Report

American Enterprise Institute

Key Points

Intergenerational mobility has stalled for the past four decades and is below that of several other developed nations. Stagnant mobility has persisted despite periods of economic growth.

Often, people view the American dream as a national phenomenon, but recent research reveals that upward mobility is better understood as a neighborhood issue. Local reforms and social capital are critical to improving economic mobility.

We present local policies to bring together a cross section of city leadership and residents with the explicit purpose of increasing economic opportunity, including opportunity councils, in-city vouchers to help people relocate within the same metropolitan area to achieve better economic outcomes, and rebuilding social capital by democratizing and encouraging local charitable giving.

We also present targeted federal policies that would help increase economic mobility, such as specific tax and benefit reforms, vocational programs, helping the societal reintegration of the formerly incarcerated and other marginalized populations, and more supportive family policies.

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Introduction

When we were researching and writing this report, a global pandemic was the farthest thing from our minds. In a matter of weeks, the economy has been overturned by COVID-19 and the response required to combat it. Economic opportunity has become not a question of how to climb the economic ladder and achieve the American dream, but how to survive when paychecks and livelihoods are threatened. Addressing the immediate needs of mass unemployment and financial insecurity are now the priority, along with repairing the underlying cracks in the system, which the pandemic more fully revealed, such as the lack of paid leave, crisis preparedness, and medical infrastructure.



Even so, the impact and response to the pandemic underscores many of the core themes in this report. The latest research on economic opportunity and upward mobility highlights the importance of social capital for economic well-being. The power of community has become all the more poignant as we have retreated to more isolated lives required by social distancing. Oftentimes, local institutions and neighborhoods have a greater influence on economic outcomes than what is occurring at the federal level.



Certainly, we have seen dramatic differences in how various regions have responded to the crisis with life-altering implications for those who live there. Examining and experimenting with how to strengthen our connections to each other and provide greater space for localities to thrive are large parts of this report.

This report dives into the question of how to improve economic opportunity for those at the margins of society. It focuses on long-run structural issues that existed before the pandemic and will remain after it runs its course. In a separate report, Aparna Mathur and Abby McCloskey1 explored the influence of segregation, income inequality, family structure, education, work, and existing welfare systems on upward mobility and provided policy reform recommendations focused on low-wage workers. This report is an update in reviewing the new research that has emerged over the past five years and puts forward another set of policy reforms to improve economic mobility. In particular, recent research reveals economic opportunity to be highly local, connective, and relational.



This report is organized as follows. To begin, we provide an overview of the literature on economic opportunity and mobility in the United States today. People often talk about the American dream as a national phenomenon, but upward mobility is better understood as a neighborhood issue, one that varies significantly street by street, irrespective of the national policies in place. These findings have pushed us to explore how to improve opportunity at the local level. We explore what can be done to strengthen “social capital”—the strength of one’s relational connections—at the grassroots level and how to better coordinate local action and experimentation around economic opportunity.



Finally, we describe federal policy solutions targeted toward the most at-risk populations. In brief, we make the following evidence-based policy recommendations.

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Notes