Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy Edited by the Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy Federal Reserve Bank of St. Louis 1 Federal Reserve Bank Plaza St. Louis, MO 63102 Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue N.W. Washington, D.C. 20551 Editors: Alexandra Brown David Buchholz Daniel Davis Arturo Gonzalez Copyright © 2016. Federal Reserve Bank of St. Louis and the Board of Governors of the Federal Reserve System. With the exception of pages 139–174, this book may be reproduced in whole or in part provided that it is: 1. For noncommercial, personal, or educational purposes only (i.e., not for private gain), and 2. Appropriately credited to its author or authors, the Federal Reserve Bank of St. Louis, and the Board of Governors of the Federal Reserve System. The views expressed herein do not necessarily reflect the views of the Federal Reserve Bank of St. Louis or the Federal Reserve System. Printed in the United States of America 2 Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy Contents ACKNOWLEDGEMENTS 6 ABOUT COMMUNITY DEVELOPMENT AT THE FEDERAL RESERVE 7 FOREWORD The Importance of Economic Mobility 9 Janet L. Yellen INTRODUCTION Economic Mobility: An Overview 15 Ray Boshara, David Buchholz SECTION 1: PERSPECTIVES ON ECONOMIC MOBILITY Improving Opportunities for Economic Mobility: New Evidence and Policy Lessons 35 Raj Chetty The State of Economic Mobility and Why It Matters 43 Scott Winship The Subjective Meaning of Mobility and Its Implications for Policy Solutions 55 Katherine S. Newman Coming of Age in the Great Recession 65 Lael Brainard Fed Policy, Inequality, and Equality of Opportunity 77 Joseph E. Stiglitz 3 SECTION 2: ECONOMIC MOBILITY & FAMILIES A Generational Perspective on Living Standards: Where We’ve Been and Prospects for the Future 97 Neil Howe, Diana Elliott A Country Divided: The Growing Opportunity Gap in America 139 Reuben Finighan, Robert Putnam Intergenerational Correlations in Wealth 175 Fabian T. Pfeffer, Alexandra Killewald Stepping Stone or Quicksand? The Role of Consumer Debt in the U.S. Geography of Economic Mobility 203 Meta Brown, Matthew Mazewski Income Gains and Month-to-Month Income Volatility: Household Evidence from the U.S. Financial Diaries 235 Anthony Hannagan, Jonathan Morduch SECTION 3: ECONOMIC MOBILITY & COMMUNITIES Individual and Community Economic Mobility in the Great Recession Era: The Spatial Foundations of Persistent Inequality 259 Robert J. Sampson Can Schools Level the Intergenerational Playing Field? Lessons from Equal Educational Opportunity Policies 289 Rucker C. Johnson Rebound Neighborhoods in Older Industrial Cities: The Case of St. Louis 325 Todd Swanstrom, Henry S. Webber, Molly W. Metzger 4 Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy Patterns of Housing Voucher Use Revisited: Segregation and Section 8 in 2013 353 Molly W. Metzger, Danilo Pelletiere SECTION 4: ECONOMIC MOBILITY & THE ECONOMY Inequality … of Opportunity and Economic Performance 385 Gustavo A. Marrero, Juan G. Rodríguez Skills, Mobility, and Growth 421 Eric A. Hanushek, Ludger Woessmann How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility 451 Richard Freeman, Eunice Han, David Madland, Brendan V. Duke Income and Earnings Mobility in U.S. Tax Data 481 Jeff Larrimore, Jacob Mortenson, David Splinter 5 Acknowledgements This publication reflects information and perspectives first presented at a conference hosted by the Community Affairs officers of the Federal Reserve System. The conference, “Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy,” was organized by the Federal Reserve Board of Governors and the Federal Reserve Bank of St. Louis with support from the Federal Reserve Bank of Minneapolis. It was held in April 2015 in Washington, D.C. Conference Planning Committee Ray Boshara Alexandra Brown David Buchholz Daniel Davis William Emmons Joseph Firschein Allen Fishbein Shalyce Fryer Arturo Gonzalez Michael Grover Jeff Larrimore Barbara Robles Yvonne Sparks The editors would like to thank the authors for their contributions to this publication. They would also like to thank the following individuals whose input and assistance helped make this publication possible: Anna Alvarez Boyd, Andrea Brachtesende, Michael Budzinski, Barry Cynamon, Brian Ebert, Michael Eggleston, Lynn Gottschalk, Rob Grunewald, Marian Haggard, Maria Hasenstab, Heidi Kaplan, Ellen Levy, Serena Lynn, Jeanne Marra, Marysol McGee, Ellen Merry, Bryan Noeth, Andrew Pack, Ela Rausch, Daniel Ringo, Don Schlagenhauf, Maximilian Schmeiser, Jenny Schuetz, Maureen Slaten, Dick Todd, Audrey Westcott, Howard Williams, and Michael Williams. 6 Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy About Community Development at the Federal Reserve The community development (CD) function within the Federal Reserve System—consisting of individual community development departments at each of the 12 Federal Reserve Banks as well as at the Board of Governors— promotes economic growth and financial stability for lower-income communi- ties and individuals through a range of activities, including Convening stakeholders: The function brings together practitioners from financial institutions, nonprofits, governmental agencies, and the philanthropic and private sectors to collaborate on community and economic development initiatives and to identify both key challenges and promising practices to address them. Conducting and sharing research: The function provides policymakers and practitioners with objective analysis on the economic challenges facing lower-income communities and attendant policy and program implications. CD research is often posted online in articles and working papers and is shared both in small group settings and at larger-scale conferences. Identifying emerging issues: The function gathers and analyzes current information on economic and financial conditions to identify emerging issues affecting lower-income communities and individuals. For example, staff reg- ularly conduct web-based polls or surveys of individuals and organizations to help track perceptions and provide market intelligence and sentiments around a wide range of CD issues. For more information, please visit www.FedCommunities.org. 7 8 Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy