Why Manhattan children earn less when they grow up

I am late to covering this excellent piece by David Leonhardt, but it is worth your attention.  The core result is this:

Low-income children who grow up in Manhattan make less money as adults than similar low-income children who grow up elsewhere…It’s just that affluent Manhattan children don’t grow up to be quite as affluent as affluent children elsewhere.

To make the case of the affluent child concrete, if the Manhattan parents earn 400k a year, the child at age 26 averages 50k a year, compared to an average of 55k for comparable non-Manhattan kids at that same age.  David considers a few hypotheses:

1. That effect is possibly diminishing as Manhattan improves, but the changes doesn’t yet show up in the data.

2. Perhaps Manhattan parents, or Manhattan itself, teach that money is not so important.  For one thing, you get interested in culture there.  Or maybe you want to become famous more than you want to become wealthy.

3. People who grew up in Manhattan are less likely to be married at a particular age.

4. Manhattan schools are less than perfect.

I would add a few hypotheses (not claims) of my own:

5. Manhattan is a selection of the most ambitious, highest-achieving individuals from elsewhere, and thus if you grow up there ambition and achievement seem to be especially forbidding prospects.  Better not to try too hard.  Recall David Hume on the “posts of honour” appearing to be filled?

6. Manhattan is a bad place, and bad things happen in bad places.

7. Manhattan families are more likely to spoil their children, create problems of moral hazard by promising or implying future support, and have less of an internal aspirational culture.

8. If you grow up there, Manhattan appears to be the center of the known universe and you are less likely to leave it in pursuit of higher earnings.  Fewer people from New Jersey feel this same way, and so they end up in the region with the highest potential earnings for them; that is sometimes but not always New York City.  (This mechanism also means Manhattan children are more likely to remain near their parents, see #7.)

9. A lot of Manhattan wealth is linked to finance and entertainment, and other superstar markets, which are maybe “less heritable” in terms of income than that small Midwestern furniture factory.

What else?

Comments

I did not realize that Manhattan had any low-income people living in it. What parts?

Ah, Harlem. Harlem is in upper Manhattan. So this study is about Harlem?

I've recently been to Manhattan, and it seemed to me there's lots of public housing there. Am I wrong?

Yes there are a lot. A lot of it can be seen clearly on Google Maps (look for the blocks with a lot of greenspace... you'd think it would be rich living in the areas with the huge lawns and parking lots but it's the poorest who get to live in such luxury) or straight from the source: https://data.cityofnewyork.us/Housing-Development/Map-of-NYCHA-Developments/i9rv-hdr5

I lived next to NYCHA developments for a couple years. Trust me, they are not living in luxury--no matter how many trees they have on the lot, those developments are hell to live in.

Being afforded luxury and ruining it is still being afforded luxury.

It lacks the 'eyes on the street' that are needed to keep order in the City. Instead they become places of shadows...

Page 2 81% of rentals are rent controlled. Wow.

http://furmancenter.org/files/publications/HVS_Rent_Stabilization_fact_sheet_FINAL_4.pdf

I've been looking at Chetty's list of all the counties in America based on income mobility for youngish people whose parents were at the national 25% percentile in income in the later 1990s vs 2011-2012. Chetty looks at people whose families moved to get some sense of nurture as a natural experiment.

Of course, how random were these moves?

The counties that look the best in Chetty's huge ranking are overwhelmingly all-white counties in the North Central States. They tend to be not very fast growing. Anybody who moved to a small town in the frigid north in the 1990s likely had some pretty good reason, such as a job skill in need there. Being a working class young person in the North Central was pretty terrible, until recently when the North Dakota energy boom drove wages way up for guys who would work outdoors in North Dakota, luring in all sorts of blue collar folks from the entire region.

The counties at the bottom of Chetty's list tend to be heavily Native American or black.

Interestingly, a lot of the counties that Chetty's latest methodology sees as the worst are fast growing ones, often ones attracting blacks from the north.

In general, they attract a lot of working class people for construction jobs and a low cost of living. For example the whitest county among the bottom 25 is Horry in South Carolina, which is part of the huge Myrtle Beach golf resort region. It offered a lot of construction jobs in the 1990s, but Myrtle Beach got crushed by 2008, so by 2011 there were no construction jobs to speak of.

So, I have a hard time taking Chetty's data seriously. His data is pushed around by current busts and bubbles way too much to draw long term conclusions.

I've looked some more through Chetty's 2015 county rankings, and they simply aren't accomplishing what he hoped they'd accomplish: tease out long term differences that make some places better for raising kids than other places. Instead, they are obviously driven by short term booms and busts, like the farm boom in Iowa and the collapse of lumber, furniture making, and home construction in North Carolina.

