Your Income: Where you Live (and Grew Up) Matters

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In earlier blogs, I talked about the importance of where you live on your health, with multiple studies from various locations showing the strong relationship between place and health. But where you live also has far reaching implications in terms of your income opportunities. As a Globe and Mail article on inter-generational income mobility in Canada notes, “Geography is destiny”.

Dr. Miles Corak, an economist at the University of Ottawa, looked at annual income data of a sample of Canadians born between 1963 and 1970 and compared their incomes (adjusted for inflation and age) to their children. His findings show that where people grew up shapes their income potential as an adult.    In fact, Corak argues that where you grew up may affect income potential as much as family or culture. Places that act as ‘mobility springboards’ often have a variety of employment or schooling opportunities, and often (but not necessarily) correspond to urban areas. Conversely, ‘mobility traps’ – places where the income of adult children is less than their parents – often lack the opportunities to advance their income or education, and include places that are based on limited income opportunities. While the analysis shows that there is more upward income mobility in Canada than in the United States or Britain, not everyone benefits: people born in areas with low average incomes are less likely to make more income than their parents. Likewise, Canada’s indigenous population experiences less inter-generational income mobility on average.

While the analysis is based on Canadian data and experiences, the broad relationships are likely found in other countries. Why? One is the often noted poverty trap: it is harder for children living in poverty to advance out of poverty, given their more limited circumstances and opportunities. Conversely, children raised in families at the top end of the income distribution are more likely to remain in this group given connections and opportunities that high-income brings. These reflect the ‘cycle of low income’ and ‘cycle of privilege’ that is highlighted in this work. Another broad reason that we would expect these findings to apply elsewhere is the role of large cities. In the Canadian case, cities act as ‘mobility springboards’ and enable people to move up the income ladder, and is reflected in some of the work that I have done with my colleague, Mark Brown on how human capital is grown and concentrated, what explains the greater proportion of university graduates in large urban areas, and income mobility. This same effect is observed in other countries – large cities tend to propel people faster and further up the income ladder given greater opportunities in the labor market and better labor matching. For children growing up in these large cities, they can see the diversity of economic opportunities, while easier access to universities makes it easier to pursue educational opportunities.

The mobility traps that the work highlights are perhaps the most worrisome, especially given conversations on how to advance and grow the economy. Whether in the Canadian context or elsewhere, the work consequently highlights the importance of human capital, and the need to invest in it from an early age, given that education facilitates upward mobility. Post-secondary education is also important, and easier physical access promotes participation. Clearly, not every place can have (or should have, given the expense), post-secondary education opportunities. But, technology can help overcome such barriers and create educational opportunities where they had not previously existed, with high speed internet and broadband offering one way to overcome some of these barriers.

Further Reading:

Find the full paper by Miles Corak, along with interactive maps, at: https://milescorak.com/equality-of-opportunity/

Doug Sanders and Tom Cardoso. The Canadian Dream, deciphered. The Globe and Mail, 24 June 2017, p. F4. https://www.theglobeandmail.com/news/national/a-tale-of-two-canadas-where-you-grow-up-affects-your-adult-income/article35444594/

John Ibbitson. Improving Canadian’s income mobility is the next big policy challenge. The Globe and Mail, 29 June 2017. https://www.theglobeandmail.com/news/politics/improving-canadians-income-mobility-is-the-next-big-policy-challenge/article35497231/

Map Credit: Doug Sanders and Tom Cardoso. The Canadian Dream, deciphered. The Globe and Mail, 24 June 2017, p. F4.

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