Transcript: Explaining America with Raj Chetty

Dr. Raj Chetty, a very warm welcome to Washington Post Live.

DR. CHETTY: Thanks so much, Frances. It’s a pleasure to be here.

MS. STEAD SELLERS: Raj, let me start with some context. What exactly do we mean by the American Dream first, and then, secondly, what’s your understanding based on the kind of big data research that you do about where it stands now?

DR. CHETTY: So the way I think about the American Dream is the age-old idea, I think, that lies at the cornerstone of this nation, that through hard work, any child should have the chance of rising up in the income distribution relative to their parents. So my own parents were drawn to this country by that notion, like countless other immigrants, Frances, and I think many people aspire to the view that, regardless of your political background, we should have a country where no matter where you come from, what your family background is, if you work hard, you have a shot of succeeding. And so in our research group here at Harvard, Opportunity Insights, we’ve been trying to study whether that notion of the American Dream is really alive and what we can do to promote the American Dream going forward, and as a starting point, in response to your question, what we find is if you look back historically, say, at the middle of the last century, kids born in the 1940s and 1950s, the American Dream was well and alive at that point. If we look at the fraction of kids that went on to, say, earn more than their parents did, something like 90 percent of children born at that point in time went on to outdo their parents in terms of standards of living.

But if we look at what has happened over time, we see a dramatic fading of the American Dream, such that for children born in the middle of the 1980s and the 1990s who are entering the labor market today, it’s now become a coin flip, a 50-50 shot, as to whether you’re going to do better than your parents. And so that feeding of the American Dream motivates, I think, a lot of concern and motivates our focus in trying to understand how we can revive the American Dream going forward.

MS. STEAD SELLERS: That’s a pretty dramatic change, and I wonder whether it’s unique to America or elsewhere. How does upward mobility compare here to other large immigrant-receiving countries around the world?

DR. CHETTY: Yeah. So, you know, maybe somewhat surprisingly, especially given the notion of the American Dream, we find that at present, if you’re growing up, say, in a low-income family in Canada or in many European countries, Scandinavian countries, for example, you actually have a better shot of rising up in the income distribution than you do here in the U.S. And so the–you know, contrary to what you might expect, that America is the land of opportunity, the place where you have the best chance of succeeding, that no longer seems to be the case for many folks. And so I think that further underscores the importance of understanding how we can restore the American Dream.

MS. STEAD SELLERS: So clearly, you know, America remains a country that attracts many immigrants. Just look at our Southern border. But for immigrants who have a choice about which country they go to, are there any signs that there’s less appeal to America now than there used to be? Is Canada, for example, taking over?

DR. CHETTY: Yeah. You know, I think immigrants are considering many different countries. Certainly there are geographic factors, like you mentioned, the Southern border, that are going to govern why people go to certain places.

Now, to be clear, we also find in our research that there are many parts of America that still provide tremendous opportunities for rising up, and there are many sectors, for example, in the context of innovation where the U.S. remains unparalleled in terms of the opportunities that it offers. It’s just that those opportunities are not distributed as widely or uniformly as you might like them to be, and that’s why, on average, the U.S. ends up being less of a land of opportunity than it has been historically and that it might otherwise be compared to international competitors.

MS. STEAD SELLERS: But, Raj, let me step back a little bit from this, because for women and minorities, people of color, aren’t the opportunities greater now than they were, say, earlier in the 20th century when this term was coined?

DR. CHETTY: Yes. So, you know, I think if you look at how these things have evolved over time, certainly for certain subgroups, there are greater opportunities, but perhaps surprisingly, Frances, we’re finding even if you look at people of color, if you look at underrepresented minority groups, say, Black Americans, for example, we find that their chances of upward mobility even today are dramatically lower than they are for White Americans. There’s been some progress, perhaps, over the past several decades, no doubt, but the gaps relative to White Americans remain quite large.

On the gender front, certainly, you see more convergence in income than you do by race, but I don’t think there’s been as much progress as people might suspect.

MS. STEAD SELLERS: This is fascinating. So let’s drill a little bit more into some of the factors contributing to this lack of social mobility. I know this is work you’ve done. Target two or three for me.

DR. CHETTY: Yeah. So the way we answer that question, that we were able to harness the power of big data, which is really what we focus to try to study, these big questions, like what’s driving the fading of the American Dream, is by disaggregating that national picture that we just started out with by looking at different parts of the country. So using data on millions of kids linked to parents from anonymized tax returns, we’re able to look at how kids’ chances of rising up vary across neighborhoods in America. So block by block, city by city for every part of the United States, you can go to a website called the Opportunity Atlas and literally type in your address and look at how kids who grew up in your neighborhood are doing.

