Child poverty is one of the great challenges of developed, industrialised countries today. How can we ensure the best opportunities for poor children to grow up and be better off than their parents?
Professor of Economics at Stanford University, Ray Chetty, made a presentation in the University of Oslo Aula on the 24 October 2016. This is a summary of the presentation. Link to the full presentation below this article.
Ray Chetty himself got some academic clout, first becoming a professor at the University of California, Berkeley when he was 23 and a professor at Harvard when he was 29. He has for years been Secretary Clinton’s go-to person on social issues.
Chetty’s data is from America but especially considering the scale of the data and the similar social, cultural and racial issues facing other developed countries and Australia, his findings should be considered in the Australian context as well.
The lecture looked at data concerning the upbringing and income of 10 million Americans born 1980-82. Using advanced statistical analysis, he has looked at what is particular about the cities where children grow up to have a better life in terms of their economic and social status compared to their parents.
Black or white, Rich or Poor
The first conclusion he draws is that it does not matter to the children of wealthy parents where they grow up: they do equally well or poorly no matter where they grow up. The big differences are to be found within the group of kids who grow up with less well off parents.
When the parents have little money, it matters a great deal where the kids grow up. In the study, if they grew up in cities like Baltimore and Atlanta, they did not make any social or economic progress into adult life. These are cities with great degrees of segregation along economic and racial lines. Poor people were concentrated in some neighbourhoods and these neighbourhoods were again segregated along racial lines.
Teachers, Classes and Funding
Chetty found that schools have a profound effect on social mobility and teachers are especially important.
Chetty found that schools have a profound effect on social mobility and teachers are especially important. Not surprisingly, the poor areas also had poorly performing schools. The performance of a school was measured by test scores. How well did the students do when joining a teacher and how well did they do when leaving that teacher: how much did the teacher raise test scores.
When a student did better when leaving, he rated that teacher as a good teacher. Thus he graded the schools not by overall performance but according to how well a teacher could support their students and how many good teachers schools had.
Poor vs. rich schools
With this measure, he assessed that overwhelmingly, schools in poor areas had fewer teachers who were able to improve the performance of their students. Other important factors Chetty pointed out in regards to the schools in upwardly mobile areas, was that these schools had smaller classes and the schools had more government funding – without breaking down what the school funding was used for.
..it takes a village to raise a child
Interspersed Ethnicity and Integration
Cities and areas where the poor did better included Salt Lake City and the midwest around San Francisco. These areas have interspersed ethnicity and a great degree of integration. The poor are not found in ghettoes or in discrete geographic areas and people are not settled according to race. These areas also had smaller class sizes, better funding for schools and teachers were rated better according to student performance.
City Scale Analysis
This pattern is found again as Chetty analyses city areas and suburbs. He has quantified how poor families that moved from the Bronx to Queens in New York did much better than similar families that remained in the Bronx. These suburbs reflected the makeup of the large cities on a smaller scale in terms of segregation versus integration and school funding and teacher performance.
The children must be young
There is a qualification for this outcome: families have to move while the children are young. Families who moved with teenagers or young adults who moved later did not enjoy any difference in their social and economic outcomes.
Chetty reasons that aspirational role models might play a part in this context. When children find it reasonable and viable that they can do well, just like the other kids in the street, then that is the direction they will take. They have exposure to role models and to values that support their decision-making.
Family structure was a statistical factor in upward mobility. Two-parent families are more socially mobile than single-parent families. While recognising that statistical correlation is not an explanation, he reckons this may have to do with social capital and thus is a correlation not a causative factor in itself. What is important is the degree of social engagement, trust and feelings of social responsibility within a community, and communal meeting places.
He refers to the saying that it takes a village to raise a child. It is not the family unit in itself but the social structure around this family unit that matters.
To emphasise this point, he stated that the number of bowling alleys also correspond with upwards mobility, while just as clearly has nothing directly to do with it.
Invest in kids, invest in the future
Chetty on teacher added value
Below, I have some of Chetty’s slides with his comments that were presented at the lecture and is also on his website.
Long-Term Impacts of Teachers
A teacher’s “value-added” is defined as the average test-score gain for his or her students, adjusted for differences across classrooms in student characteristics (such as their previous scores). Is teacher value-added a good measure of teacher quality?
When a high value-added (top 5%) teacher enters a school, end-of-school-year test scores in the grade he or she teaches rise immediately…
…. and students assigned to such high value-added teachers are more likely to go to college, earn higher incomes, and less likely to be teenage mothers. On average, having such a teacher for one year raises a child’s cumulative lifetime income by $80,000 (equivalent to $14,500 in present value at age 12 with a 5% interest rate).
The earnings gains from replacing a low value-added (bottom 5%) teacher with one of average quality grow as more data are used to estimate value-added. Discounting future earnings gains to present value, the gains are $270,000 with 3 years of data. If future earnings are not discounted, cumulative earnings gains surpass $1.4 million per class.
Note: The results of this study were originally disseminated as NBER Working Paper 17699 in December 2011. The final results of this study are published in the American Economic Review as two separate papers. The first paper evaluates bias in VA estimates, while the second estimate teachers’ long-term impacts. The two final papers, as well as the original paper, are posted on this site; the STATA code corresponds to the revised manuscripts.