Back in the 90s, the federal government ran a bold experiment, giving people vouchers to move out of high-poverty neighborhoods into low-poverty ones. They wanted to test if housing policy could be hope – whether an address change alone could improve jobs, earnings and education.The answer to that seems obvious. But it did not at all turn out as they expected.Years later, when new researchers went back to the data on this experiment, they stumbled on something big. Something that is changing housing policy across the country today.Today's episode was originally hosted by Karen Duffin, produced by Aviva DeKornfeld, and edited by Bryant Urstadt. The update was hosted by Amanda Aronczyk, produced by Sean Saldana and fact checked by Sierra Juarez. Our supervising executive producer is Alex Goldmark.Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: What questions do you have about the economy?
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Here's the episode.
This is Planet Money from NPR.
Five years ago, we did an episode about the American dream. What does it take to climb up that economic ladder? And how real is that ladder anyway? Well, since then, there's been kind of an explosion in answers to those questions, led by work from Raj Chetty and his team based at a Harvard. They've got some new work out just recently.
So here's our original episode, and then we'll talk with Raj Chetty about the latest insight into the American dream from 2024. Here is Karen Duffin back in 2019.
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Chapter 2: What was the original experiment about the American dream?
Once upon a time, in a cubicle not so far away, sat a government bureaucrat in his government-issued chair preparing for a very big meeting. It was 1994, and Mark Schroeder was an economist at HUD, the Department of Housing and Urban Development, and his team in D.C. had just flown in local public housing authorities from five major cities.
Baltimore, Boston, Chicago, Los Angeles, and New York.
The staff gathers in a basement conference room. It's about 30 people. These are people who run what's now known as the Section 8 Voucher Program, which is a voucher that subsidizes rent for low-income families. It's like a monthly payment to a landlord. Families can wait years on waiting lists just to get one.
Everyone settles into their chairs, you know, sipping their government-brewed coffee, and the meeting starts. They learn that they are about to join a test program. Small in the scheme of HUD overall, but a huge change. They're going to start handing out a new kind of voucher to a small group of their tenants. And then HUD is going to run an experiment on them.
Hasn't been an experiment quite like this ever before.
With the old vouchers, people could, at least in theory, move anywhere they wanted. But people who get this new voucher, they are required to use it to move to what HUD calls low-poverty neighborhoods. So just a nicer neighborhood. This is sort of a radical change for HUD.
A big part of the program had always been unlimited choice of neighborhood.
Unlimited in theory, at least. But what the majority of tenants have chosen was to use the vouchers to stay in high-poverty neighborhoods for a lot of complicated reasons, including discrimination. Landlords often refuse to take Section 8 tenants. So back in the basement at HUD, as this big new idea gets introduced—
I imagine people, you know, put down their government brewed coffee and start raising their hands. Like, why are we doing this? Our job is to move people into housing, period. Now HUD is basically asking them to reverse that, to move people out.
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Chapter 3: How did the Moving to Opportunity experiment work?
For them, housing was just housing, not opportunity.
I think they didn't buy into the hypothesis we were testing.
No.
I have to say that I wasn't that surprised. We're asking them to do something that people were not doing.
The vast majority of people who get vouchers do not use them to move to areas with lower poverty.
Also, Mark and his HUD crew were asking people to participate in a science experiment on themselves, asking them to be living test subjects for a theory they have not proven yet, which is an especially hard thing to take from the federal government, a government that has a history of intentionally segregating people of color into high-poverty neighborhoods. The experiment took years to set up.
But in the end, about 4,600 families were part of it. And in 1994, the moving began. We were not able to talk to the families that moved, but NPR's Morning Edition did cover the study while it was happening. Stevenskeep spoke to a mother named Shirley Hudnall who had moved with her 15-year-old son, Brian. She talked to him about some of the things that do make these kinds of moves hard.
When Brian moved out of Baltimore, he lost touch with his friends. He was expelled from junior high school for fighting with his new classmates.
I was like, have I failed or what is really happening? And the thing that I found out that it was him having to adjust, feeling that I was taking something away from him until I really sit down and talk to him that this was for his betterment.
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Chapter 4: What unexpected outcomes arose from the housing experiment?
We had been working with data at the IRS.
This is Nathan Hendren. He's an economist from Harvard. And for a few years, he and some of his research pals had been granted access to tax records at the IRS, with all kinds of privacy restrictions, of course.
