The persistence of poverty in America and the dramatic increase of economic inequality in recent decades have garnered growing public awareness. Isn't the United States at least a land of economic opportunity, in which those who start lower on the economic ladder have a reasonable expectation that they, or their children, might advance into the middle class? Or are we at risk of being a caste society, in which multiple generations are trapped in a cycle of relative deprivation, while others inherit the security of a “gilded” lifestyle? Important recent research by social scientists has shown that intergenerational economic mobility in the United States is low compared with many other wealthy countries, and that opportunity is unevenly distributed across the country. In this presentation, Professor Sundstrom will summarize some of these findings, including what they have to say about opportunity in the Silicon Valley region. He will provide an overview of the potential causes of intergenerational persistence in income status, and the implications for community and policy strategies for increasing opportunity.

1. William A. Sundstrom
Department of Economics
Santa Clara University
wsundstrom@scu.edu
Economic opportunity or
low-income trap? Lessons
from recent research on
intergenerational mobility in
the United States

2. Thanks to…
• Step Up Silicon Valley, http://stepupsv.org/
• Bannan Institute, Ignatian Center for Jesuit Education at Santa Clara
University, https://www.scu.edu/ic/programs/bannan-institutes/

3. The poverty-reducing impacts of the nation's social safety
net have been facing the headwind of increasing
inequality of earnings and family income, and reductions
in real market income of individuals and families at the
bottom of the distribution.
This growing inequality of wages and income appears to
have large intergenerational effects as parental support
for children is directly related to family economic position
and to the education and resources of parents.
The drive for increased equality of opportunity and
upward mobility for poor children is a topic of growing
interest and includes support for more and better
preschool education as well as calls for parenting and
“two-generation” programs.
Haveman et al,
“The War on Poverty: Measurement, Trends, and Policy”

4. The poverty-reducing impacts of the nation's social safety
net have been facing the headwind of increasing inequality
of earnings and family income and reductions in real
market income of individuals and families at the bottom of
the distribution.
This growing inequality of wages and income appears to
have large intergenerational effects as parental support
for children is directly related to family economic position
and to the education and resources of parents.
The drive for increased equality of opportunity and
upward mobility for poor children is a topic of growing
interest and includes support for more and better
preschool education as well as calls for parenting and
“two-generation” programs.
Haveman et al,
“The War on Poverty: Measurement, Trends, and Policy”

5. The poverty-reducing impacts of the nation's social safety
net have been facing the headwind of increasing inequality
of earnings and family income and reductions in real
market income of individuals and families at the bottom of
the distribution.
This growing inequality of wages and income appears to
have large intergenerational effects as parental support
for children is directly related to family economic position
and to the education and resources of parents.
The drive for increased equality of opportunity and
upward mobility for poor children is a topic of growing
interest and includes support for more and better
preschool education as well as calls for parenting and
“two-generation” programs.
Haveman et al,
“The War on Poverty: Measurement, Trends, and Policy”

6. “Upward mobility for poor children”
• What have we learned?
• How much intergenerational mobility is there?
• Is there a generational poverty “trap”?
• What factors are associated with intergenerational mobility?
• What kinds of policies and interventions work to prevent
generational poverty?

7. Persistence of poverty
• Poverty remains a persistent problem in affluent America… and in
affluent Silicon Valley

8. Source: http://www.cbpp.org/research/poverty-and-inequality/chart-book-accomplishments-of-the-safety-net

9. Poverty in Santa Clara County, 2014
USA
Santa Clara
County
Everyone: Official 15% 9%
Children: Official 22% 9%

10. Poverty in Santa Clara County, 2014
USA
Santa Clara
County
Everyone: Official 15% 9%
Children: Official 22% 9%
Everyone: Supplemental 15% 17%
Children: Supplemental 17% 19%
Sources: https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-254.pdf
http://www.ppic.org/main/publication_show.asp?i=261
http://www.ppic.org/main/publication_show.asp?i=721

11. Why haven’t we solved this problem?
• Structural changes in the economy loom large
• Especially, unequal sharing of gains from economic growth since
the 1970s
• But another recurrent concern: Is poverty so persistent because
people become “trapped” in poverty?
• These concerns melded with fears that policies associated with the
War on Poverty may only have made things worse

12. Challenge of generational poverty
• Poverty status transmitted across generations
• Challenge to the “American creed” of equal opportunity
• Challenge to social science: Can we measure it? What causes it?
• Challenge to policy: breaking the vicious circle

13. Concerns have been around a long time
“These are people who lack
education and skill, who have bad
health, poor housing, low levels of
aspiration and high levels of mental
distress.…Each disability is the more
intense because it exists within a
web of disabilities. And if one
problem is solved, and the others
are left constant, there is little
gain.”
Michael Harrington
The Other America (1962)

14. Feedback loops
• Harrington and many others have linked intergenerational
persistence to a “culture of poverty”
• But there are structural sources of disadvantage too…
• Children in poverty tend to:
• Receive education of lower quantity and quality
• Have lower nutritional and health status and less access to quality health
care
• Live in more stressful, violent, and polluted places
• Develop fewer valuable social connections
• Suffer from greater segregation and racial discrimination

