Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps

This paper documents sharp divergent trends in intergenerational economic mobility by race and class in the United States across the 1978 to 1992 birth cohorts, and investigates the causal mechanisms driving those changes. The core empirical facts are two: between 1978 and 1992 birth cohorts, the earnings gap between white children from high-income versus low-income families grew by approximately 28–30% (the “white class gap”), while the earnings gap between white and Black children from low-income families shrank by approximately 27–30% (the “white-Black race gap”). These twin trends — growing class gaps and shrinking race gaps — appear consistently across earnings, employment rates, educational attainment, SAT/ACT scores, incarceration, marriage, and mortality, and they hold in nearly every region of the country.

The data are drawn from de-identified federal income tax returns linked to decennial census records and the Numident database, covering 57 million children born between 1978 and 1992, with information on parental and child incomes, employment, marital status, mortality, and residential location, supplemented by ACS educational attainment and linked SAT/ACT records covering 24.8 million students. Children’s outcomes are measured primarily as household income percentile ranks at age 27.

In dollar terms, the white class gap (mean income difference between children raised at the 25th vs. 75th parental income percentile) grew from $17,720 to $20,950 in real 2023 dollars, while the white-Black race gap for low-income families fell from $20,810 to $14,910. The intergenerational rank-rank slope for white children increased from 0.23 to 0.29. The racial gap in intergenerational persistence of poverty — the probability of a child born to the bottom income quintile remaining there — shrank from 14.7 percentage points to 4.1 percentage points (a 72% reduction), driven roughly equally by improvement in Black children’s chances of escaping poverty and deterioration in low-income white children’s chances. The white class gap in early-adulthood mortality more than doubled, while the white-Black race gap in mortality fell by 77%.

The paper systematically rules out three alternative explanations. Observable family characteristics (parental education, wealth, occupation, and marital status) explain only 7% of the growing white class gap and none of the shrinking white-Black race gap. Neighborhood-level common shocks, tested by including childhood county or Census tract-by-cohort fixed effects, similarly explain only 7% of the class gap and none of the race gap. The divergent trends persist even among children raised in the same Census tract, pointing to forces that operate differentially across race and class groups within the same neighborhood.

The paper’s central finding is that changes in children’s outcomes across cohorts are strongly and positively correlated (r = 0.91 across subgroups) with changes in parental employment rates within the child’s social community, defined as families sharing the same race, class, and childhood county. Low-income white communities experienced sharp relative declines in parental employment rates; low-income Black communities experienced relative improvements. These community-level parental employment changes account for nearly all of the divergent trends.

To establish causation, the paper exploits variation in the age at which children move to counties with changing parental employment rates. Children who moved at younger ages (before age 8) to counties where parental employment was increasing experienced larger improvements in earnings than those who moved at older ages (after age 13), consistent with a causal exposure effect with greater impact for longer durations of exposure. Sibling comparisons — comparing outcomes of younger versus older siblings who moved together — confirm that the age gradient reflects causal exposure rather than family-level selection.

The social interaction mechanism is supported by two sources of variation: children’s outcomes are more strongly related to parental employment rates of their own birth cohort than adjacent cohorts (cohort specificity unlikely to be explained by resources), and outcomes are primarily driven by the employment rates of same-race, same-class community members, with cross-racial influence appearing only in counties where cross-racial interaction is greater (counties with small Black population shares or higher interracial marriage rates). The unified explanation the paper proposes is that children’s outcomes mimic those of the adults in their social communities, following Borjas (1992).

Q: What are the precise magnitudes of the growing white class gap and shrinking white-Black race gap in income percentile ranks? A: The white class gap — the difference in mean household income ranks between white children raised at the 25th versus 75th parental income percentiles — increased from 11.1 to 14.1 percentile ranks between the 1978 and 1992 birth cohorts, a 28% increase. The white-Black race gap for children from low-income families fell from 14.9 to 10.9 percentile ranks, a 27% decrease. The intergenerational rank-rank slope for white children increased from 0.23 to 0.29 (a 28% rise in persistence).

