financial empowerment, what is economic mobility

What is Economic Mobility?

What Is Economic Mobility?

Economic mobility describes how someone’s economic well-being changes over time. Most often, economic mobility looks at how someone’s income changes over their lifetime. When someone’s income improves over their life, that person is considered upwardly mobile. This means their economic situation is getting better over the course of their life. By contrast, when someone’s income stays flat or decreases over their life, that person is considered downwardly mobile. 

Economic mobility, therefore, describes the opportunity available to one individual. However, economic mobility is often more useful when scaled to summarize the overall opportunity in a neighborhood, city, or state. For example, due to historical policy decisions, some neighborhoods provide a higher rate of upward mobility. Considering this, some families may use measures of economic mobility to decide where to live. Alternatively, lawmakers may decide on different policies and programs to improve mobility in a neighborhood, city, or state.

Economic mobility can also refer to the changes in economic outcomes for groups of people, or generations over time. For example, since the 1940s, fewer children in each generation are earning as much as their parents’ generation. Additionally, certain places provide greater economic mobility than others. For example, low-income children growing up in Denver’s Washington Park neighborhood, on average, grow up to have an income of approximately $40,000. By contrast, in Denver’s Elyria-Swansea neighborhood, low-income children on average grow up to earn incomes in the mid $20,000s.

In considering our work, the Bell Policy Center is interested in trends in upward mobility. We ask questions like, who is most likely to achieve upward mobility and how has this changed over time? How does it vary for different groups or for different areas of the state?  How does Colorado compare to other states and to the nation as a whole in terms of economic mobility? What policies and systems are affecting economic mobility in Colorado, for better or for worse?

How Is It Measured?

Because it shows us economic status over time, there are two elements that make up a measure of economic mobility: time and an economic indicator. Most often, income is the easiest economic indicator to use. However, there are many elements that feed into economic well-being, including education, health, homeownership, wealth, and other indirect measures of economic status.

A few ways we can look at mobility include:

  • Change in indicator over time. We might look at the change in an individual economic indicator — for example, one individual’s income over time. These income changes could be averaged for groups of people to show how a certain group’s economic mobility is. If those people are from the same neighborhood but of different races, we could average the overall change in income and compare economic mobility for people by race, but who were born in the same geographic location. If there are significant gaps in economic mobility for two groups of people from the same neighborhood and with similar household income at birth then we would know that something besides neighborhood factors are leading to gaps in economic mobility. In this hypothetical, if the groups of people differ only in terms of race/ethnicity, we could infer that systemic racism is causing significant gaps in economic mobility. To see if this is true, we could see if there are racially-driven gaps in other measures of economic mobility to help home in on the root cause of economic mobility gaps. 
  • Change across generations. Another way to measure trends in economic mobility is to see if an individual earns more money than their parents. This allows us to measure economic mobility across generations. Because wealth building traditionally occurs across generations, a fair society would create more economic mobility for each generation. 
  • Change across groups or identities. Any of these indicators, mobility compared to parents or peers, income, education level, homeownership, and so on, can be grouped at the neighborhood, county, city, or state level. This can be useful because often it is hard to find data that track people’s income over time. When these data are available it is often at a significant time lag. This means measures of income for economic mobility measurements are always slightly outdated, out of necessity. The best available current data tracks the mobility outcomes of people who were children in the 1980s and 1990s and are now adults. This is so our measure of income growth represents real observed outcomes. This contrasts with common statistical methods that predict outcomes based on a number of different factors. Some measures of economic mobility build on both observed and predicted outcomes. 
  • Indirect indicators. However, the consequence of this is we don’t know the economic mobility of people who are currently children. This is where indirect measures can help us make estimates about the current conditions of economic opportunity. As we know, educational attainment is strongly related to someone’s income. So, it can be easier to measure which neighborhoods or cities are allowing for people to pursue postsecondary education. While not directly measuring income changes over time, educational attainment in different neighborhoods helps illustrate which neighborhoods are providing more opportunity for upward mobility. This is especially useful when we control for different variables, such as race, ethnicity, average income, and other indicators of mobility.

Because the goal of measuring economic mobility is to help ensure society is working as fairly as possible, these indirect and direct measures (direct measures like income and indirect measures like graduation rates, incarceration rates, homeownership rates, etc.) can help identify places where policies can create more opportunity. This notion of fairness is also why we care about mobility for similar groups of people where one small difference (whether it is race, geography, or gender), leads to big gaps in outcomes.

How Does Colorado Stack Up?

Despite a strong economy, upward mobility in Colorado is average compared to other states in the country. Since our economy is one of the strongest economies nationally, we would expect to have better mobility outcomes for Coloradans. The fact this growth isn’t translating to some of the best economic mobility in the nation suggests there are better and more strategic ways we can structure our systems to improve economic opportunity.

This reality becomes more concerning when we account for some of the unique issues facing Colorado’s indirect measures of economic mobility. Education funding for both K-12 and postsecondary education is staggeringly low compared to other states. Graduation and postsecondary enrollment gaps across different races and ethnicities are significant. Furthermore, communities of color are much more likely to experience incarceration.

Colorado’s public spending decisions only worsen these inequities. Existing measures of mobility reflect a time of higher public investment. That public spending hasn’t kept up with population growth and inflation suggests Coloradans today have less economic opportunity than before. For example, spending in higher and K-12 education hasn’t kept up with population growth or inflation. This has left mechanisms for upward mobility less affordable or effective as they were in the past. 

Why Does It Matter?

While an increase in income is the obvious benefit of economic mobility, upward mobility also leads to other benefits, including better physical and mental health and educational opportunity. People with greater economic mobility have more choices available to them and their families than people with low economic mobility. At the same time, existing systems in society affect economic mobility. Improving mobility is therefore critical to improving the quality of life available to people.

Economic mobility is a useful measure to show how likely someone is to achieve the American Dream. No one can control their economic conditions at birth; however, a fair society gives everyone equal opportunity to improve their economic conditions. Looking at economic mobility measures tells us to what extent our systems — government, education, workforce and more — are supporting opportunity or creating barriers to it. Therefore, this measure can help guide lawmakers’ decisions to improve economic mobility.

How Do We Achieve Economic Mobility in Colorado?

Economic mobility will be a reality when every child born has equal odds of reaching a middle class life. This means equity gaps in education, incarceration, homeownership, and jobs and wages will disappear. 

Some ways this can be achieved is by ensuring our different systems are working for Colorado families. Ensuring every child can access a quality school, graduate, and then enroll and complete a postsecondary credential relevant to the workforce demand is critical to maximizing earning potential in work. Working families need to be able to afford basic needs, including child care and health care, without going into debt. Incarceration can be dramatically reduced. Everyone’s job could provide basic benefits, including retirement savings and paid family medical leave, so working Coloradans have a basic safety net. All of these outcomes would ensure systems are working fairly and providing as much opportunity as possible. 

The Bell Policy Center leverages the power of public policy to fight for upward economic mobility for every Coloradan. By focusing on the direct and indirect drivers of economic mobility, the Bell ensures economic opportunity is equal across the state. 

The Bell fights for direct changes, such as advocating for a stronger minimum wage, empowering communities with the tools to build wealth, and building a fairer tax code. We also work on indirect drivers of economic mobility, by fighting for accessible and affordable child care, working on making postsecondary education more attainable and relevant for the future of work, ensuring the work of unpaid caregivers is valued, and by looking to build our social safety net through passing a paid family and medical leave plan and retirement savings program.

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