15. Investment in
human and
social capital
Next
generation’s
resources
Parental
resources,
neighborhood

16. On the other hand…
• Many forces counteract negative feedback loops
• Despite its shortcomings and inequities, public education provides many
skills and access to opportunities
• Kids and communities are resilient
• Luck plays a role
• So does place… and people do move around
• What is the balance of these forces for persistence across
generations (poverty trap) vs. mobility?
• A look at the evidence

17. Intergenerational income mobility in USA
• New evidence and insights from large team led by Raj Chetty at
Stanford
• http://www.equality-of-opportunity.org/
• Using tax records to link people across generations and track their
incomes… Big data!
• How does your income as an adult depend on the income of your
parents when they were raising you?

18. Intergenerational mobility by income rank
• Thought experiment: Start with a kid who is 15 years old in 2000
• Determine her family’s pre-tax annual income: Where do they rank
in the national income distribution (percentile)?
• Family in the middle: about $60,000
• Family at rank 10th/100: $15,000
• At rank 90th/100: $145,000
• Now track that same kid to age 30 in 2015. Where does she rank?

27. 3040506070
0 20 40 60 80 100
Parent Income Rank
1971-74 1975-78 1979-82
71-74 Slope = 0.299
(0.009)
75-78 Slope = 0.291
(0.007)
79-82 Slope = 0.313
(0.008)
Child Income Rank vs. Parent Income Rank by Birth CohortMeanChildIncomeRank

28. Implication for generational poverty
• What percentage of kids raised below the poverty line will end up in
poverty as adults?
• They don’t answer this, but using their table, we can estimate it
• Glass half empty interpretation: about a quarter (27%) will be poor
as adults.
• Glass half full interpretation: Despite adverse economic conditions,
about three-quarters do “escape” poverty.

29. Opportunity and place
• On average, people who grow up poor do escape poverty
• But this average masks a lot of variation across individuals and
places
• Source for maps: http://www.equality-of-opportunity.org/assets/documents/mobility_geo.pdf

30. The Geography of Intergenerational Mobility in the United States
Predicted Income Rank at Age 26 for Children with Parents at 25th Percentile

31. Corr. with baseline 𝑦25 = 0.98 (unweighted), 0.86 (pop-weighted)
Adjusted for local cost of living

32. Upwardly mobile places have…
• Less segregation by income and race
• Lower levels of income inequality
• Better schools
• Lower rates of violent crime
• More social capital
• Larger share of two-parent households

33. Generational poverty?
• Nationally, most people who grow up poor are not caught in an
intergenerational “poverty trap”
• But there are places where it is much more likely to happen:
• Segregated urban areas, esp. in the “Rust Belt”
• Areas of the South and Southwest with large concentrations of people of
color

34. Preventing generational poverty
• What can be done to reverse generational poverty where it occurs,
and prevent it elsewhere?
• No one-size-fits-all policy solutions: different families in different
places face different challenges
• Still, we actually know a lot about policies and interventions that
work for many

35. Investment in
human and
social capital
Next
generation’s
resources
Parental
resources,
neighborhood

36. Investment in
human and
social capital
Next
generation’s
resources
Parental
resources,
neighborhood

37. Income and safety net policies
• Income support
• EITC
• Making work pay: jobs, training, minimum wage
• The safety net
• SNAP, Medicaid, housing assistance, etc.

38. Income and safety net policies
• Does just giving families more resources help the kids long-run?
• Growing body of evidence says yes
• Effects of EITC, food stamps, on educational achievement, health, and
income
• Even temporary help important
• In other words, one can address “root causes” by treating
“symptoms”

39. Strengthening communities
• Importance of place suggests these may be important, but research
on long-run effects lacking…
• Neighborhood economic development
• Environmental justice
• Public safety
• Reducing discrimination
• Mitigating impact of mass incarceration

40. Investment in
human and
social capital
Next
generation’s
resources
Parental
resources,
neighborhood

41. Investing in children
• Education and early childhood development
• Return to human capital – both quantity and quality – larger than
ever…
• … but educational inequities are large and may be growing:
income-achievement gap has widened

42. Investing in children
• When do we get the most bang for our buck?
• Earlier investments should be more effective
• Young brains are more “plastic”
• Learning dynamics: skills beget skills
Sources: See https://heckmanequation.org/

43. Early childhood interventions: the evidence
• Paradox: Many studies find
modest short-run impacts on
cognitive skills and outcomes, but
these often fade out within a few
years
• But a number of studies have
found large positive long-run
impacts of high-quality early child
development interventions in
terms of incomes, crime, etc.
• Perry Preschool Project: 1960s
• Carolina Abecedarian: 1970s
• Head Start
• Now a widely accepted policy
prescription

44. Summing up
• Poverty is not destiny
• We know strategies that work
• We know more strategies that we expect will work… but the
evidence is not in
• We should strive to:
• Protect and expand income transfers and the safety net
• Invest more in disadvantaged kids
• Mobilize politically for positive change
• Experiment and learn!

45. Thank you, and keep up the good work!