May 10, 2012

Economic Mobility Better in Northeast, Worse in South

Pew research looks at Americans in their prime earning years

New York: If you can make it there, you've got a good shot at upward mobility. New York: If you can make it there, you've got a good shot at upward mobility.

Location, location, location. That old real estate mantra is also the key factor if you want to move up the economic ladder. If you live in the Northeast, you’re more likely to enjoy higher upward and lower downward mobility than the nation as a whole, Pew’s Economic Mobility Project said Wednesday.

Residents of Southern states, on the other hand, face consistently lower upward and higher downward mobility.

These observations were among the findings of the Pew project’s Economic Mobility of the States, a new online interactive tool.

“When it comes to achieving the American dream, it matters where you live,” Erin Currier, project manager of Pew’s Economic Mobility Project, said in a statement. “Understanding that mobility rates differ by state is the first step toward helping policy makers pinpoint what enhances their residents’ mobility.” 

The Pew research evaluated economic mobility in three ways: absolute mobility, measuring residents’ average earnings growth over time; and upward and downward relative mobility, measuring people’s rank on the ladder relative to their peers.

The study defined relative peer groups using the national earnings distribution, including all people in the nation, and using the regional earnings distribution, including only people in the same geographic region.

The key findings of the study used the national earnings distribution and aggregate results from all three mobility measures to identify those states where economic mobility differs from the national average on at least two measures.

  • Eight states, primarily on the Eastern seaboard, have consistently higher upward and lower downward mobility compared with the nation as a whole. Maryland, New Jersey and New York have better economic mobility than the national average on all three measures investigated, while Connecticut, Massachusetts, Pennsylvania, Michigan and Utah have better mobility on two measures.
  • Nine Southern states have consistently lower upward and higher downward mobility compared with the nation as a whole. Louisiana, Oklahoma and South Carolina have worse economic mobility than the national average on all three measures investigated; Alabama, Florida, Kentucky, Mississippi, North Carolina and Texas have worse mobility on two measures.
  • Geographic mobility—whether people born in a particular state stayed there or moved elsewhere—does not drive state differences in economic mobility. States have similar rates of economic mobility regardless of whether Americans were grouped by their birth states or the states they were living in at the time of the survey.

The research focused on Americans born between 1943 and 1958, with the most recent data coming from 2007. The study investigated their mobility prospects during their prime working years, the spans between ages 35 and 39 and 45 and 49. Data were drawn from the Survey of Income and Program Participation and the Social Security Administration.

Interestingly, the findings show little relationship with other recent research focusing on one path to upward mobility: starting a small business. 

In a study by the Small Business & Entrepreneurship Council that focused on the states with the best and worst tax incentives for small businesses, New Jersey and New York ranked third and fourth worst respectively, while Southern states were well-represented. A study by Thumbtack.com, a site that connects small business providers with clients, found that businesses run by political conservatives, a group with a stronger foothold in the South than the Northeast, were 17% healthier than those run by liberals.

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