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Aerial view of of a residential neighborhood in Hawthorne, in Los Angeles, CA

SALT LAKE CITY — Libraries, community centers, parks, houses of worship and other neighborhood gathering places can unlock opportunities for children to achieve the American Dream.

That's what experts told a joint congressional committee Tuesday in Washington, asserting that rebuilding declining communities to foster social connections is key to closing the widening gap of economic inequality in America today.

"The message is simple: neighborhoods matter," said Nathaniel Hendren, an economics professor at Harvard University. "Where we grew up shapes our outcomes in adulthood. If we can improve the neighborhood environments for children, especially for those who are most disadvantaged among us, we can increase upward mobility in the United States."

Hendren was among four panelists who fielded questions from the Joint Economic Committee that convened for the first time this year to begin the policy-making phase of its "Social Capital Project."

The project, spearheaded by committee Chairman Sen. Mike Lee, R-Utah, is a multi-year initiative investigating the nature, quality and importance of Americans’ relationships, what sociologists commonly call “associational life.”

Lee told committee members that while personal economic wealth is essential to overcoming problems associated with poverty, the opportunities to tap into economic growth largely depend on the social capital available to people through family, friends, neighbors, coworkers and others in the community.

"And so the goal of the (committee) is now to craft policies rooted in social capital — policies that will expand opportunity for all Americans by strengthening families, communities and civil society," he said.

Preventing collapse

Hendren said one measure of economic opportunity we describe as the "American Dream" is the ability to go from "rags to riches." But in the U.S., only 7.5 percent of children whose parents are in the bottom fifth of the income distribution grow up to reach the top fifth of the income distribution.

"The U.S. as a whole has lower rates of social mobility than nearly every developed country," he said.

There are pockets of ideal social mobility in the U.S., Hendren said, citing Provo, Utah, where his research discovered children from low-income families grow up to earn $66,000 on average at age 35. In contrast, low income children who grow up in parts of inner Baltimore grow up to earn, on average, only $16,000 in adulthood.

Heather Tuttle

But Hendren, co-director of the data research nonprofit Opportunity Insights at Havard, also documented that the economic disparities can happen within the same community. In midtown Manhattan, children in neighboring tracts will earn $28,000 and $45,000, depending on which side of 3rd Avenue they grew up on.

"Our results suggest that the outcomes we see today of people in adulthood have their roots in the neighborhood environments in which we grew up," Hendren said. "Every year a child spends growing up in a neighborhood with higher rates of upward mobility increases their incomes in adulthood."

Dr. Patrick Sharkey, a sociology professor at New York University, said government policies offering incentives to reversing a 50-year trend of families, businesses and social institutions fleeing economically hard-hit communities could address the disparities that Hendren's research revealed.

"The most effective way to build stronger communities is to invest in core public institutions like schools and libraries, and public amenities like parks and playgrounds, that bring people together in shared spaces," he said.

Panelists added that nonprofit organizations, religious groups, business improvement districts, health care clinics and other institutions provide the crucial social networks and services that enable communities to absorb inevitable economic downturns and not collapse.

"These types of investments, which are taken for granted in most communities across the country have been absent, typically in low income communities of color," Sharkey said. "So we need to make sure that every community across the country has these basic investments that provide the foundation for community life."

Poverty is expensive

The need for core community institutions wouldn't be a top-down government response to social and economic ills, Sharkey explained.

He cited the American Enterprise Institute’s 2018 Survey on Community and Society that found when a national sample of respondents was asked what makes a community successful, the two top responses were “good local schools” and “having libraries and community centers nearby."

Ryan Streeter, director of Domestic Policy Studies at the American Enterprise Institute, said these types of institutions provide both the formal and informal connections that provide a wide range of social benefits that go beyond a paycheck.

"Consistent with other research, we found that people who know their neighbors, cooperate with them to solve community problems, and are involved in nonprofit and other community organizations are less lonely, happier with the communities in which they live, and happier with their own lives," Streeter said in his written testimony to the committee.

José A. Quiñonez, an immigrant who founded the Mission Asset Fund in San Francisco, said these social connections are central to the human condition and that economic circumstances are not the only source of stress on social capital.

" Being poor in America is expensive, particularly for people living outside of the financial mainstream. "
José A. Quiñonez, an immigrant who founded the Mission Asset Fund in San Francisco

"Our current political climate actually deteriorates our social capital within very specific groups of individuals," he said in response to a wide-ranging question from Rep. Jaime Herrera Beutler, R-Wash., on how to define social capital. "And so, we need to acknowledge the broader sense of what the capital is and then try not to put up policies that could break up families in that process."

Quiñonez, who later said immigration reform is essential to resolving income inequality in America, said Latino immigrants have leveraged their relationships with family and friends to gain access to financial services they are denied because of their income or immigration status.

"Being poor in America is expensive, particularly for people living outside of the financial mainstream," he said.

Quiñonez said Latinos practice a time-honored tradition of pooling their money together to provide loans to members based on their "word and trust."

"We built our Lending Circles Program on this tradition. We formalized loans by having participants sign promissory notes, which (Mission Asset Fund) then services and reports to credit bureaus," he said.

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"Since launching the program in 2008, we have made 11,223 loans to help participants build credit — in fact, they see an average score increase of 168 points, opening a world of possibilities for them in the credit market. And the repayment rate is 99.3 percent—an unheard-of rate in the microlending world."

Quiñonez received a McArthur Fellowship in 2016 for his innovative work in financial services and his lending model has been replicated by 53 nonprofit providers in 17 states and the District of Columbia.