Before this, I was working mainly with survey data sets, where if you had 10,000 people in your data set, you were quite excited. In this data, you're dealing with millions.
Having that much data allows them to be so much more precise.
And what that allows you to do is really kind of put a sharp knife into your analysis and really uncover patterns.
Nathan is trying to understand the impact of tax policies on upward mobility, which is economists speak for, can you achieve the American dream? Can a child go from the bottom income bracket to, over time, the top income bracket? And this is an issue that has become increasingly urgent.
Right now, the data says that you are twice as likely to be able to achieve the American dream in Europe, or at least a lot of countries in Europe. So Nathan is looking at tax records from across the country, and he does start seeing a pattern. A pattern that surprised him. That huge MTO study. It looked like it had missed something. Something enormous.
Actually, I remember the day vividly.
After the break, the experiment that changed everything has to change. Okay, so Nathan Hendren was knee-deep in all of this income tax data at the IRS. alongside his researcher pal Raj Chetty.
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Chapter 5: Did moving to a new neighborhood improve economic outcomes?
Nathan and that team will also be expanding to new cities. And yes, we do now know that housing policy can be hope. Housing policy, we are sorry we underestimated you. Thank you for your service. But for now, we can probably only call it a sliver of hope because the number of families whose lives are improving through this program is really just a tiny drop in a much bigger pool.
That is where we left the story back in 2019. And since then, the researchers have been busy. They're known as the Opportunity Insights team based at Harvard. And they have put out a steady stream of papers that have made the director, Raj Chetty, into something of an economic rock star.
Our own newsletter writer, Greg Rosalski, called him the Beyonce of economics because each new paper is like an album drop. Anyway, before we get to his latest release, we asked Raj Chetty himself to catch us up on the biggest hits or maybe findings since our original episode.
Yeah, so one of the basic findings that's emerged in this research over the past decade is that where you grow up plays an enormous role in shaping your long-term outcomes. And what we've been focused on since identifying that result is trying to figure out why. Is it because of resources available in the area, the quality of schools, the quality of jobs, public transit?
Is it about who you're interacting with, who you're influenced by? And what we found in a nutshell is that social capital, who you're connected to, and in particular, the amount of interaction between low and high income people in a given area, is one of the strongest predictors of differences in economic mobility worldwide.
His new paper called Changing Opportunity is about how the gap between rich and poor is changing over time. So is it more or less likely that a poor kid will end up rich? So to do this, they looked at data from 57 million people born between the late 1970s and early 1990s.
We find that in some places and for some subgroups, Black Americans, for example, growing up in low-income families, they now have slightly better chances of rising up than they did in the past in many places. White kids growing up in low-income families, unfortunately, have worse chances of rising up than they did in the past.
So what is leading to these disparate changes across subgroups, across areas? We looked at many different factors, and what we find is that there's one variable that strongly predicts these differences, which is the change in the share of parents who are working in these subgroups in the area in which you grew up.
So if you grow up in a community where more of the adults are working, you have more of a shot at rising up. And over time... low-income white communities saw steep drops in employment rates compared to Black communities.
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Chapter 6: What did the follow-up research reveal about housing and opportunities?
you know, engineering or connect you to an internship opportunity or give you a sense of what kind of college could be good for you, that puts you on a very different trajectory than if you're growing up in a community where all of those things have disappeared.
Raj says he was surprised at how fast some places changed in just over a decade or so. Some communities created more opportunity. Many low-income Black communities, for instance. And even if some other ones changed in the wrong direction, the idea that opportunity can change in a given place is hopeful to him.
That's what this most recent study shows titled Changing Opportunity. It's actually possible to change places and make them higher opportunity areas for the kids living there.
He says the biggest and most powerful way to find opportunity for a given kid from a poor family is still to move to opportunity. But he's making progress on figuring out what changes opportunity in a given place. So you can watch for more studies to drop on that front over the next few years. Now that we know who will be president in 2025, help us make episodes that you want to hear.
What questions do you have about a second Trump presidency? Email us at planetmoneyatnpr.org or message us on social media. We are at Planet Money. Today's episode was originally produced by Aviva de Kornfeld and edited by Bryant Urstadt. This update was produced by Sean Saldana, and it was fact-checked by Sierra Juarez. Our executive producer is Alex Goldmark. I'm Amanda Aronchik. This is NPR.
Thanks for listening.
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