Is Location Everything?

Both GOP nominee Donald Trump and Democratic candidate Hillary Clinton have, in their own way, acknowledged that Americans' financial success or failure depends at least in part on where they live.

During the third presidential debate at the University of Nevada, Las Vegas, Trump said America's inner cities are "a disaster" and that residents, who he insinuated were mostly African-Americans and Latinos, "have no education. They have no jobs."

"I will do more for African-Americans and Latinos than she can ever do in 10 lifetimes," he said.

Clinton, meanwhile, has proposed expanding credit access and opening up mentoring and training programs to "small-business owners in underserved communities across the country" to help foster "an economy that works for everyone."

Research shows that geographic location plays a significant role in an individual's ability to lock down a well-paying job for which he or she is qualified. This is supported by the fact that labor markets in cities and major metro areas have fared far better than in rural communities. There are simply more jobs in metro areas. If Americans don't have access to well-paying jobs and are lower income, they are likely to remain lower income. And, importantly, children growing up in that household also may lack upward mobility when they grow up.

But even within the same metropolitan region, the neighborhood or community in which one lives is a primary factor in an American's financial well-being. Sarah Sattelmeyer, an officer with The Pew Charitable Trusts' family financial security and mobility project, published a recent research note highlighting the ways in which neighborhood wealth "can influence economic opportunity."

Sattelmeyer's research suggests communities aren't necessarily divided along economic lines. She notes that there are "sizable numbers of high- and middle-income families" living in "high-poverty areas" and that policy makers looking to improve conditions in high-poverty areas should focus "more broadly" on solutions that aren't exclusively focused on individuals' levels of income.

U.S. News spoke with Sattelmeyer to hear more about her research and to what extent location weighs on Americans' finances. Excerpts:

Broadly, how does where an individual lives shape his or her finances?

When we talk about looking at neighborhoods, communities, metro areas, states – they matter for Americans' financial security. Location can really play a role in determining the opportunities available to households.

The financial stability of residents in low-poverty neighborhoods tends to be greater than individuals in high-poverty neighborhoods. High-poverty areas are much more likely to have unstable economic situations, earnings that are equal to or lower than expenses, difficulty meeting basic financial obligations such as mortgages, rent or bills.

But metro areas with distinct pockets of concentrated wealth and concentrated poverty – which you can think of as a host of higher-income families living in one location or a host of lower-income families living in another location – tend to have lower economic mobility than a place where the wealthy and poor are more integrated.

When you talk about financial stability and economic mobility, what are you referring to? What is Pew's research looking at?

So we think about the health and status of the American dream, which is what we call economic mobility. It's Americans' ability over a lifetime and across generations to move up the income ladder and to be doing better than their parents did.

And one driver of economic mobility is the status of Americans' balance sheets, or kitchen table issues like income and wealth. Upward economic mobility and financial security, or having a healthy balance sheet, often go hand in hand.

So what does a typical household in a low-poverty area or a high-poverty area look like? Have you seen trends develop?

Residents of these communities are not homogenous in terms of income, and I think this is a really important point. Sizable numbers of high- and middle-income families live in high-poverty areas, and even more income variation is evident in lower poverty areas. Most residents of high-poverty neighborhoods are in the bottom tier of the income distribution. But almost a quarter are in the middle, and about 1 in 10 at the top of the income distribution are residents of high-poverty neighborhoods.

But do you see any demographic trends – either in terms of race or with single-parent households?

We do see that high-poverty neighborhoods have the highest share of households headed by single people, both with and without children. And while the percentage of residents with college experience is similar across neighborhoods, the share of residents with a college degree is significantly higher in areas with low-poverty.

And as the concentration of poverty decreases across neighborhoods, so does racial diversity. Three-quarters of residents in low-poverty neighborhoods are white, compared to just one-third in high-poverty communities.

Pew's research has touched specifically on where children are raised and how that can influence financial incomes later in life. Can you describe some of what you've found along those lines?

We do see that growing up in a high-poverty community strongly increases children's chances of being downwardly mobile – or ending up on a lower rung of the economic ladder than their parents were. Although only a small percentage of white children live in neighborhoods of high disadvantage, many black children do. And this is a pattern that really hasn't changed over the last generation. And the statistic I like to emphasize is that disparity accounts for a greater portion of the black-white downward mobility gap than the combined effects of parental education, occupation, labor force participation and a range of other family characteristics.

But I don't want to focus too much on a doom and gloom note. Black children whose neighborhood poverty rates declined had a greater economic success in adulthood than their peers who continued to live in communities where poverty rates were stable or increased. We see that as a positive thing.

But patterns that emerge in childhood can carry over into adulthood. Data shows that those raised at the bottom are likely to remain there, and those raised at the top are likely to remain there.

What sorts of policies can address this mobility disparity? What can fix this?

Our program doesn't have specific policy recommendations. The goal is to build a fact base on family balance sheets that can inform policy. But we really do think there are important lessons here. Families are vulnerable across multiple areas of their balance sheets, so programs do need to be targeted to where families are geographically and where they are financially – how Americans are doing and how they're feeling.

Policy should be focused more broadly on savings, on wealth and on debt [instead of just income]. We conducted a survey in 2014 that demonstrated that 60 percent of households had experienced a financial shock in the last year. Many families can't even replace one month of income or come up with the $2,000 that is the cost of the typical household's most expensive shock. This is something that impacts families across the distribution – across income levels, across races.

So we really need policies that help Americans across their balance sheet but also help build and maintain savings. That's really important.

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