It's too bad because Chetty put a lot of work into this, but after two long years of publishing he doesn't have much of value yet. Paying attention to his results is more of a distraction than they are worth.

It's not impossible for him to salvage something of value from his huge project by taking a number of methodological steps, but he'll have to swallow his pride.

Perhaps living in Manhattan raises the incomes of rich people more than living in any other city does, so since some of the children who grew up in Manhattan will move away they will tend to make less than their parents did. Also, the link should be to here:
http://www.nytimes.com/2015/05/05/upshot/is-manhattan-bad-for-affluent-children.html?abt=0002&abg=1

Cost of living and average salary. Let's say you have "300k talent" - that is, you'd make an average of 300k per year across the US. In Manhattan, you make 400k. You pass along your 300k genes to your kids, you nuture them with your 300k talent, etc. They're only going to make 400k if they stay in Manhattan.

Choice. Let's say you have a range of career choices you could make - you could be a teacher in Arkansas for 40k a year or a stock broker in NYC for 400k a year. Those in Manhattan have chosen the highest end of the spectrum, but there's no guarantee their children will look at their options and choose the highest wage opportunity.

Luck. Let's say you have 200k talent, but you get a little lucky in your career and somehow get promoted to a 400k job in Manhattan. You pass along your 200k genes to your kids, you nurture them with your 200k talent, but they don't have the good fortune you had, and so they make an average of 200k.

In other words, when researchers think that they are "adjusting for parental income", they could actually be introducing errors due to parental income. That's actually a very good point more broadly. I wonder how many results have been found by improperly adjusting for "confounding" factors. Maybe they should be called pro-founding factors.

I had the same thought. If you believe that genetics is the main driver of economic success, and you acknowledge the Manhattan earnings premium, you end up with similar hypotheticals as you made.

+1. This looks like a particular pure example of regression to the mean,

Yeah, I came here to say that

> 5. Manhattan is a selection of the most ambitious, highest-achieving individuals from elsewhere, and thus if you grow up there ambition and achievement seem to be especially forbidding prospects. Better not to try too hard. Recall David Hume on the “posts of honour” appearing to be filled?

is a very odd way of spelling 'regression to the mean'.

If you made $400K/yr in Manhattan, during the incredible finance boom of 1990-2008, you didn't have "$300K talent" -- you were an utter mediocrity. I don't think most commenters realize how freely the money flowed, and how easy it was to obtain at least some of it. All you had to do was be there, starting sometime in the early 1990's.

Personal anecdata: I arrived late to the party, in 1994 just as one wave was tapering off. I spent the next 15 years working for the people who had the good sense to get hired in 1991-2 instead. And I didn't make some pitiful amount like $400K/yr. (Now I do!)

I posit that for young people from Manhattan, the demands of social competition might dwarf any potential returns on ambition and achievement within a reasonable timeframe.

i.e. being marginally more successful as a 26 year old may be far less utility enhancing than having nice abs. Alas, feminism.

You blame feminism? Wow--angry white dude in China alert.

The desire to have nice abs is much stronger in Miami than NYC. You've been away from the U.S. for a long time. Probably a good thing for all parties.

You argue like a girl. All.you left out was calling him creeeepy. Broken home/weak father?

nah, he doesn't poop enough.

Can't find the article (your link doesn't take me to it) and I don't feel like looking for it, but if you're talking about the earnings of 26 year olds then you have to take into account those in Manhattan are getting more education and probably won't reach their peak earnings until much later.

Plenty of Manhattan's 26 year olds are busy getting advanced degrees and traveling Europe on daddy's dime.

Much more reasonable to look at the wages of 36 year olds.

This, like most of Chetty's research, is an utterly incomprehensible Rorschach test that allows you to tell a story to suit whatever political agenda suits you.

Right. The simplest explanation is that Raj Chetty's 2013 analysis of his giant database suffered from massive problems, as I pointed out in the comments to Dave Leonhardt's 2013 NYT articles:

http://economix.blogs.nytimes.com/2013/07/25/the-complex-story-of-race-and-upward-mobility/

Chetty is slowly digging his way out of the hole-in-the-ground he dug himself in 2013, but the best reaction to all the counterintuitive results that Chetty has published on income mobility is that the burden of proof for rationalizing his results rests on Professor Chetty's shoulders.

The cost of living, especially housing, is supposedly very high in Manhattan. Perhaps a $400k income doesn't seem as impressive there as, say, in Texas, and does not motivate the children to pursue wealth. Add to that the social stigma applied to wealth in the education system of a liberal city. Far more important to try to stop climate change.

