Location, location, location – it’s not just a real estate cliche anymore. Turns out, where you grow up likely impacts your earning potential as an adult.
(Photo Credit: Helga’s Lobster Stew/Flickr)
A recently published study by some of the top economists in the country is being lauded as the most important research on income mobility — ever. Income mobility rates are a measurement showing what chance a child has of making more money than his or her parents. In general, the lowest mobility rates were found in the South and regions struck by the decline of the auto industry, Michigan, Ohio and Indiana. Much higher rates were found in the West and Northeast.
Doing the Math
For example, a child born in the Memphis area, with a family that has a household income in the 20th percentile nationally ($26,000), will on average rise to the 32nd percentile as an adult and only 8 percent advance to the top fifth percentile in income.
Now compare that outcome to that of a child born into same financial situation in the Salt Lake City area. Those children, on average, rise to the 45th percentile and 16 percent climb the ladder all the way to the top 20th percentile. The Salt Lake City area compares closely to some of the highest income mobility areas on the planet (e.g., Denmark, Norway), while Memphis appears to have a lower mobility rate than any rich country, the New York Times reported.
Unexpected Causes
The United States is a large country and some discrepancies in social mobility in different regions can be expected. However, a few caught the researchers by surprise. They initially believed income mobility might be linked to tax credits for the poor and higher taxes on the rich. They found a correlation, but only a slight one. Researchers also found modest to no relation between the number of colleges and tuition costs in an area and mobility rates.
The study found a connection between the rates and the number of quality elementary and high schools. Also, the amount of civic engagement, two-parent households and metropolitan areas where poorer families lived near middle-income families, all appeared to play a role in increased mobility rates.
Time to Move?
If you’re a parent in a low-mobility rate area, here’s the upshot.
Young children who moved from a low-mobility area to a high-mobility area did about as well as their peers who were born in the high-mobility area, according to the study. But teenagers who moved, on average, never fully caught up.
So if you’re looking for an excuse to make a move, this is a decent reason. And we can help. Check out our Cost of Living Calculator and get started.
Tell Us What You Think
If you lived in a low mobility rate area, would you consider moving to a higher one? We want to hear from you! Leave a comment or join the discussion on Twitter.
More from PayScale
Which Cities Are Flying High In the Q2 2013 PayScale Index?
Leave a Reply