Economic Mobility

Economic Mobility

Economic Mobility is the ability to rise up the income ladder, either in one’s own lifetime or across generations. This is a fundamental principle of the American Dream, and it’s also a key metric in assessing the strength of an economy and the fairness of society. Research shows that upward mobility has slowed in recent years, and it’s particularly low for people from poor families. Whether measured relative to parents or peers, income, education, housing, job quality, or other indicators, we need more opportunities for individuals and families to move up the economic ladder—to achieve their potential and share in the prosperity of our communities.

At the Federal Reserve, we’re working to improve data and develop new tools that help us measure economic mobility and identify the factors that support or inhibit it. This work is vital for ensuring that our policies and programs are helping everyone, not just some.

Measuring economic mobility requires access to high-quality longitudinal data that follow households over time, tracking their income, health, and many other important outcomes. But such data are often unavailable at the neighborhood, county, state, or city level. To address this challenge, we’re collaborating with other organizations to develop new ways of measuring mobility that focus on the dynamic movement of households within and between income quintiles—rather than their average position at any given point in time. These new approaches will enable us to examine the effect of policy interventions on mobility at various points in the life cycle, allowing us to understand what is and isn’t working.

The guiding principles on which we base our research and partnerships include:

1. Opportunity matters, but so do the conditions that create it.

The ability to move up the income ladder, both in a person’s own lifetime and across generations, is essential for fighting poverty, reducing inequality, and boosting growth. But the ability to do so depends on the quality of opportunities available—conditions that are highly dependent on government policies.

2. Unequal starting points lead to unequal outcomes.

We need to understand the many barriers that prevent people from reaching their full potential, including the inequalities that shape early-life opportunities. This includes the high cost of living in many neighborhoods, which can make it difficult for families to afford essential services like affordable child care and safe housing. It also includes the way that schools treat low-income students, and financial institutions target them with predatory products.

3. Policies that support mobility.

Increasing economic mobility requires the right mix of public investments, which should be targeted to improve the educational and employment outcomes of low-income children and adults. In addition, we need to invest in measures that ensure that our workforce is skilled and inclusive, so that everyone has a chance to participate in and benefit from America’s prosperity. To this end, we’re partnering with other organizations to develop and implement promising ideas that will expand opportunities for Americans. This includes investing in new learning platforms like WorkRise, and supporting research and data tools that will help educators and community leaders identify the most effective strategies to improve opportunity for their communities.