Hmm, actually how about a similar but simpler explanation? $400k goes less far in Manhattan than anywhere else in the country, so the parents have less disposable income to transfer to their children, either directly or indirectly through, you know, whatever. Supplementary education or whatnot.

Simple to say, but is it simple to demonstrate how supplemental income from parents would increase reported income by adult children?

I'm pretty certain it's because Income in Manhattan has lower signaling value.

#5 is surely right.

#6 is...wtf? A bad place? The center of culture, finance, and popular entertainment? Ah, Cowen, you haven't looked this much of a philistine since you praised 19th century noblemen for being the greatest artists in history.

#7 is just plain stupid. You think upper middle class suburban kids raised by Stepford wives aren't coddled?

#8 yup

#9 absolutely--I think this is the biggest thing. If this is the main driver, the failure of Manhattan kids to strike it rich is a good thing--it indicates the dynasticism of the Piketty camp may not be absolute. Yet.

Perhaps #7 should be distinguished from perception of family insurance against poverty. In a culture rich environment like Manhattan, non-pecuniary opportunity costs might be higher. Lower poverty risk and higher non-pecuniary opportunity costs might result in lower income, higher fulfillment occupations.

"a culture rich environment like Manhattan"
In other words, an island filled with expensive ethnic restaurants, big buildings with tastefully-displayed bad art, an oppressive city government, and a population obsessed with pecuniary gain is rich in culture. In many ways, Missoula, El Paso, Richmond and Ft. Pierre have more real cultural credibility than Manhattan.

9. A lot of Manhattan wealth is linked to finance and entertainment, and other superstar markets, which are maybe “less heritable” in terms of income than that small Midwestern furniture factory.

Hollywood seems riven by nepotism to me. How is that not heritable?

Don't forget the Donald Trump effect - someone who makes it in New York marries a series of dumb blond models. Their children revert to the mean. From either a genetic or a social effect.

I just saw the sci-fin movie "Ex Machina" starring a likable-looking young redheaded actor with a vaguely familiar mug: Dohmnall Gleeson. Not surprisingly, he's the son of the great Brendan Gleeson.

Is he burly

No, fortunately the NYT is allowed to described the son but not the burly father.

Re: 9, maybe Manhattan is more hit by elite overproduction effect, where selection to fill the niche becomes more affected by random factors (luck) due to the saturation of talented candidates the market can't effectively select between.

Re: more on 9, and more on luck again, personality tests on London seem to indicate that the city centre favours or creates personalities who are emotionally reactive, open, energetic and extraverted, spontaneous (rather than planned), tolerant and disagreeable. Compared to the city periphery and the country.

They're probably also quite intelligent compared to their ethnic population average.

Which makes some sense - city centres are environments for a transient population moving in to make money, or looking for a theme park for adults full of restaurants and bars and shopping, and the cultural and legal regulation there (even if or especially if there's lots) tends to reward either rule breakers or sly rule benders.

That sounds like a recipe for a tilt towards high risk, high reward.

So maybe a lot of the children of city centre types have a wealth disadvantage for this reason - for a given level of wealth on average Daddy and Mummy made their money by taking a higher level of risk than the country mice, and while their children inherit the personality trait that made them take the risk (plus regression) whether genetically or by also living in the same place, that luck goes away in the second generation.

The more the city centre rewards "casino" forms of capitalism (high risk, high reward, those who luck out can't pass their luck on to their kids), in all forms at all levels (but ultimately the source is financial, even if a norm is present in all business), the higher the tendency would get.

Having said that, we are just talking 5,000 per annum here. So perhaps the point above about Rorschach tests stands.

A) the article mentions, that about one-third of that household data efffects comes from later marriage

B) at age 26 a sizable portion of future upper income folks are still at University or other prep jobs, which provide only a small income.
I dont know the average age of fresh PhDs in the US, but in Germany this is around 30 years.

B is surely a big part of the reason.

Plus many of them are not in a hurry. They have their parents' money.

Yep, age 26 is the wrong data point to be using. Manhattan earned wealth (from Finance, etc) starts showing up when people are in their late 30s to late 50s. You would expect the children, at age 26, if they follow their parents' career trajectories, to still be investing in their futures.

Also, talking about $50K/yr vs $55k/yr is absurd if we are discussing affluent families in Manhattan. My 12 year old earns $25/hr dog-sitting.

Maybe rich people in Manhattan have kids later in life. Advanced paternal/maternal age is proven to impact offspring IQ.

Which do you think is more likely?

- That the Masters of the Universe are collective fools about their scions’ financial fates?

