Social Mobility Series Part 1

Last year, I read the play Raisin in the Sun and it piqued my interest in the topic of economic disparities. Highlighting practices of redlining and predatory lending during the 1950s in Chicago, this play describes how both these practices were products of systemic racial steering in real estate that prevented Black families from building wealth and accessing better infrastructure.

In 1968 redlining was ended by the Fair Housing Act, but the portrayal of unfair housing in Raisin in the Sun is still relevant today because families from previously redlined areas are still financially disadvantaged. When redlining was practiced many minority families were hard-pressed to qualify for conventional loans. As a result, they had to pay higher mortgage rates which strained families’ incomes and landed those same payments on the shoulders of the next generation. Redlined areas, “drawn by the federal Home Owners’ Loan Corp (HOLC) from 1935 to 1939 are today much more likely than other areas to comprise of lower-income, minority residents” (Source A). Many families were unable to move out of these areas because they were only being offered expensive and risky loans such as subprime loans that would lead to the 2008 event where the US housing asset bubble burst, causing many families to lose their homes. Soon after this large setback, losses for white families slowed to zero, whereas the average Black family would lose another 13% of its wealth. Redlining influenced modern-day loans that would cripple communities financially, preventing intergenerational wealth for years to come.

This made me ask questions, “Has intergenerational mobility changed over the decades?” and “Is the American Dream dead?”. Here is a graph that answers my first question:

It appears the probability for children to reach the highest level of income distribution has been flat for decades across all parent income levels. Read more about this study here. Let us see how the US compares to other countries:

According to this study, Canada is the new land of opportunity. Canada has 2X the probability of a child born to parents in the bottom quintile of income distributions reaching the top quintile. What is interesting is that “in Canada, the relationship between the income of parents and the income of children in adulthood is weaker than in the United States and the United Kingdom” (Source B).

So why does America have a lower social mobility rate compared to the rest of the world? Just like Canada, many Scandinavian countries outperform America in offering “the American dream”. The thinking behind this is that countries like Sweden have a higher average social mobility rate than America. America has greater variance in that, certain areas have remarkably high social mobility rates. Whereas other areas have extremely poor social mobility rates. If you wanted the best chance of your kids reaching the top income quintile you could live anywhere in Sweden, while in America it does matter where you live. Does this have any connection to redlined areas? Is this connected to education quality? What lowers America’s average social mobility rate? More to come in part 2 of the social mobility series.

Here are some interesting articles:

Source A: “Redlining was banned 50 years ago. It’s still hurting minorities today.” by Tracy Jan

Source B: “Social mobility is alive and well in Canada” by Charles Lammam and Hugh MacIntyre

Extras: