Limited economic mobility persists in high-poverty neighborhoods across urban, rural, and suburban communities in the United States due to factors such as unaffordable quality housing, inadequate transportation options, and inaccessible workforce development opportunities. One way policymakers attempted to improve residents’ outcomes was to relocate low-income households to areas with low levels of poverty. This so-called Moving to Opportunity initiative was based on the idea that greater access to opportunities in well-funded communities would materialize increases in employment, income, and education.
Recent analysis of these programs, however, finds that moving workers and their families can disrupt social networks, making it harder to realize economic gains without robust financial support systems or human capital to aid in their transitions to new communities. This underscores the imperative for comprehensive investment in both underresourced individuals and their communities to promote economic mobility and tackle enduring income, racial, and ethnic economic disparities.
This article will demonstrate why the MTO initiative largely failed to achieve its objectives yet in the process revealed why investing in programs that boost economic mobility in and near underresourced neighborhoods show substantial promise when designed well and fully financed. But to see why these investments can boost economic mobility, it’s important to first understand the effects that neighborhoods have on a residents’ economic trajectory.
Neighborhood Characteristics Influence Education, Employment, and Earnings
Neighborhoods provide different levels of opportunity to residents based on the ease of access to essential resources such as health care, healthy food, quality education, and good jobs. The role of these and other community conditions in influencing socioeconomic outcomes is referred to as neighborhood effects. Underresourced communities, however, are often characterized by their levels of disadvantage, as quantified through metrics such as poverty rates, reliance on public assistance, and unemployment.
Characteristics of Underresourced Communities
Underresourced communities in the United States are spread across the country and are as diverse as the nation itself. Here are some key data points from a recent study:
- Residents of underresourced communities make up 14 percent of the US population but account for 31 percent of US residents living below the poverty line.
- Of those who live in underresourced communities, 69 percent live in principal cities and 31 percent live in suburbs.
- 52 percent of residents in underresourced communities are people of color despite only comprising 27 percent of all US residents.
- The most impoverished underserved communities are more likely to be located in the Midwest or Northeast, located in principal cities of 500,000 or more residents, and have a high concentration of Black residents.
The author uses the term “underresourced” for consistency and occasionally replaces associated phrases used in external literature such as “disadvantaged,” “underserved,” or “low opportunity.”
For decades, these neighborhood effects led policymakers to consider ways to move individuals out of high-poverty neighborhoods rather than invest to in them. Yet, studies find that adverse neighborhood effects can be remedied in underresourced communities through targeted investments.
Economic and sociological research highlights the profound impact of neighborhood effects on individual outcomes, influencing factors such as health, education, and earnings. A child growing up in a well-resourced neighborhood is expected to earn an adult income $17,000 more than a child with similar characteristics who grew up in an underresourced neighborhood, equating to a 37 percent boost in salary.
An individual’s labor market activity is significantly influenced by neighborhood social characteristics, especially in underresourced neighborhoods. These factors, such as local employment rates, education, public assistance, and poverty, alongside job proximity, all significantly impact individuals' employment status and annual working hours. Notably, the influence of neighborhood effects is particularly pronounced among less-educated workers and Hispanic residents. This observation holds significance as the Latinx demographic is overrepresented in underresourced communities, particularly in the West, and is expected to undergo rapid population growth across the country in the coming decades.
MTO Initiatives Require Significant Trade-Offs of Essential Resources
Location plays a pivotal role in economic mobility within the United States. In many metropolitan regions, employment opportunities have spread outwards to the suburbs in recent decades, leading to a spatial mismatch between affordable housing and job opportunities for low-wage workers. While the promise of higher wages would typically entice people to move, the rising costs of housing have recently dampened internal migration. Racial economic disparities arise due to unequal access to suburban job opportunities, with latent housing market discrimination and inadequate public transportation limiting access for those from underresourced communities.
To address these issues, the MTO experiment of the mid-1990s provided housing vouchers to low-income households in five cities, some of which could only be used to move to a low-poverty neighborhoods. Analysis of MTO programs suggests that while there were gains to mental and physical health, simply moving adults to well-resourced neighborhoods did not improve employment, earnings, or participation in social assistance programs.
Analysis of MTO participants in Baltimore may give some insight into these findings. Researchers found that relocating disrupts participants’ social networks crucial for finding jobs. Over two-thirds of these movers relied on their social networks for employment, often leveraging referrals from acquaintances from past jobs and other community venues with similar jobs titles and credentials. Consequently, relocation deprived them of the daily routines that usually brought them into contact with relevant employment opportunities.
The researchers also found that moving to a low-poverty neighborhood had no effect on their probability of using a neighbor to get a job. Disparities in human capital such as education, work experience, and mental and physical health challenges prevented movers from using social connections with new neighbors to access higher quality jobs.
In Boston, Los Angeles, and New York City, MTO participants balanced concerns about access to employment and child care in deciding where to rent. For many low-income workers, affordable and accessible public transportation is an essential service—one that one in seven participants had to sacrifice as a cost of moving to a low-poverty neighborhood. Some chose to use the housing voucher to move closer to their current workplaces to avoid the uncertainty that comes with changing jobs. One participant even leveraged the shorter commute time to work more overtime hours.
In contrast, another participant found new employment after moving, with the benefit of having family nearby who could provide child care. When they moved away, the mother faced unstable employment and financial hardship and moved in with her mother, who could provide child support. Her next job was a 70-mile commute each way, and when she finally saved enough to move closer, her daughter was left without after-school care. These findings highlight the trade-off of essential resources that low-wage workers had to balance in “moving to opportunity.”
Despite the MTO experiments’ failure to significantly change outcomes for adults, many studies found that exposure to well-resourced communities during childhood is an important determinant of children's long-term economic outcomes and results in strong positive effects on their economic mobility as adults. Moves to neighborhoods with lower levels of poverty were positively correlated with children's academic success and expected adult incomes. While regional labor market opportunities shape adult economic outcomes, children notably thrive in higher-opportunity neighborhoods.
Thus, when it comes to improving economic mobility, the focus should shift from relocating low-income households to bringing opportunities to them. By investing in essential services such as education, employment, and health in underresourced areas, both children and adults can benefit. This approach allows individuals to bolster their human capital, income, and consumption and to support their local economic ecosystem.
Local Transportation Is a Primary Driver of Employment
Transportation plays perhaps the most crucial role in employment outcomes for workers, as it marks the range of physical resources and opportunities accessible to a person. When it comes to jobs, research indicates that increased employment levels are linked to closer proximity to transit stops. Car ownership also significantly boosts individual employment probabilities, particularly for low-income workers and their families who tap public income supports such as Temporary Assistance for Needy Families, though longer commute times slightly decrease the likelihood of employment.
In large metropolitan areas, public transit access to jobs varies considerably, with cities and lower-income neighborhoods generally having better mobility in this regard. The typical metropolitan resident can reach around 30 percent of jobs in their area via transit in 90 minutes, with disparities based on skill levels and industry types. This radius includes about one-quarter of jobs in low- and middle-skill jobs, which are less prevalent than opportunities in high-skill industries that are usually concentrated in cities.
This raises concerns about the limited access for workers in growing low-income suburban communities because residents in these communities can only reach about 22 percent of metropolitan jobs in relevant industries. Regional variations are also evident, with most metro areas with the best transit coverage located in the West, with those ranked lowest congregated in the South.
In rural Mississippi, for example, a lack of public transportation compounds difficulties for residents without a car. While some have access to family’s or friends’ personal vehicles, the inconvenience and cost often outweigh the benefits. Access to a vehicle significantly correlates with employment, but more than 40 percent of adults receiving public assistance don't live in households with automobiles. Racial disparities in auto lending can contribute to inequities, with Black and Hispanic applicants facing lower approval rates and higher interest rates, despite being less likely to default compared to similarly financially situated peers. This racial bias limits their access to vehicles and, consequently, hinders employment opportunities.
Policy Implications: Invest in Local Infrastructure to Bolster Economic Mobility
Investing resources into underresourced communities is essential to eliminate the need for people to move in order to gain economic mobility. After decades of research into economic development within impoverished communities, a wealth of valuable lessons and successes have emerged. One nonprofit conducted a series of investments made in underresourced communities focused largely on improving housing supply. The study found that in neighborhoods receiving significant investment, jobs and incomes grew 9 percent more than in similar communities with limited or no investment.
The levers of local economic development outlined below are not one-size-fits-all. Successful strategies should be comprehensive andtailored to each community’s conditions, strengths, and needs. They should reflect community priorities by granting residents a meaningful role in decision-making. As value is returned to these neighborhoods, it’s important to ensure that low-income households are not displaced in the process. Having community representation and participation throughout can ensure that the benefits of investment are reaching the residents they are meant for. Here are the key action steps that recent research shows are effective:
- Preserving affordable housing is integral to ensure resident renters’ stability and can be bolstered by rental assistance programs for those facing housing instability alongside blight removal and the creation of new low- or mixed-income housing units. In communities that received the intervention, this contributed to less crime, growth in vital business districts, and improved schools and public services.
- Supporting homeownership can also contribute to local economies. This would entail addressing historical discriminatory housing practices that still affect mortgage lending and housing values for Black homeownersGrant programs covering down payments and closing costs, particularly for low-income and low-savings households of color, provide an avenue for affordable homeownership. Homeownership has been found to foster positive changes in residents’ self-reported well-being and even reduce crime rates by nearly 22 percent.
- Robust public transportation systems connecting urban and suburban communities are vital. Promoting fair lending practices can also support low-income people of color seeking to purchase personal vehicles and increase their mobility.
- Friends, family, and neighbor child care often underpins underresourced communities as a critical determinant of work for women with children. These services can be supported by child care block grants, with funds specifically designated to supporting low-income families. New job training programs, child care centers, schools, banks, and other essential services should also be affordable andeasily accessible to residents. Gains in human capital can lead to a workforce in new industries and trades, so a business and job growth strategy is essential.
- Economic development is a crucial component for improving a community and should be coupled with an emphasis on geographical access. These strategies can use mixed funding streams to bring in investors to underresourced communities, with several federal incentives for such purposes. These include tax breaks for women or minority-owned businesses, community development block grants, and the Thriving Communities Initiative. With proper incentives, even remote workers may be enticed to relocate and spend their income on goods and services that benefit the local economy.
Together, these policy levers can help ensure that low-income workers and their families living in currently underresourced communities can maintain the advantages of living and working in and nearby their own neighborhoods.
Conclusion
It is evident that neighborhood resources strongly influence long-term economic outcomes. Transportation emerges as a key determinant of work within a neighborhood, as it enables people to care for their families, attend to their health, and participate in the labor market. Research supports the notion that improving public transport access and job availability can notably enhance employment probabilities, especially for those without car access and in areas with limited job opportunities.
When these opportunities are unavailable, simply relocating individuals has the potential to disrupt employment if other essential needs are not addressed. Individuals need more opportunities close to home to develop skills and education, enabling them to afford the cost of living when moving to cities with higher returns to human capital. Improving economic mobility for residents of underresourced communities requires meaningful investing in the neighborhood, with attention to housing, education and training, and transportation.
As neighborhood effects are tied to exposure, there is never a better time than now to begin investing in underresourced communities. Such investments promise benefits for residents of all ages, with even greater returns for the next generation.