DATA SPOTLIGHT: Tax Credits and Building Economic Mobility for Youth
Economic Mobility in Indiana
Economic mobility is defined as the ability of an individual to improve their economic status. This is often measured by whether a person can do better economically than their parents. It is based on the odds of a child from the bottom 20% of the income bracket reaching the top 20%. In essence, it measures the attainment of the American Dream. Mobility rates are relatively low in areas with high-income inequality and racial segregation. While children in higher-income households tend to not be impacted by location, geography matters for children growing up in poverty.
Throughout Indiana and across the country, being raised in poverty significantly affects the chance of achieving the American Dream. Children raised in poverty in Indiana have a limited chance of earning a median income equal to their peers from higher-income families. For Hoosier children who grew up in poverty in urban or rural counties, they earned a median income less than children who grew up in poverty in suburban counties. Place, especially the effect of neighborhoods, has an influence on a child’s economic mobility.
Every year that a child spends in a disadvantaged neighborhood has an incrementally negative effect on their outcomes as adults, regardless of their race, income, or other demographic characteristics. Understanding wealth is important to fully comprehend economic mobility in the United States, especially the effect of wealth on economic mobility across generations.