- Or that Professor Raj Chetty of Harvard doesn’t fully grasp how regression toward the mean affects his giant database?

The "mean" of what? What's the variable you are referring to?

As said above. Income = Expected Income + Luck. The high earners of Manhattan have had, on average, a lot of luck. Luck is random, so on average their children have none. (Note that expected income can be based on as many factors, including genetics or drive or anything else you have data for. As long as there is a random unexplained component, regression to expectation, as Francis Galton demonstrated a couple of hundred years ago, will always work.)

Thanks! I understand the concept of regression towards the mean, I was just trying to understand what variable Sailer was referring to (he seems to use the "regression to the mean" phrase pretty much everywhere, but not in a scientifically precise way.)

But correct me if I am wrong, we observe regression towards a mean only if the mean is constant, right? In other words, the probability distribution of the variable we are measuring must be known and unchanging during the course of our measurements. Is there any reason to believe that income is an unchanging phenomenon w.r.t the nature and ability of the population? Would environmental factors not affect it? Or is there a normalization factor being applied to account for environmental changes across generations?

By environment, what I meant was extraneous factors like available labor supply in the local marketplace, available capital, technological innovations that can be converted to commercial success, loss of reputation of a place that leads to outflow of capital. It seems to me that incomes in Silicon Valley have kept rising (though cost of living too, but that's a different story) for the past half century thanks to its reputation as a hub for geeks, lots of loose VC cash, and periodic technological innovations that have been translated into higher incomes for the residents. There's been no regression of incomes towards some expected mean in the Silicon Valley, has there?

So is it not possible that Manhattan has seen a reversal of fortune that has nothing to do with the nature and abilities of the people currently entering its workforce? Does that make sense or am I getting the concept wrong?

"But correct me if I am wrong, we observe regression towards a mean only if the mean is constant, right?"

Chetty is normalizing income relative to the whole country in the different time periods, so regression toward the mean is a big issue for him.

Professor Raj Chetty of Harvard has improved his analysis of regional differences in upward mobility somewhat since he originally splashed it in 2013, but it still suffers massive prima facie problems, such as Chetty declaring that meth-ridden Boone County, West Virginia is much better place for the One Percent to raise their children than Manhattan, San Francisco, or Marin Counties.

http://www.unz.com/isteve/amazing-chetty-facts-boone-county-wv-is-very-good-for-income-mobility-for-children-in-poor-families/

Four obvious problems that plague Chetty's work are:

- He hasn't figured out how to deal with regression toward the mean.

- He doesn't adjust for the huge cost of living differences

- His results get battered around by temporary bubbles and booms affecting the economy in 2011-2012

- He's worried that Hillary won't continue to use him as an advisor if he's honest about how big an impact race has on income mobility simply because blacks tend to regress toward a lower mean income than whites do.

It’s a statistical inevitability that, on average, the children of Manhattan’s One Percent — the If I Can Make It There, I Can Make It Anywhere elite — are going to regress somewhat toward a lower mean. Some of them are into organic farming in Vermont, some are ski bums in Boulder, some are writing screenplays in Silver Lake. Heck, some of them are corporate lawyers in Chicago or doctors in Denver or bond traders in New York.

They’re just not going to be quite as high income on average, relatively speaking, as the single richest group in Chetty’s database: the top 1% earners in Manhattan. It doesn’t mean these gilded youths didn’t get a lot of privileges, it’s just how the world has to work, as Francis Galton pointed out.

Conversely, while the top of the One Percent (nationally speaking) in Manhattan goes more into the stratosphere than the One Percent anywhere else, the bottom of the national one percent is probably easier to get into in Manhattan than anywhere else because salaries are higher there than elsewhere because the cost of living is higher.

For the same reason that children of very tall parents tend to be shorter than their parents. Regression to the mean.

But this is true about Manhattan across all income levels.

I read the result to be analogous to children of tall parents in Manhattan ending up shorter than children of tall parents living elsewhere. Per Mike's response to James D. Miller above though, parents of the same income in Manhattan vs. Austin may not be as alike as parents of the same height. One does not receive a cost of height adjustment when moving to Manhattan.

Last month, just before Chetty released his new, improved analysis (and he does a very clever thing in his 2015 paper involving siblings moving), I analyzed in depth why his celebrated 2013 analysis of income mobility from parents in the later 1990s to their children in 2011-2012 was so obviously flawed:

http://www.unz.com/isteve/helping-hillarys-idea-man-raj-chetty-understand-america/

Chetty's new attempt at making sense out of his massive amount of IRS data does some very nice things, but it's worth understanding how he botched his first attempt at analyzing it so badly.