Q: How did the trends in poverty persistence versus upward mobility differ? A: The convergence in white-Black outcomes was driven almost entirely by changes in poverty persistence rather than upward mobility. The racial gap in the probability of remaining in the bottom income quintile shrank from 14.7 percentage points to 4.1 percentage points (a 72% reduction), with roughly half from Black children being less likely to remain at the bottom and half from white children being more likely to remain. By contrast, the white-Black gap in the probability of rising from the bottom quintile to the top quintile fell by only 1.9 percentage points (17%).

Q: How widespread geographically were the divergent trends? A: Outcomes declined for low-income white families in nearly every county, but the largest declines occurred in historically high-mobility areas such as the Great Plains and the coasts. For low-income Black families, outcomes improved in most areas, with the largest gains in historically low-mobility regions including the Southeast and the industrial Midwest. The correlation between county-level changes for low-income white versus low-income Black children is a positive 0.58, meaning the areas where Black families improved most tended to be areas where white families declined least, not most.

Q: Do the trends persist when using non-rank, inflation-adjusted dollar outcomes? A: Yes. The white class gap in mean household income grew from $17,720 to $20,950 in real 2023 dollars, and the white-Black race gap for low-income families narrowed from $20,810 to $14,910. The paper also reports similar patterns for individual earnings (as opposed to household income), ruling out changes in household composition as a driver.

Q: What do the pre-labor-market outcomes show? A: The divergent trends emerge before children enter the labor market. The white class gap in educational attainment grew by 20%, driven by growing gaps in four-year college completion. The white-Black race gap in educational attainment disappeared by the 1992 cohort, driven by narrowing gaps in high school graduation. The white class gap in the share of students taking the SAT/ACT increased by 12.1 percentage points between the 1980 and 1991 birth cohorts, while the white-Black race gap in SAT/ACT-taking decreased by 20.3 percentage points. The white class gap in mean SAT/ACT scores grew by 62% between the 1980 and 1997 birth cohorts among test-takers.

Q: How large is the mortality dimension of these trends? A: The white class gap in early-adulthood mortality (ages 24–27) more than doubled between the 1978 and 1992 birth cohorts, while the white-Black race gap in early-adulthood mortality decreased by 77%. These non-monetary outcomes are invariant to inflation and income measurement choices, confirming the robustness of the broader trends.

Q: How much do family-level characteristics explain? A: Controlling jointly for parental education, wealth, occupation, and marital status reduces the estimated growth in the white class gap by only 7% (from 3.37 to 3.13 percentile ranks). The same controls do not explain the shrinking white-Black race gap — the estimated reduction in the race gap actually becomes slightly larger (4.56 rather than 4.16 percentiles) after controlling for family characteristics, indicating that observable family factors work against the observed convergence.

Q: How much do neighborhood-level common shocks explain? A: Including childhood county fixed effects interacted with birth cohort explains only 7% of the growing white class gap and none of the shrinking white-Black race gap. Including Census tract fixed effects yields essentially identical results. The divergent trends persist among children growing up in the same Census tract, ruling out explanations based on differential exposure to neighborhood-level economic shocks.

Q: What is the community-level parental employment correlation, and what does it explain? A: Changes in children’s earnings, SAT/ACT scores, and educational attainment across cohorts are strongly positively correlated with changes in parental employment rates within the child’s community (same race, same class, same county), controlling for the employment status of the child’s own parents. The correlation between changes in children’s outcomes and changes in community parental employment rates across all race and class subgroups is 0.91. This single community-level factor — as proxied by parental employment rates — accounts for nearly all of the divergent trends by race and class.

Q: What is the quasi-experimental design for estimating causal effects, and what does it assume? A: The paper compares outcomes of children who moved to counties with increasing parental employment rates at younger versus older ages, across earlier versus later birth cohorts. The identification assumption is “constant selection by age”: any selection of families into moving to a given county in years when parental employment is higher may differ across cohorts, but those selection differences must not themselves vary systematically with the age at which children move. The paper treats this as a “constant selection by age” assumption standard in the neighborhood effects literature.

Q: What do the causal exposure results show? A: Children who moved before age 8 to communities where parental employment was increasing show systematically higher earnings in later birth cohorts, while children who made the same move after age 13 show little difference in earnings across cohorts. This pattern — larger effects at younger ages — is consistent with a causal exposure effect of growing up in an improving community, with effects proportional to the duration of exposure.

