simply put, it’s the American Dream.

Millions of income records were analyzed to see what children who were born in 1980 or 1981 were earning at age 30, and how that compared with their parents’ income while growing up. Records dealing with tax policies, family structure, educational attainment and other factors were scrutinized.

One finding: Those who grew up just about anywhere in the South had lower average incomes as adults, and much lower odds of making it into the top 20 percent of income earners, compared with those born elsewhere to families with similarly low incomes.

For example, a child born in South Carolina to a family with an income in the bottom 20 percent — that’s about $27,000 or less — had no better than a 5.4 percent chance of growing up to earn an income in the top 20 percent, which would be roughly $100,000, at age 45.

In areas including Pittsburgh, Seattle, Salt Lake City and, yes, Scranton, lower-income children had about double the chances of making it into the top fifth of income-earners.

“It was very interesting, but not surprising,” said Amanda Lawrence, director of financial stability for Trident United Way. “I think it’s something we have known anecdotally.

“In South Carolina and the rural South you just don’t have exposure to things,” she said. “I think that isolation has a lot to do with it.”

The researchers at Harvard and Berkeley found that income mobility is connected to economic and racial segregation in residential areas. They also found a correlation with the quality of K-12 schools, income inequality and measures of family structure, such as the percentage of single-parent homes.

As a region, Southern states have the nation’s highest percentage of single-parent households.

Place, not race


The South also is home to states with the largest percentages of black residents. The study found no direct connection between race and income mobility, but it did find that when people of different races and different incomes live apart from one another, income mobility drops for people of all races.

“It suggests these differences are about the place,” Hendren said. “We have inklings that the correlations with segregation suggest that some of these things could be more historically based than due to recent political policies.”

As Frank Hefner, director of the College of Charleston Office of Economic Analysis, put it, “Color of skin is not a determining factor, but everything historically associated with that is a factor.”

Hefner said the study adds an interesting geographical twist to questions about income disparities and income mobility.

“Lower levels of income have long been common in the South,” he said. “Educational disparities have also been well-documented.”

Hefner said he disagrees with the idea that your place of birth determines how you will do later in life.

“The one part of it that is very uncomfortable, on a quick read, is the deterministic aspect of it, that if you’re born in Atlanta you’re stuck,” he said.

Atlanta ranked near the bottom for income mobility among the largest metropolitan areas, and was the focus of a New York Times story that Atlanta Mayor Kasim Reed has said unfairly portrayed the city.

“Anyone with even a cursory knowledge of American history knows that the Southeast has long been challenged by entrenched intergenerational poverty largely as a legacy of our challenging past,” Reed said in an editorial published in the Huffington Post. “One of the most difficult legacies of segregation is concentrated poverty that exacerbates the challenges of income disparity: higher crime rates, underperforming schools, poor health outcomes and substandard housing options.”

Tax policies


Hendren and the three other economists did not set out to learn if growing up in the South made it harder to achieve financial success. Their goal was to learn if “tax expenditures,” such as the Earned Income Tax Credit, can increase poor kids’ chances of earning more as adults.

They did find a link between local tax rates and income mobility, but it was a link that left much of the variation between different areas unexplained. So they looked at cost of living, economic growth rates, race, education, family structure and other factors, hoping to explain the surprisingly large role played by the area where a child is raised.

The researchers concluded that local tax policies, economic and racial segregation, and “social capital and family structure,” such as participation in religion and whether children were raised by single mothers, were all strong predictors of income mobility.

Areas with a large middle class tended to have higher income mobility, but having a high concentration of wealthy residents didn’t make a big difference.

“We think the crucial next questions are, why are some areas better than others at giving opportunities for kids from poor backgrounds?” Hendren said. “We try to be very clear that this study does not have answers, as to why there is less mobility in the South than in places like Salt Lake City or San Francisco.”

And as for moving away from the South in search of better prospects, Lawrence from Trident United Way notes that that’s not a new idea.

In the period known as the Great Migration, millions of black Southerners moved to states in the North, West and Midwest between 1910 and 1970.

“I have lots of cousins that live in New York City and Chicago,” Lawrence said. “But we have to focus on the services we can offer here.”

Reach David Slade at 937-5552 or Twitter @DSladeNews.

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