Ensuring the American Dream

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A defining feature of the American Dream is upward mobility—the ability of all children to have a chance at economic success, no matter their background.
Children’s chances of earning more than their parents have declined in recent decades: "Whereas 90 percent of children born in 1940 grew up to earn more than their parents, only half of today’s young adults earn more than their parents did at the same age."
The Opportunity Atlas is the launch point for analysis: an interactive data set using census and tax records to measure upward mobility for every neighborhood in the United States.
The key lesson: target policy interventions during childhood. Childhood matters because (1) children’s environment growing up profoundly shapes their adult outcomes, and (2) policies that directly expand investment in children—especially low-income children—are often the most cost-effective way to reduce intergenerational inequality.

Analysis of the life trajectories of more than 5 million children whose families moved while they were growing up.
Main finding: children who moved to more upwardly mobile neighborhoods tended to have better outcomes as adults—neighborhoods have substantial causal effects on a child’s outcome as an adult.
Geographic variation: some neighborhoods produce high upward mobility for low-income children, while others produce persistent poverty for comparable children.
Specific neighborhood comparisons:
- Brownsville, Brooklyn: income in adulthood for low-income children depended significantly on which side of Dumont Avenue they grew up.
- Van Dyke Houses north of Dumont Avenue versus Nehemiah Houses just south of Dumont: moving earlier yields larger gains.
Timing effects:
- Children who make a move at age two are predicted to have larger adult incomes relative to remaining in lower-opportunity neighborhoods.
- Improvements in environment matter into adolescence and beyond; moving to a better neighborhood at 15 instead of 20 is still quite valuable.
- It is only after age 23 that there are no longer observable effects on income from a move to a higher-opportunity neighborhood.
Experimental evidence from families randomly assigned to move from high- to low-poverty neighborhoods shows similar patterns.

Predicted adult incomes in the Brownsville example:
- Children who move at age two to Nehemiah Houses: predicted to earn roughly $25,000 a year as adults.
- Children who remained in the Van Dyke Houses: predicted to earn $17,000 a year, on average.
Sample size underlying neighborhood-move analysis: more than 5 million children.
Policy experiment (Creating Moves to Opportunity, CMTO, 2018, Seattle Metropolitan Area):
- 53 percent of the families receiving assistance moved to higher-opportunity neighborhoods.
- 15 percent of families with no help found housing in high-upward-mobility neighborhoods.
- Estimated lifetime earnings effect: children who move at birth to a high-opportunity neighborhood as part of the CMTO program and stay there until adulthood will have lifetime earnings that are $200,000 higher than if they remained in a lower-opportunity neighborhood.

Study of 133 policies implemented over the past 50 years.
Policies compared using a standardized metric: the marginal value of public funds (MVPF) = ratio of the benefit to recipients relative to net cost to the government (including long-term budget effects such as reduced social expenditures or increased tax revenue).
Policies divided into 12 programmatic categories; plotted average MVPF against average age of beneficiaries.
Main result (Chart 4 summary):
- Investments in children have historically yielded the highest MVPFs.
- High-MVPF examples include expanded health insurance for children, investments in preschool and K–12 education, and policies to increase college attendance.
- Three category averages lie along the top of Chart 4 and are assigned an MVPF of infinity—these policies end up paying for themselves, saving taxpayers money in the long run.
- Example magnitude: policies that expanded health care insurance coverage for children, on average yielded $1.80 for every $1.00 in up-front spending.
Pattern similarity: high returns from improving conditions throughout childhood align with the timing results from neighborhood-move analysis.

Observed behavior: many low-income families, including voucher recipients, tend to concentrate in neighborhoods with low levels of upward mobility despite housing choice vouchers that subsidize rental costs—suggesting limited effect of vouchers on residential integration and opportunity expansion.
Creating Moves to Opportunity (CMTO) program (2018, Seattle Metropolitan Area) design:
- Provided a randomly selected group of voucher recipients with services: housing search assistance, connections to landlords, and financial support.
- Result: substantially higher take-up of moves to higher-opportunity neighborhoods among assisted families (53 percent) versus unassisted (15 percent).
Interpretation: barriers (as opposed to preferences) currently limit low-income families’ ability to secure housing in high-opportunity neighborhoods; reducing such barriers can increase opportunity for children in low-income families.

Target programs during childhood to increase upward economic mobility.
Prioritize public investments that expand opportunities for children, as they tend to yield high MVPFs and can pay for themselves over time.
Use data-driven approaches (e.g., Opportunity Atlas) to identify geographic disparities and tailor policies to local conditions.
Reduce barriers to mobility for low-income families (for example, provide housing search assistance, landlord connections, and financial support) to enable moves to higher-opportunity neighborhoods.
Consider scaling interventions that demonstrate both large social returns and favorable fiscal impacts (including policies with MVPF = infinity or MVPF > 1.00).

Raj Chetty and Nathaniel Hendren; F&D Magazine article "Ensuring the American Dream," June 2022.

Ensuring the American Dream
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