So using that data gives you essentially a very powerful microscope to study the determinants of economic opportunity and answer your question about what the key factors are that are driving the decline in mobility over time and, more broadly, why we have greater opportunity in some places than others. And so what we find from that is we isolate four factors. We look at a variety of different factors, but four things seem to pop out as very strong predictors of these differences in economic mobility across areas. The first is poverty rates. So if you grew up in a community that has more concentrated poverty, where you’re not mixed in with higher income folks, you tend to have lower rates of upward mobility. Second, we find that family structure is a very strong predictor of upward mobility across areas. In particular, places with more two-parent families tend to have higher levels of economic mobility. Third, we find that, as you might expect intuitively, places with better schools, both at the K-through-12 level and in terms of access to higher education, have higher levels of upward mobility. And then, finally, and perhaps more–most importantly, Frances, we find that places with greater social capital, in particular, greater degrees of connection and interaction between low- and high-income people, tend to have higher levels of upward mobility.

So why might that be? It could be that you’re more likely to get a job referral. If low-income folks are more connected to high-income folks, it could be that your aspirations change when you’re living in a community where you’re more connected to people who have, say, gone to college or pursued certain career pathways. Using very detailed data from Facebook on links between people from different socioeconomic backgrounds, we’re able to show that this last factor seems to be a particularly important predictor of economic mobility.

MS. STEAD SELLERS: So you hit right there on a question I had, which is where your data came from. You mentioned tax data but also social media. So is this a key way that you can advance an understanding? And does it also have problems? Because not everybody is on Facebook. Certain groups are more than others. Where are the possibilities and traps here?

DR. CHETTY: Yeah. So we’re, I think, in an unprecedented time in social science, and more broadly, in thinking about these questions, we all see the importance of big data in the private sector, how companies use large-scale data, including social media, to improve the products they offer. Our vision is that those same data can be very useful in tackling critical economic and social policy questions.

Now, as you know, Frances, those data are not perfect. So take the example of Facebook. Not everyone uses Facebook, but it turns out that about 85 percent of people between the ages of 25 and 45 do use Facebook in the United States. So it’s not perfect coverage, but it’s pretty close, and we’re able to do a lot of analysis comparing to other representative survey data sets to understand are we getting the right picture from the Facebook data. And it turns out, you know, one can look at these papers in detail that go into this that these data sets actually do offer a pretty representative picture and, thus, can help us advance with tremendous granularity looking at, say, the degree to which low- and high-income kids are connected to each other school by school in America, trying to understand where we need to foster more of those connections, why we have social disconnection across class lines in different schools, in different cities and so on. So I think there’s tremendous potential there, and we’re just scratching the surface.

MS. STEAD SELLERS: So, Raj, education is often seen as the great equalizer. When you gave me that list of factors, it came up third. I don’t know if those were ordered, but I think they were. That was the third. Is it the great–is it the answer to the problems of bringing people out of poverty and increasing social mobility or not? Are we overselling education?

DR. CHETTY: So I think education can be the answer, but at present, it’s not necessarily functioning as leveling the playing field and creating more social mobility. And so that’s related to the study that we just released recently on college admissions and who gets into the colleges in America that are propelling people to leadership positions to the top of the income distribution. And when you look at that data, where there, we linked admissions data from many colleges to tax records to look at who gets in, what happens to them 10 years after graduating from college and so on, what you find is that kids from high-income families are much more likely to attend top colleges, for example, Ivy League colleges, and moreover, they’re much more likely to attend even if they have the same academic qualifications at the point of application.

So to give you a concrete example, say you’ve got two kids who have an SAT score of 1500, which is at the 99th percentile of the test score distribution, if you come from a family in the top 1 percent of the income distribution, you’re about one and a half or two times more likely to get in than if you’re from a family in the middle class. And so what that does is potentially creates a society where we’re perpetuating privilege across generations, where if you come from a high-income family, you get access to institutions that in turn that are more likely to propel you to the top, which is working precisely in the opposite direction from leveling the playing field and creating more opportunity for all.

So my sense is that education, particularly higher education, has tremendous potential to create more mobility, but at present, it’s not structured in a way that’s leading to that outcome, and there are important changes that we can make in the higher education space and also in the K-through-12 education space to make education more equitable and create more opportunity for all.

