Race and economic opportunity in the United States

The sources of racial disparities in income have been debated for decades. This column uses data on 20 million children and their parents to show how racial disparities persist across generations in the US. For instance, black men have much lower chances of climbing the income ladder than white men even if they grow up on the same block. In contrast, black and white women have similar rates of mobility. The column discusses how such findings can be used to reduce racial disparities going forward.

This comes from a posting at VoxEU.org on Race and economic opportunity in the United States by Raj Chetty, Nathaniel Hendren, Maggie R. Jones and Sonya R. Porter. The findings of the study are:

Finding #1: Hispanic Americans are moving up in the income distribution across generations, while Black Americans and American Indians are not.

Finding #2: The black–white income gap is entirely driven by differences in men’s, not women’s, outcomes.

Finding #3: Differences in family characteristics – parental marriage rates, education, wealth – and differences in ability explain very little of the black–white gap.

Finding #4: In 99% of neighbourhoods in the United States, black boys earn less in adulthood than white boys who grow up in families with comparable income.

Finding #5: Both black and white boys have better outcomes in low-poverty areas, but black-white gaps are bigger in such neighbourhoods.

Finding #6: Within low-poverty areas, black–white gaps are smallest in places with low levels of racial bias among whites and high rates of father presence among blacks.

Finding #7: The black–white gap is not immutable: black boys who move to better neighbourhoods as children have significantly better outcomes.

The implications of the study are given as:

Differences in rates of mobility out of and into poverty are a central driver of racial disparities in the US today. Reducing the black–white gap will require efforts that increase upward mobility for black Americans, especially black men.

Our results show that the black–white gap in upward mobility is driven primarily by environmental factors that can be changed. But, the findings also highlight the challenges one faces in addressing these environmental disparities. Black and white boys have very different outcomes even if they grow up in two-parent families with comparable incomes, education, and wealth, live on the same city block, and attend the same school. This finding suggests that many widely discussed proposals may be insufficient to narrow the black–white gap themselves, and suggest potentially new directions to consider.

For instance, policies focused on improving the economic outcomes of a single generation – such as temporary cash transfers, minimum wage increases, or universal basic income programs – can help narrow racial gaps at a given point in time. However, they are less likely to narrow racial disparities in the long run, unless they also change rates of upward mobility across generations. Policies that reduce residential segregation or enable black and white children to attend the same schools without achieving racial integration within neighbourhoods and schools would also likely leave much of the gap in place.

Initiatives whose impacts cross neighbourhood and class lines and increase upward mobility specifically for black men hold the greatest promise of narrowing the black-white gap.There are many promising examples of such efforts: mentoring programmes for black boys, efforts to reduce racial bias among whites, interventions to reduce discrimination in criminal justice, and efforts to facilitate greater interaction across racial groups. We view the development and evaluation of such efforts as a valuable path forward to reducing racial gaps in upward mobility.