Q: How do sibling comparisons validate the identification assumption? A: When siblings move together to a community with increasing parental employment rates, the younger sibling — who receives more years of exposure to the higher-employment environment — earns significantly more than the older sibling. The earnings difference is proportional to the age gap between siblings. This rules out explanations based on fixed unobserved family characteristics and supports the constant-selection-by-age assumption.

Q: What evidence distinguishes social interaction mechanisms from economic resource mechanisms? A: Two sources of variation are used. First, children’s outcomes are much more strongly related to the parental employment rates of peers in their own birth cohort than peers in adjacent cohorts — a cohort-specificity that is implausible for economic resource channels (school budgets, local tax bases) which would not vary sharply across adjacent cohorts. Second, outcomes of low-income white children are driven primarily by the employment rates of low-income white parents, not by low-income Black or high-income white parents’ employment rates, and vice versa for low-income Black children — consistent with interaction patterns being stratified by race and class.

Q: What role does cross-racial interaction play? A: In counties where Black children constitute a small share of the population (making cross-racial interaction more likely), Black children’s outcomes are also related to low-income white parental employment rates. Similarly, in counties with higher interracial marriage rates (a proxy for cross-racial interaction), Black children’s outcomes are related to white parental employment rates even after controlling for racial composition. This cross-sectional variation supports the interpretation that the influence channel is social interaction rather than parallel economic shocks.

Q: How do the findings for Hispanic, Asian, and AIAN children compare? A: Changes in economic mobility for Hispanic, Asian, and AIAN children between 1978 and 1992 birth cohorts were much more modest than for white and Black children. For children from low-income families, mean household income ranks were essentially unchanged for Asian children and rose by only about 0.5 percentiles for Hispanic and AIAN children. However, the same community-level parental employment rate mechanism explains the (smaller) changes for these groups as well; the correlation between changes in children’s outcomes and changes in community parental employment rates is 0.91 across all subgroups.

Q: What is the paper’s unified theoretical account of all the divergent trends? A: The paper concludes that a parsimonious theory — that children’s outcomes mimic those of the parents in their social communities, following Borjas (1992) — explains the divergent trends by race and class. Because social interaction is stratified by race and class even within neighborhoods, changes in parental outcomes in the parent generation propagate differentially to white versus Black and high-income versus low-income children, producing growing class gaps and shrinking race gaps through the same underlying mechanism.

Q: What does the paper imply about the malleability of economic mobility disparities? A: Because the causal exposure effects of community environments on children’s outcomes can be detected within a 14-year span (1978 to 1992 birth cohorts), the paper implies that differences in economic mobility by race and class may be malleable in policy-relevant timeframes. This is despite the fact that long-standing disparities partly trace back to historical factors such as slavery, Jim Crow laws, redlining, and the Great Migration.

White class gap: The difference in mean household income ranks in adulthood for white children born to families at the 25th versus 75th percentiles of the national parental income distribution; increased from 11.1 to 14.1 percentile ranks (28%) between the 1978 and 1992 birth cohorts.

White-Black race gap: The difference in mean household income ranks in adulthood for white versus Black children born to families at the 25th percentile of the national parental income distribution; decreased from 14.9 to 10.9 percentile ranks (27%) between the 1978 and 1992 birth cohorts.

Social community: In this paper’s usage, other families who share the same race, class category, and childhood county as a given child; the unit within which community-level parental employment rates are measured and found to be predictive of children’s outcomes.

Causal exposure effect: The effect on a child’s adult outcomes of an additional year spent growing up in a community with higher parental employment rates, estimated quasi-experimentally by comparing children who moved to counties with changing parental employment rates at younger versus older ages; larger effects at younger ages imply a causal, duration-sensitive exposure channel.

Constant selection by age: The identification assumption underlying the quasi-experimental design; requires that any systematic differences in the types of families who move to a county when parental employment is high versus low do not themselves vary with the age at which children move to that county.

Intergenerational rank-rank slope: The OLS slope coefficient from regressing child income percentile rank on parental income percentile rank; for white children, increased from 0.23 in the 1978 birth cohort to 0.29 in the 1992 birth cohort, indicating greater persistence of economic status.

Cohort-specificity of community effects: The empirical pattern that children’s outcomes are more strongly related to the parental employment rates of peers in their own birth cohort than those of adjacent cohorts, used in the paper as evidence favoring social interaction over economic resource channels as the mediating mechanism.