MS. STEAD SELLERS: And, of course, higher performing schools are often located in wealthier neighborhoods. Talk to us about this importance of neighborhood. It’s so compelling in your data. You compare, I think, Charlotte, North Carolina, and San Jose, California. But where you grew up, which is not in your own control, seems to have a huge impact in how well you succeed later on. Is that right?

DR. CHETTY: That’s exactly right. So when we look at that disaggregated data that I was mentioning earlier, where you’re able to look at the Opportunity Atlas, kids growing up in different neighborhoods and different cities, we do a series of analyses where we look at people who move from one neighborhood to another. And what we find is if you move at an earlier age to a place that has the types of characteristics that I just described, a more mixed-income area with greater interaction across class lines, better schools, lower poverty rates, and so on, the earlier you make that move, the better you do as an adult, the more likely you are to go to college, the higher your earnings are, the longer your life expectancy on numerous dimensions. We see tremendous improvements in people’s outcomes with a dosage sort of effect. Every extra year that you spend in these better environments, the better you do in adulthood, and there are now a series of studies that have established that point, looking at millions of families that move across areas, looking at families as part of randomized experiments, some of whom got housing vouchers to move to lower poverty, better neighborhoods, and we uniformly find that neighborhood is profoundly important for all of the reasons that we’ve been touching on, Frances.

MS. STEAD SELLERS: And then just getting from these sort of–these huge issues, like where you grow up, to ones that can happen by chance, mentors–you mentioned having two parents in a family, a father at home, that kind of thing. What is the importance of a mentor, of an individual as far as you can drill down into that kind of individual kind of data?

DR. CHETTY: So our sense is that there’s a very important sociological influence here, where if you’re growing up around folks who are working folks in certain career pathways, that has a tremendous impact on what kids end up doing.

So let me return to that point I made about family structure and two-parent families. So the nuance there, which is very interesting, is that it’s not literally about whether you yourself are growing up in a family with two parents versus a single parent. It actually turns out to be that what matters is the fraction of two-parent families and the community in which you’re growing up and the area in which you’re growing up. So even if you yourself are growing up in a single-parent family, we find that if you’re growing up in a community where there are many fathers present, particularly working fathers, you tend to see better outcomes for boys in particular, rather than girls, which is consistent with growing evidence that boys are influenced by the presence of male role models.

Let me give you another example from a different domain. So we–you touched upon gender issues earlier. If we look at another outcome that leads to upward mobility and is important for economic growth, innovation. In another study, we linked patent data for the universe of patent holders in the U.S. to tax records to look at who goes on to become an inventor, and one of the things we found is, again, being around mentors and being exposed to innovation is incredibly important for whether kids themselves grow up to become inventors.

So what we find, in particular, is if a girl grows up in an area where there are a lot of female inventors, it greatly increases her chance of going into innovation herself. But if there are more men who are inventing in that same area, it has essentially no impact at all. So what that underscores is the broader point that it really makes a difference who you’re seeing, particularly if they look like you, and kids tend to follow those pathways.

MS. STEAD SELLERS: I want to ask you to step back a little bit internationally and look at these patterns you’ve been discussing in other countries. Do you expect–or suspect there are universal principles of social mobility, that the factors you’ve been picking out in the United States have the same impact in, say, New Zealand or Canada or Australia?

DR. CHETTY: Yeah, absolutely. So there are several studies building upon the work that states that replicate the same work in other developed countries, like the ones you mentioned, and also in developing countries, places like Brazil, places like India, and so on. And what you find are qualitatively similar patterns with different fault lines that matter in different societies.

So, for example, in the Indian context, caste turns out to play a role similar to what race plays in the United States, where you see divisions along those lines in terms of economic opportunity, but the same types of factors we’ve been talking about, education as a potential level or the importance of who you’re mentored by, who you’re influenced by, the importance of K-through-12 schools, other neighborhood-level factors, all of those things seem important universally. I think these are broader truths rather than something unique to the United States.

MS. STEAD SELLERS: Raj, another set of very disturbing data came very clear this year, and that is the decline in U.S. life expectancy. I think we’re at 76 now, which is a number we haven’t seen for almost two decades. Do you see this as a mirror image of what’s happening with the American Dream or some other pattern going on here in the United States?

DR. CHETTY: So we’ve also done some work looking at trends in life expectancy and looking at their connection with economic outcomes, and I think those things are very tightly connected. We find in many different contexts that greater economic mobility is also associated with better health, and so I think the same factors that are leading to declines in economic outcomes, lower levels of economic mobility, are also correlated with the deterioration of health. They’re not, one for one, the same thing, but these types of factors–social disconnection, social isolation, lack of opportunity–I think are leading to declining life expectancy on average.