Anecdotally wealthy kids from Manhattan do a lot of drugs. Probably due to some combination of easier availability, and greater cultural openness. It becomes a lot harder to shield your 14 year old from getting into coke when you live in the West Village. Hard drug habits developed early in life are probably not great for long-term earnings trajectory.

I would think they would want to earn more in order to pay for their addiction. The people I know who have done a lot of drugs early have gone on to become major distributors and pull in comparable cash to big finance, although they probably aren't going to report it on a survey.

This is a sample set of two, but:

I grew up in Manhattan in a relatively wealthy family, and I decided that I wanted a different life, because most of the people I knew seemed miserable. Now I live in a rural area and earn much less money than my parents did (but I think I am happier).

My sister followed in my parents' footsteps and went to law school. She just turned 27 and is about to graduate from Yale Law. (She's not married). As far as I know she earned 0k at 26, but I imagine she will earn somewhere in the six figures at 28.

Based on my sister I would add: 10) Manhattan children are more likely to pursue extensive secondary education. I wonder what the numbers would look like if you compared incomes at 28 or 30 or even later. This could potentially mitigate the later marriage effect also.

Amazing Chetty Facts from the New York Times article that auto-generates narratives for each county in the U.S. based on Raj Chetty's database:

http://www.nytimes.com/interactive/2015/05/03/upshot/the-best-and-worst-places-to-grow-up-how-your-area-compares.html?abt=0002&abg=1

- "Manhattan is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

But also ...

- "Marin County is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

- "San Francisco County is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

- "Santa Barbara County is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

- "Los Angeles County is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

- "Orange County is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

- "San Diego County is extremely bad for children in families in the top 1%. It is among the worst counties in the U.S."

- "Montgomery County is very bad for children in families in the top 1%. It is better than only about 7 percent of counties."

The poor One Percent! Is there no refuge they can find for their children?

According to Professor Chetty, the One Percent are incredibly bad decision makers about where to raise their children in terms of giving their kids financial advantages in life.

Who knew?

More Amazing Chetty Facts:

"Boone County [West Virginia] is pretty good for children in families in the top 1%. It is better than about 70 percent of counties."

Chetty's 2015 methodology reports that Mississippi is one of the very best states for the One Percent to raise their children in.

An obvious problem is that Chetty doesn't adjust for cost of living (his 2014 paper claims he checked the ACCRA cost of living data and it didn't matter so don't worry your pretty head about it). But think about how cost of living combines with regression toward the mean over the generations. Mississippi is just about the lowest housing cost, lowest salary state in the country. The people who were living in Mississippi in 1996 are less likely to live in Mississippi in 2011 than their parents were to live in Mississippi (by definition, 100% of them lived in Mississippi in the later 1990s), so they are more likely to have moved somewhere higher paying than Mississippi than their Mississippi parents. Heck, some of them may have moved to Manhattan.

Conversely, people living in Manhattan in 1996-2000 can't have children who, on average, are more likely to live in Manhattan in 2011-2012 than they were in 1996-2000, since 100% of them had to live in Manhattan in 1996-2000. Some of the 1990s Manhattan kids have even moved to Mississippi, with its lower costs and lower incomes.

Yeah, I would expect there to be a correlation between a county's poverty and the income gains that people who moved away from there make. The poorer the place, the greater the gains that those who relocate get, especially if they're not black, given their inherently lower upward mobility.

Shit! I just bought a house in Montgomery County so my child could become rich.

Here's the kind of county you should have bought in so your kids will get the full advantage of social capital according to Prof. Chetty:

https://youtu.be/pUIapa-U0bY?t=25s

Steve, thanks for repeatedly bringing up "Regression to the Mean", but a clip of white trash behaving normally could be filmed in any of the states.

There are a lot of countries Montgomery, some of them aren't that bad.

The one I chose apparently is.

I think the various arguments thrown out there are reasonable, but the most plausible explanation to me is: there is a wage premium when you work in Manhattan that's higher than pretty much everywhere else. Kids move away from Manhattan and lose the wage premium. Eyeballing it I think the wage premium could be larger than the effect they found the other direction.

Except, it looks like they just ran the premium on every county and it's all over the place. Manhattan doesn't look that special, just on the lower end of the range. Of course they'll get some results, and it's easy to come up with reasons why it has to be (wage gains for the children of Manhattan? Culture, rich friend connections, that's what the expensive property is for - duh, private schools, imbues ambition, materialistic, networks, cities make everyone rich including children, etc).

Trustafarians? Rich kids in those towns are so rich they don't have to work?

