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The (Surprising) Key to Economic Mobility

One weird trick for escaping poverty

July 2023

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The American Dream: No matter who you are, no matter how modest your background, you still have a chance at success.

But … maybe that’s the wrong way to talk about it?

After all, it’s misleading to say you have a “chance” to succeed. It’s not random. It’s not as if the American Dream Fairy comes and visits you in the night.

Whether you get ahead in life has a lot to do with the circumstances that surround you … and the choices you make.

And in fact, researchers actually have a pretty good idea of the things that are most likely to take people from rags to riches.

And, spoiler alert: It may not be what you think.

[OPENING SEQUENCE]

What does it take to be successful in America?

The answer to that question … probably depends a lot on your background.

Yes, the U.S. is a country that prides itself on economic mobility — on the idea that where you start off in life doesn’t determine where you’re going to end up.

People born into poverty can end up fabulously wealthy. And people born into rich families … can end up doing improv on cruise ships.

But here’s the thing: Not everyone’s likelihood for success looks the same.

For proof of that, we can look to the actual statistics on economic mobility. If everyone’s prospects were identical, we’d expect just as many poor children as rich children to end up as wealthy adults. And that is … not at all what we see.

Amongst children born into the poorest 20 percent of families, as few as three percent of them end up in the top 20 percent as adults. By contrast, around 40 percent of children born into the top 20 percent … end up staying there.i

And here’s where it gets really crazy: A child born in the bottom 20 percent in Canada is nearly double as likely to end up in the top 20 percent as one born in the U.S. ii

So, close up shop, everyone, we had a good run.

Ok, so, the bad news: The country doesn’t have as much economic mobility as we’d like. But there’s good news too: which is that researchers have actually found a hack for how to get more of it.

Over the years, lots of different ideas have been proposed as the silver bullet to help the most disadvantaged Americans: spending more on anti-poverty programs, reforming the worst-performing schools, trying to reduce the number of broken families. And while all of those issues are worth debating, it turns out that the factor that’s most important in getting people out of poverty is … who they know.

You see, as much as we like to think of ourselves purely as individuals, the reality is that all of our lives are powerfully shaped by our personal networks — the people we’re connected to, whether through work, family, friends, or even informal settings like little league or your local hangouts.

In 2022, a team of researchers led by the Harvard economist Raj Chetty studied those networks to examine their effect on people’s lives. Their conclusion: The single most important factor in moving people out of poverty — more important than education, more important than family, more important than the levels of inequality in their neighborhood — was their relationships; specifically, whether they had social ties to people who aren’t living in poverty.iii

Why would that matter? Because of a counterintuitive way that our social networks work.

Relationships in poor communities tend to be dominated by what sociologists call “strong ties”iv — which is just a fancy way of saying people we spend a lot of time with and know really well. But many of the most important relationships for economic advancement are “weak tiesv”: the wider world of people we don’t know very well, like acquaintances or friends of a friend.

Think about it: If you’re middle class or above, you or someone you know has probably gotten a better job at some point because someone knew a guy who knew a guy who needed a guy to do a thing. In poor neighborhoods … that doesn’t happen as often.

And there’s evidence to show just how much of a difference your social circle can make. In the 1990s, a research study in five major American cities took poor families and moved them into neighborhoods with lower levels of poverty. The results: The children who moved ended up being 16 percent more likely to go to college — and ended up with incomes more than 30 percent higher — than those who didn’t move.vi

All of which is great news, but there’s still a problem here. The kind of relationships that would help people move out of poverty … don’t happen very often. It turns out that most Americans’ social circles are heavily class-based. The more money you have, the more money your friends and acquaintances tend to have.vii

You can see this in terms of where people’s friendships come from. The poorer you are, for instance, the more likely your friends are to be people from your neighborhood; while the wealthier you are, the more likely your friends are to be people from college.viii

And the more likely they are to be named Chauncey and have been there on a polo scholarship. The research doesn’t say that part, but we’re going with our gut on this one.

All of which means that, yes, the key to social mobility is for disadvantaged people to get out of their bubbles — but it also means that wealthy people have to get out of their bubbles too. Raj Chetty’s research finds that social settings that draw people from all different backgrounds together — places like religious institutions, for example — are the places most likely to create these friendships across class lines.ix

Which … sounds pretty appealing doesn’t it? By just getting to know people who aren’t like us, we may actually be creating a better country. So, maybe we should all be looking for more opportunities to connect. It doesn’t matter whether it’s a bowling league or a book club.

Just please, for the love of God, don’t let it be an improv group.

Sources

  1. The Wealth of Relations: Expanding Opportunity by Strengthening Families, Communities, and Civil Society — U.S. Congress Joint Economic Committee
  2. "Improving Opportunities for Economic Mobility: New Evidence and Policy Lessons" (Raj Chetty) — Federal Reserve Bank of St. Louis
  3. "Social Capital and Economic Mobility" (Raj Chetty, et al.) — Opportunity Insights
  4. "The Strength of Weak Ties" (Mark S. Granovetter) — American Journal of Sociology
  5. A Team of MIT, Harvard and Stanford Scientists Finds “Weaker Ties” Are More Beneficial for Job Seekers on LinkedIn — MIT Sloan School of Management
  6. "The Effects of Exposure to Better Neighborhoods on Children: New Evidence From the Moving to Opportunity Experiment" (Raj Chetty, Nathaniel Hendren, Lawrence F. Katz) — National Bureau of Economic Research
  7. "Social Capital and Economic Mobility" (Raj Chetty, et al.) — Opportunity Insights
  8. "Seven Key Takeaways From Chetty’s New Research on Friendship and Economic Mobility" (Richard V. Reeves, Coura Fall) — Brookings Institution
  9. "Social Capital and Economic Mobility" (Raj Chetty, et al.) — Opportunity Insights

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