And one thing I would emphasize, Frances, is that decline is not uniform, right? There’s growing inequality in life expectancy, where the rich are actually continuing to experience quite steady increases in life expectancy. It’s low-income folks in the United States who are having the sharpest reductions, and that’s what’s pulling the overall average down. So the inequality dimension here is really crucial in the context of life expectancy, just like it is in the context of opportunity more broadly.

MS. STEAD SELLERS: Historically, though, life expectancy has been tied very tightly to a country’s GDP, and now something else is happening around the world. Countries like Chile, Costa Rica, Portugal, which are not high income in the way the United States, are showing much better numbers. Is pure economics what it’s about? And I know you’re going to talk about inequality, but what else is going on here that is working to the detriment in the United States?

DR. CHETTY: Yeah. I mean, I think it’s not pure economics. It’s not literally about the money you make. I think it’s an underlying set of factors, often sociological factors, that are leading people to be disconnected, maybe make different choices in terms of health behaviors, feel more isolated. The term “depths of despair” that people talk about a lot in terms of recent increases in mortality due to things like opiates and suicides, those kinds of factors directly affect health, independent of income, but they also affect people’s economic outcomes. And so, in that sense, I think there are a common set of factors that are affecting many communities in America, and they may also be related to some of the patterns we’re seeing in other countries where we’re seeing favorable outcomes on certain dimensions, despite perhaps an overall level of GDP that’s lower than you might otherwise expect.

MS. STEAD SELLERS: So, Raj, I want to ask you more about innovation. Clearly, the United States is a hub for innovation, and actually in areas like public health, the source of some of the most innovative data, which it then fails to scale across the country or distribute widely across the country. Is this level of competition, the sort of spur for innovation, the necessary flip side of inequality? Are we–do we have this sort of turmoil here that sparks innovation but also allows inequality to continue?

DR. CHETTY: Yeah. I think there’s been a traditional view in economics that there may be a trade-off between growth and inequality or innovation and inequality that you need to let some people really succeed tremendously and reap the rewards of capitalism, and that’s what’s going to lead to growth. And that may, as a consequence, also have substantial inequality.

I think there’s some truth to the importance of market incentives, but I also think we’re at a point in the U.S. where we have so much inequality of opportunity that we’re actually losing out on innovation and growth that we could otherwise have had. And so, in particular, in the context of that data I mentioned earlier on inventors and patents, we coined a term that we call “lost Einsteins.” We estimate, using that data, that we would have four times as many inventors in America if women, underrepresented minorities, and kids from low-income families were to become inventors at the same rate as high-income White men. And so those lost Einsteins, who I think are lost because of all the factors that we’ve been discussing–they don’t have exposure to the same set of factors. They’re not mentored in the same way. They don’t have access to the same schools. They’re not attending the same colleges. They’re disconnected socially and so on. If we could bring those kids through the pipeline and address inequality on that dimension, I actually think we would have more innovation and more economic growth.

And so, in my view, there’s no fundamental trade-off between equality of opportunity and economic growth, given where we are at the moment, and this is a further reason to be very focused on this issue.

MS. STEAD SELLERS: Take that to the next step. You’re a policy institute. What are the policies you see could be pushed forward to make sure those lost Einsteins are no longer lost?

DR. CHETTY: Yeah. I mean, the way I would think about that is, you know, stepping back from the lost Einsteins, in particular, which is focused on one domain of innovation, let’s just step back and ask more broadly in the context of this conversation. What policy steps can we take to improve equality of opportunity, leading to more innovation, leading to better outcomes for everyone? And I think the way I think about it is to summarize in a nutshell what we’ve learned from the many different studies that we’re touching upon is that the roots of economic opportunity are hyper local. It’s about where you’re growing up within something like a one-mile radius around your house, and things like who you’re connected to and your childhood environment are playing a key role in your life trajectory.

So if you have that view of the world, I think you would naturally think about three different policy solutions to try to improve economic opportunity going forward. The first is to try to help people move to higher opportunity areas. If I see two miles down the road in New York City, that there are much better opportunities for kids, why don’t I just help more low-income families move to those neighborhoods? Why don’t I try to desegregate the city by class and by race and so on?

We currently spend about $45 billion per year in the U.S. on affordable housing policies that at some level intend to do exactly that but in our view are not actually that successful in achieving that goal, because despite that expenditure, families who, say, receive housing vouchers from the government, we find are still living in low-opportunity, high-poverty areas where we see in our data they’re no more likely to break out, break the cycle of poverty, and rise up in the next generation.