When my brother, a bond trader, was trying to buy an apartment in Park Slope in the early '00's, he was always getting trumped by Trustafarians. Inevitably, they were documentary film makers or whatnot.

Being the son of a mailman, he couldn't compete with that. He now lives on the far fringes of Jersey City, in a neighborhood that will gentrify sometime after he retires.

Bring on the wealth tax. Amirite?

Why?

So we don't have to be jealous of trust fund kids. Isn't that the point of a wealth tax?

"So we don’t have to be jealous of trust fund kids. Isn’t that the point of a wealth tax?"

Inheritance taxes directly effect Trust Fund kids, I'm not sure why you would consider a wealth tax, which would be an indirect effect at best. Unless you're jealous of the rich in general?

Inheritance taxes directly effect Trust Fund kids

Nah, if it's an irrevocable trust fund it's gift taxes when created, not inheritance taxes.

Inheritance and estate taxes in some ways most effect people with large illiquid assets (like a farm, small business, land) that can't be put into trust funds, life insurance, generation skipping funds, etc.

Daniel Patrick Moynihan used to joke that his adult children were "blessedly unemployable". They were self-actualized artists or writers or whatnot.

The rich can indulge their children in that fashion. The problem is that our university system allows non-rich kids to choose majors that also make them "blessedly unemployable", and that doesn't work when your parents aren't of Daniel Patrick Moynihan's ilk.

Example of middle class "blessedly unemployable": my wife's best friend, from upstate New York, daughter of an Asian community college math teacher, went to Pratt for "fine art", University of Michigan for grad school in art. Granted, she married a douchebag, and is now a single mother living in Brooklyn, working as an adjunct art professor at Pratt. Probably on food stamps.

Her old man wanted her to be an engineer, and her life trajectory would have been much better had she listened to him.

Well, their analysis applies across all income groups, so you can put away your point protractor of wrath.

The point protractor of wrath is staying out. The rich can indulge their kids with trust funds and other financial support. The middle class' kids end up on food stamps, we ALL pay for their foolish choices.

Ok, I can't tell if you're just complaining and mad at this woman or think there should be a solution. Here's one: deny federal loans for institutions that do a crap job on graduation rates and employability. Also, create federal subsidies for the kinds of education we want to promote. You seem to think engineering is good. Fine, let's do that.

One of the things you stress in your anecdote is that this woman got divorced and is now a single mom. That may well be coloring your view of this woman, but it didn't happen because she decided to not be an engineer.

The point is that only the rich can afford to have their kids have stupid college majors. While the kids might be left with salaries below the median, they're still way better off than the middle class kids who went down the path of, say, art history. And we all pay for the mistakes of the middle class, both through the college subsides, but mostly through welfare when these kids can't make a living and have enormous college loan debts.

"College for all" has been a disastrous economic/ education policy.

Of course people that graduate college (any major) tend to do ok for themselves. Even BFAs, despite their relatively low earnings, place themselves well into the middle class. Ironically, Pratt, where your wife's friend went, produces some of the highest salaries. It is so far above food stamp-level that your assertion that we're all just supporting those deadbeats is ridiculous.

http://college.usatoday.com/2015/01/23/top-colleges-for-a-degree-in-fine-and-studio-arts/

http://insights.collegefactual.com/earnings-potential-for-fine-arts-grads/

Adjuncts are on food stamps.

There are a few anecdotes. But by and large that is utter bullshit.

There are quite a few housing projects in Manhattan, they dot the whole length of the island. You also have low income folks crammed in rent stabilized tenements.

Last I checked the median household income in Manhattan is mid 50k. Nothing to write home about.

#3 - later marriage - is the only answer that seems to be indisputable here, and the article says it accounts for about a third of the difference. The fact that people from Manhattan marry later is not surprising at all, though I would be interested to see if it is also true for people from comparable places.

Here's my current Taki's Magazine column about why the top few hundred baseball statistics analysts are more competent at thinking about batting lineup philosophy than Harvard economist Raj Chetty is at advising the Presidential frontrunner about income mobility:

http://takimag.com/article/moneyball_for_medicine_anyone_steve_sailer#axzz3Zddig2nY

Reversion to the mean.

I add this to hypothesis 5 "Manhattan is a selection of the most ambitious, highest-achieving individuals from elsewhere".

Reversion to the mean for the wealthy, but that does not explain the results for the lower income kids.

Maybe there are a lot of bad influences drawn to the wealth, and the poor kids don't have the resources to recover.

