August 9, 2022

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Growing up with rich friends can help a child escape poverty. It’s a phenomenon known as ‘economic connectedness.’

Want a more economically equal society? Start with your inner circle — or your child’s.

For people with a lower socioeconomic status, having friends across class lines “is among the strongest predictors of upward income mobility identified to date,” according to a new and expansive research project led by researchers and collaborators at the Harvard University-based nonprofit Opportunity Insights, which studies barriers to economic opportunities. 

Poorer kids who grow up in communities where more of these kinds of friendships exist, for example, can even expect 20% higher income as adults, according to a pair of papers the researchers published in the peer-reviewed journal Nature on Monday.

“Many have argued that the strength of an individual’s social network and community — their social capital — may have an important effect on outcomes ranging from health to education to earnings,” Raj Chetty, a Harvard University economist and one of the studies’ authors, said in a statement. “But measuring social capital has proven to be difficult, with most work to date having to rely on small surveys or indirect proxies, limiting our understanding of what social capital really is and why it matters.”

Here’s how the research project’s principal authors — including Chetty and Matthew O. Jackson of Stanford University and the Santa Fe Institute, as well as New York University finance professors Johannes Stroebel and Theresa Kuchler — figured out the solution to analyzing a person’s social network.

The researchers relied on privacy-protected data from 72.2 million Facebook
META,
-2.03%
users, encompassing 21 billion friendships and 84% of the U.S. population between the ages of 25 and 44 years old, according to the research. Socioeconomic status was based on a combination of things like the median household income in an individual’s ZIP code, an individual’s phone model, and the college they attended.

Then, the researchers measured three kinds of “social capital” by ZIP code: connectedness, including across classes; cohesiveness, or “the degree to which friendship networks are clustered into cliques and whether friendships tend to be supported by mutual friends”; and civic engagement. 

Disconnection between classes can be caused by people of different incomes attending different high schools, but it’s just as much based on ‘friending bias,’ or high-income people building friendships with other high-income peers.

In the studies, cross-class friendships were termed “economic connectedness” — deemed good for upward income mobility and kids’ chances of rising out of poverty. The researchers said that even when controlling for other predictors of economic mobility — racial segregation, poverty rates, school quality, job availability and so on — economic connectedness is a driver of people’s opportunity to climb the economic ladder. 

Prior research has shown that connections to well-educated, wealthy people can “be valuable for transferring information, shaping aspirations and providing mentorship or job referrals,” the study authors note.

The increase in future earnings from low-income kids making friends with high-income kids, for example, is “equivalent to the difference in average outcomes between a child who grows up in a family that makes $47,000 a year instead of $27,000 a year,” the authors said in a summary of their research.

The chances for “connectedness,” however, can vary widely depending on where a person lives. Generally, economic connectedness is lowest in the Southeast, the Southwest, and some industrial communities in the Midwest, but highest in the rural Midwest and parts of the Northeast, according to the research.

Disconnection between classes can be caused by people of different incomes attending different high schools, but it’s just as much based on “friending bias,” or high-income people building friendships with other high-income peers, the researchers found in a second study. Both stem from “institutional and policy choices,” the researchers said in their summary — zoning laws, college admissions policies, and the presence of Greek life, among other factors.

“There have been extensive policy efforts on the segregation dimension, such as zoning and affordable housing policies aimed at integrating neighborhoods and college admissions reforms to boost diversity on campuses,” the researchers said. “Such interventions to increase integration can increase cross-class interaction substantially and are likely to be very valuable.”

“However,” they continued, “even if all schools, neighborhoods, and other groups were perfectly integrated by socioeconomic status, half of the social disconnection between low- and high-income people would persist because of friending bias within groups.”

In acknowledgements, the researchers noted that the work was funded by the Bill & Melinda Gates Foundation, the Overdeck Family Foundation, Harvard University and the National Science Foundation, while Opportunity Insights receives funding from sponsors including the Chan Zuckerberg Initiative, owned by Facebook founder Mark Zuckerberg and his wife, Priscilla Chan.

That funding was not used in the research, and the Chan Zuckerberg Initiative is separate from Meta, the owner of Facebook, whose data was used in the research. Meta employees, however, were listed as study authors, though Meta did not influence the findings.

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