Salt Lakers have better chance of moving up economic ladder than others, study says

Published: Monday, July 22 2013 8:25 p.m. MDT

Salt Lake City is among areas where those born into families who make $30,000 per year or less — the bottom fifth of income earners — have an 11.5 percent chance of making it into the top fifth — those who make $100,000 or more per year.

Jeffrey D. Allred, Deseret News

Enlarge photo»

SALT LAKE CITY — The ability to move up in life may depend on where you live.

A study released Monday by researchers at Harvard and the University of California, Berkeley, indicates that low-income people in specific geographic regions in the United States have a better chance at moving up the economic ladder than others.

Salt Lake City is among areas where those born into families who make $30,000 per year or less — the bottom fifth of income earners — have an 11.5 percent chance of making it into the top fifth — those who make $100,000 or more per year.

Vernal scored a percentage of 27.3 percent, the best area in the state.

Boston and New York were similar to Salt Lake City at almost 10 percent and fared better than areas in the South. There, chances for upward mobility are lower, with a 2.9 percent chance for those in the Memphis area, which includes portions of Mississpppi and Tennessee, and 4.0 percent for those in Atlanta.

The Great Plains area performed the best, with chances for upward mobility at 34.8 percent in Gettysburg, S.D., and 33.1 percent for children who grow up in the area of Williston, N.D.

"This is really a significant piece of research," said Pam Perlich, senior research economist in the Bureau of Economic and Business Research at the University of Utah.

The impact of tax policy on economic movement is controversial and would take time to full comprehend because there are "a lot of different layers and a lot of complexity."

However, there were some areas that researchers found were present in many of the mobile communities. Researchers found that five factors seemed to be associated with upward economic mobility:

Little income disparity in an area

Lower amounts of economic and racial division

Quality K-12 education, which includes good test scores and low rates of high school dropouts

Social and community involvement, including religious participation

The presence of strong families, for instance, more two-parent families

According to Perlich, these correlated areas make sense for mobility.

"The bigger your network of relationships, the better the opportunities for your life," she said.

Access to education, other ideas and the chance to have relationships with those who have different experiences are vital to moving up economically.

"Something bigger than your little tiny pod of your household," Perlich said.

As far as the correlated areas in the study, Utah is doing well with half of them, she said.

Utah's culture promotes two-parent homes, Perlich said. Utah had the highest percentage of two-parent households in the United States, with at least 61 percent, according to Census Bureau data between 2000 and 2010.

Utah culture also encourages civic and religious involvement and has a financial "safety net" of multi-generational families.

On the downside, from what Perlich has seen, educational funding is not on par with other areas in the nation. Utah also has a highly segregated economic environment.

"We could do better," she said.

The study's authors set out to test how certain tax policies, such at the Earned Income Tax Credit, mortgage interest breaks and local tax rates, impact the financial mobility of someone living in that area.

To measure economic mobility, researchers gathered millions of household income records for unidentified 30-year-olds in the United States, and their parents' earnings between 1996 and 2000.

They found "significant correlation" between the tax rates and mobility, according to the executive summary of the study, but little correlation between the Earned Income Tax Credit and mobility.

While the tax programs have some impact on mobility, it did not explain everything, according to Nathan Hendricks, one of the study's authors. They found "variation that we had no idea existed."

"That was just so surprising to us and from what we can tell, it's been surprising to other people as well," he said.

The first step was to identify which areas are doing well and which were not. The next, he said, is to understand what components account for those differences.

"There are differences and there are places that are good at helping people rise out of their present circumstance," he said, but research has yet to determine the specific patterns for success.

For instance, a child who grew up in Salt Lake whose family made less than $30,000 per year has an 11.5 percent chance of making $100,000 or more, whereas in Charlotte, N.C., they have a 4.3 percent chance.

Even though Utah is doing well compared to other areas in the nation, 11.5 percent is still not great, Perlich said. "It's not zero. I guess that's good news."

Although nothing has been proven about what causes some regions to be fruitful for economic opportunities and others not, the study did reveal one trend, Perlich said: income inequality.

"We know that the context is that we have incredible inequality of wealth and income in our country," Perlich said. "That's a given."

A lot of social safety net policies have disappeared with or before the recession, including benefits and high paying jobs, Perlich said.

This study set out to see how tax benefits "stem the tide" that has risen with these lost opportunities.

"It's really a very incredible piece of work that they've done here in processing a huge and complex data set," Perlich said, but minus the details of why, she said, it is difficult to come to any definite conclusions.

Nic Dunn with the Utah Department of Workforce Services found the study's results to be validating.

"Often at DWS we work on a micro level — person to person helping connect you know John Doe with a job opportunity. And then we see stories like this come out and we see, essentially, we're seeing a good return on our investment."

The Department of Workforce Services works to help not only people, but families, Dunn said. The department also reaches out to the different age demographics in Utah, offering youth and traditional job fairs to help citizens "chart a path so they're not spinning their wheels."

It also works to connect individuals with education to help their economic situation.

"What we do is a small piece of the puzzle that helps Utah succeed on the economic stage," Dunn said.

The data and research are available at equal-of-opportunity.org.

Email: wevans@deseretnews.com

Twitter: whitevs7

Get The Deseret News Everywhere

Subscribe

Mobile

RSS