Perhaps, Manhattan and other urban centers are great for affluent, young single people but not so great for raising children compared to, say, a suburb with large lawns, McMansions, and chain restaurants with lots of middle-aged neighbors that also like large lawns, McMansions, and chain restaurants. Perhaps, middle American culture is just better for kids than high-brow urbanite culture. This may or may not be true, but the fact that Doug above (5/9 5:45am) seems to be the only one hinting at this possibility says something about the biases of internet infovore culture.

The storm of this thread has passed, so nobody will read this, but I'll second BC's point.

People who have chosen to be in the one percent of income have chosen not to be in the one percent of parenting. Sure, income and parenting skill both correlate with IQ, but there are trade-offs between them. Making $400k in Manhattan requires a significant trade-off in talk-time with Junior while you toss around a baseball. You aren't helping him with his math homework while you're off reformatting PowerPoints for Goldman.

I'll predict that, analogously, the one percent in Manhattan aren't particularly successful at having a lot of grandchildren either.

So average isn't over.

Theory: high cost of living inflates salaries, meaning comparisons between Manhattan and non-Manhattan are apples-to-oranges.

That is, someone who can earn $400k outside Manhattan is likely to be able to learn considerably more inside Manhattan. To get apples to apples you'd need to compare the children of non-Manhattan parents earning $400k to the children of Manhattan parents making $400k + N.

IMHO, it is a combination of 6 & 8, As a reluctant denizen of Kolkata on the Hudson, I have come to view Manhattan as a Veblen good; it is "a tale told by an idiot, full of sound and fury, signifying nothing." There is a perception it is vibrant and full of culture, when the reality is it is noise and chaos producing nothing of value. Looking forward to my exit.

As Steve Sailer pointed out, his data set did not account for cost of living differences. No way Manhattan and all those rich counties are bad places to raise your child.

David considers a few hypotheses:

1. That effect is possibly diminishing as Manhattan improves, but the changes doesn’t yet show up in the data.

2. Perhaps Manhattan parents, or Manhattan itself, teach that money is not so important. For one thing, you get interested in culture there.

3. People who grew up in Manhattan are less likely to be married at a particular age.

4. Manhattan schools are less than perfect.

1. Perhaps. 2. LOL. 3. Why would that result in them having less income? I would think it would result in them having more. 4. LOL

5. Manhattan is a selection of the most ambitious, highest-achieving individuals from elsewhere, and thus if you grow up there ambition and achievement seem to be especially forbidding prospects. Better not to try too hard. Recall David Hume on the “posts of honour” appearing to be filled?

Seems to me like it would have the opposite effect. Think about it, would you rather send your young child to a school with smart, motivated kids or not as smart, not as motivated kids?

7. Manhattan families are more likely to spoil their children, create problems of moral hazard by promising or implying future support, and have less of an internal aspirational culture.

Doesn't fit the stereotypes.

2 seems quite likely, as already mentioned. If you already have a big trust fund, you'll seek out something with culture or fame instead of having to dirty your hands with money-grubbing jobs.

But wouldn't that be equally true for a trust fund kid anywhere else in the country? I just thought the suggestion that Manhattanites think that money is not important to be laughable. Isn't that totally at odds with the stereotype?

Are trust funds equally distributed geographically?

Controlling for parental income, I'd expect them to be _less_ common in Manhattan, not more. Because of cost of living.

The two simplest and most obvious factors probably account for more than all of the difference.

1 - Less conservative society, more delayed adulthood - this has been a trend over time across America, and of course places like Manhattan have led it.

2 - Public housing apartments are heritable, and those in lower Manhattan and upper Manhattan near the park are very coveted with waiting lists of around a decade or longer. If you exit low-income status from these projects you probably leave Manhattan.

For at lots of children of rich parents: the kids aren't earning money because they're already rich. It's not really rational to work crazy hard for money if you have a $10 million trust fund. Much more reasonable to pursue other goals.

I should add that there are a lot of income distribution 'mysteries' that come down to basically this. I can't find the link, but there was an article in a Seattle paper wondering how/why so many low income earners have been moving into Bill Gates's neighborhood in the last few years. Essentially, 95% of the people moving into the area were either making very, very high incomes or minimum wage.

Everyone making minimum wage that lives near Bill Gates is the adult child of a rich parents who moved home. This Manhattan mystery is just like that.

They would still have very high income. It would just be from investments rather than salary.

Even there, they can self-fund their own business. CEO pays the most and if you own everything you get to be CEO. If you have a hundred million to start off, you don't need to persuade any VCs, you can hire top talent, advertise more than anyone else, buy your competition, and probably build a viable medium business.

come on now people, we've got to listen to the algorithm to succeed in the future.

Is it me or is Sailer really fixated on Chetty? Hard-on fixated.