So one domain, I think, for intervention is trying to change affordable housing policies, changing zoning laws, basically trying to create more integration in our cities through more effective government policies, and we’ve done a series of studies that I can go into. There’s interest that shed light on how we can do that.

A second domain is recognizing that we can’t just move people around. We need to figure out how to bring opportunity to people where they currently live, and I think making strategic place-based investments to improve schools in certain areas, to create more social capital, to transform neighborhoods can be very valuable.

And then the third, which we’ve touched upon, Frances, is the role of education, higher education, in particular, trying to make our higher education system more effective in channeling kids to colleges, particularly from low- and middle-income families, that will give them pathways to upward mobility.

So those are three major areas I would focus on.

MS. STEAD SELLERS: Raj, we’ve had a number of questions from viewers, and I’d like to read you one now. It comes from Gary Izunwa. He’s writing from the United Kingdom, and Mr. Izunwa says, what effects, either positive and/or negative, do you believe the rapid proliferation of AI will have on economic and social inequality and mobility? It’s a really big question and interesting one coming from the United Kingdom.

DR. CHETTY: Yeah. So I think unfettered AI and technological progress, in general, will likely amplify inequality and amplify all the issues that we’ve been talking about. What we’ve seen historically is that as there’s been technological progress, if education keeps up with that, if you’re keeping people skills up with–to be able to compete with machines, in essence, then inequality doesn’t rise so much, because lots of people are able to get higher paying jobs. And you have a smaller pool of people competing for jobs that no longer are in as much demand because they don’t require as much skill.

And so I think unfettered, if we don’t do anything, AI is likely to amplify all of the disparities we’ve been talking about, but AI, I think, also creates tremendous potential if we harness that technology in the right way.

So take, for example, what we were talking about earlier in the context of social connections and Facebook data. At the moment, the way we’re using that data is just to study how people are essentially interacting offline, but you might think that there’s potential with modern technology to connect folks to resources in very different ways or maybe even use AI itself to help deliver education in ways that are complementary to what people are learning from each other. And I think by thinking carefully about how we intervene through policy and provide people support, perhaps taking advantage of this new technology, we can actually get the best of both worlds, both reaping the productivity benefits of AI without having exploding inequality.

MS. STEAD SELLERS: Raj, before we finish, I want to talk specifically about some of the changes in college admissions. Recently, the Supreme Court, of course, overturned affirmative action in selective admissions. What’s your response, and what kind of policy do you think can help overturn some of these issues of inequality, race-based inequality, that you have drawn our attention to powerfully today?

DR. CHETTY: So I think race and class are both incredibly important in America. They’re correlated with each other because Black Americans at present tend to have lower levels of income on average, of course, than White Americans, but race and class are distinct issues. And so I think each needs to be addressed independently.

What we’re finding in our recent work is that, in essence, perhaps inadvertently, we have a system of affirmative action for the rich, for kids from the very highest income families are more likely to get in. So I think a first step in addressing all of these issues is to try to essentially take the thumb off of the scale that’s in favor of kids from high-income families, which is going to open up more slots that can then be distributed to kids from lower income families or perhaps kids from underrepresented minority backgrounds.

Then, in light of the Supreme Court ruling, there’s a question of how one can have a more diverse class racially, admitting kids from underrepresented minority backgrounds, who may have faced more adversity, for example, in a way that complies with the law where we can’t take account of race directly, and I think there, one potential approach to think about is coming back to the measures of neighborhood disadvantage that we talked about earlier, Frances, where one could use the data, for example, from the Opportunity Atlas that I was describing, which shows us where kids have historically had better chances of succeeding versus not, and identify children who grew up in environments where it was much harder to succeed, and perhaps give them an advantage in the admissions process. That type of approach will lead to more racial diversity precisely because Black kids and Black families are more likely to be growing up in neighborhoods that are much more disadvantaged, that have lower rates of upward mobility.

So I think thinking in these data-driven ways and trying to understand the roots of these differences in mobility by race can also help us in the college admissions context.

MS. STEAD SELLERS: Raj Chetty, I’m afraid that’s all we have time for. I want to thank you so much for joining us today on Washington Post Live.

DR. CHETTY: Thanks so much, Frances. My pleasure.

MS. STEAD SELLERS: That was very insightful, and I wish we’d had time for more questions. Thank you for joining us today, everybody. As you know, you can find further programming at WashingtonPostLive.com. That’s WashingtonPostLive.com for a very exciting lineup this week and next.

I’m Frances Stead Sellers. Thank you.