The children of the Manhattan wealthy are far likelier to go into the arts than the children of the wealthy elsewhere.

Also, the proportion of wealth that comes from professions such as law and investment banking is probably higher in Manhattan, vis a vis sources of wealth that are themselves inheritable, like a family business.

There are several other explanations but the most likely is that the cost of living is so much higher in Manhattan that you can't compare incomes without adjusting for it.

According to two different cost of living calculators, a couple making $400K in Atlanta would need to earn over $850K in Manhattan to have the same standard of living. So the Manhattan family is just not as rich as other couples with the same income living elsewhere. If Manhattan isn't the highest cost place in the US - it's darn close. Even moving from San Francisco you'd need to earn over 25% more to stay even.

BTW your link goes to the wrong article.

http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx
http://money.cnn.com/calculator/pf/cost-of-living/

Fine particulate matter

Manhattan looks bad in Chetty's data because it is easy to earn a higher nominal income there. This, and rural dominance in Chetty's study more generally, is an artifact of Chetty's identification strategy.

Suppose three categories of input influence child development: geography, parental income, and everything else. Suppose as well that these can change and that their effect takes place over time so that years of treatment matters. (That's basically Chetty's model for geography; I'm supposing other influences work the same way.)

Suppose as well that income is directly influenced by "everything else" and geography. In particular, if "everything else" is good for child development, it also tends to increase income. And geography=Manhattan is good for income.

Chetty observes a family move to Manhattan. The "everything else" might be changing (divorce, sickness, promotion, graduation, parent becomes an alcoholic, etc). And the family income is also changing, due to both geography and "everything else". Chetty does his best to control for parental income, although it's complicated.

An ideal Chetty comparison would be two families originating in Cleveland (say), each earning $25,000 a year. One family moves to Manhattan, the other to Boone County, WV. Both continue to earn $25,000 a year. In Chetty's identification, that's a perfect experiment: the families are observationally equivalent, but the younger kids in one family are getting extra years of "Manhattan" treatment and the younger kids in the other family are getting extra years of "Boone" treatment.

But wait - are they really identical? A family in Manhattan should have a higher nominal income than an identical family in Boone. So maybe there's some negative shock in the "everything else" which is contributing to the lower income. (On the other hand, there are also shocks that tend to make you move to Manhattan which are different than the shocks that tend to make you move to Boone.)

So the younger kids in Manhattan are getting treated to more years of Manhattan, but also more years of dad's-an-alcoholic. The Boone kids are getting treated to Boone, but also treated to dad's-first-steady-job-with-benefits.

Drug use by parents and children reduces the IQ of children and hence the probable link to earning potential.

http://www.spiegel.de/international/international-cocaine-consumption-new-york-blows-away-the-competition-a-450078.html

If one looks at surrounding counties in the interactive map, there are many surrounding counties that have a positive income effect. Westchester, NY, is off the charts positive, while Bergen, Essex, and Hudson counties in NJ also have positive effects. Fairfield, CT, is roughly neutral (and therefore much better than Manhattan).

Thus, the explanations above that $400k-income parents in NY are different from $400k-income parents elsewhere probably doesn't apply. Presumably, workers in NY receive similar cost-of-living premia whether they live in NYC or surrounding counties. Regression to the mean arguments also don't work because all the comparisons are for children in different counties with parents of the *same* income. For the same reason, explanations involving the presumed effect of growing up wealthy also do not apply.

The question is why children of a *given parental income* do better or worse in one county vs. another. Why do wealthy kids seem to do better if they grow up in the wealthy suburbs of NYC than if they grow up in NYC itself? Maybe, neighborhoods optimized for art museums, theater, and great nightlife just aren't as good for kids as neighborhoods optimized for little league (baseball), family BBQs (hot dogs), and Mom's apple pie.

I wonder if this is one reason: One can lead a very good life by being an employee of a family foundation or a charity and living off an expense account. Taxes don't affect you much, then.

I've worked or lived in Manhattan for nearly 40 years. Insofar as the wealthier kids, go, it's mostly a version of #5. It's really hard for kids who have so much around them to make themselves be driven by income. And as a weslthy parent, you can't successfully put the fear of God into them with "if you don't, you'll..." So a statistically disproportionate number focus on arts, charity/ngo jobs and other careers where money is not the dominant factor.

Many of your hypotheses sound plausible in my socioeconomic stratum. But how is it possible to generalize about a place with such income inequality, where a quarter of the population earns less the $25K a year and a quarter earns more than $100K (per this article: http://www.slate.com/blogs/moneybox/2014/08/29/income_distribution_of_new_york_city_what_does_it_take_to_be_rich.html)?

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