How to Make It in Philadelphia: Policy Takeaways from the Survey of Economic Mobility

Economic mobility measures the degree to which people can raise their economic status over their own lifetime. Research by Raj Chetty and Nathaniel Hendren suggests that economic opportunity isn’t equally distributed across the country, as counties with certain features¹ tend to produce better outcomes for children in low-income families, such as less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates. But aside from living in the right neighborhood, how do people attempt to advance economically and provide a better life for their families?

In this brief, I examine key findings from the Federal Reserve Bank of Philadelphia’s Survey of Economic Mobility (SEM), which tracked hundreds of people residing in low- and moderate-income Philadelphia neighborhoods over several months in 2024. The findings suggest that participants tend to strive for strategies of stability over mobility, as respondents may find it impractical to strive for the latter without first achieving the former. Several factors hold low- and moderate-income Philadelphians from achieving economic stability, such as barriers to work, month-to-month swings in income, and sharp drops in government benefits after job changes or raises (benefit cliffs). When asked how they could increase their income, respondents were most likely to select a job switch or training program rather than formal higher education. The results suggest a role for policymakers to facilitate economic mobility for residents in low- and moderate-income urban communities through workforce development programs, simplifying access to public assistance and addressing benefit cliffs.

What Is the Survey of Economic Mobility (SEM)?

From December 2023 to August 2024, the Federal Reserve Bank of Philadelphia surveyed nearly 600 residents of the city’s low- to moderate-income neighborhoods (i.e., zip codes where the median household income was $70,000 or below and poverty rate was 10 percent or higher). The survey questioned respondents about their economic well-being (e.g., earnings, life satisfaction) along with how they navigate decisions around their work and lifestyles. Survey respondents tended to be representative of the sampled Philadelphia zip codes in terms of demographics, education, income, and housing status. However, survey respondents were less likely than the sampled neighborhoods’ total population to be 18–24 or 65+ years old, to be Hispanic, or to have less than a high school education.²

You Can’t Make It Before You Make Ends Meet

Results from the SEM suggest that sizable income fluctuations tend to be a feature of day-to-day life for most survey respondents: At least three out of four respondents reported income fluctuations of at least 10 percent over the six-month study period. Additionally, Figure 1 shows that many respondents reported an inability to pay all their bills (43 percent) and/or access stable housing (10 percent).

When survey participants were asked to define what economic mobility meant to them in a focus group session, many articulated concerns about making ends meet rather than consciously chasing economic advancement. One participant provided a poignant “stability before mobility” viewpoint: “To me, mobility means the ability to go places … unless you have your basic needs taken care of, you’re not going anywhere.”

How to Get Ahead, According to Philadelphians: Work

Even though employment income is the most fundamental way to cover expenses and facilitate economic mobility, results from the SEM suggest that many respondents face barriers to work due to caregiving responsibilities, health, or transportation access. Additionally, some respondents mentioned barriers such as finding jobs with adequate pay or training/experience requirements holding them back from applying for certain positions. When asked about the area or assistance which would be most helpful for them right now, the most selected answer was “find better job” over childcare, benefits, health, and housing assistance.

Figure 2 shows that when survey respondents were asked the best way to increase income, the top four answers all involved work or direct training: switch jobs within field (29 percent), other training/certificate (19 percent), switch jobs and field (15 percent), and stay with current employer (13 percent). Conversely, few respondents stated higher education as the best way to increase income: 2 percent selected get associate’s degree and 4 percent selected get bachelor’s degree.

How Benefit Cliffs Can Impede Economic Mobility

In a focus group session, participants were asked to explain strategies they typically employ to make ends meet amid fluctuating income and unexpected expenses (e.g., car or home repair). Some common strategies emerged from the discussion such as budgeting, cutting costs, and gig work. Additionally, many explained how participating in public benefit programs have aided them in achieving economic stability. However, even though participants valued the assistance, many reported issues with navigating complicated systems, losing eligibility, or facing benefit cliffs when an income increase leads to a loss in benefits greater than the added income.

We explore how these benefit cliffs arise using the Atlanta Fed’s Policy Rules Database Dashboard. Figure 3 displays the net financial resources for a family of three (one adult, two children aged 3 and 7) renting in Philadelphia on the y axis and their employment income on the x axis. With public benefits, the family breaks even on their expenses (achieves $0 net resources) at a $38,000 annual income. The family experiences a benefits plateau between $38,000 and $44,000, such that any income increase in that range will be equally offset by lost benefits. The family faces a benefit cliff when their annual income reaches $49,000. Any dollar made over $49,000 will lose them $7,000 because of losing eligibility for public assistance programs (in this case, SNAP). Owing to the loss of benefits, it will not be helpful for this family to earn any income beyond $38,000 unless it is at least $78,000. It is easy to see how families can be disincentivized from seeking higher-paying positions, given the existence of these benefit plateaus and cliffs within public assistance programs.

 

What Can Be Done?

Results from the SEM suggest that Philadelphia families in low- and moderate-income neighborhoods strive for stability and economic mobility through higher employment income. However, they face obstacles that may hinder their ability to achieve improved economic outcomes.

A good job is viewed as the best way to achieve increase economic mobility by SEM respondents, such that many respondents believe switching jobs or obtaining training can help them achieve a higher income. Therefore, policymakers should hone workforce development programs that can lead to opportunity occupations³ for residents in low- and moderate-income neighborhoods. Policymakers might consider how changing the structure of funding for workforce training can help people who may not be interested or able to pursue a two- or four-year degree. Laura Ullrich at the Federal Reserve Bank of Richmond suggests that expanding federal Pell Grant funding⁴ (which typically only covers credit programs leading to associate or bachelor’s degrees) to cover noncredit workforce training at community colleges is one way to financially support workers in their pursuit of in-demand occupations not requiring a degree.

Many respondents in the SEM noted that navigating public assistance programs can be a hurdle. Program applications can involve paperwork, interviews, and extensive documentation to verify eligibility (and reverify after enrollment). These procedures can be burdensome for households through the required time, travel, and stress that might be involved. Policymakers might consider strategies that could streamline processes to make it easier for eligible households to enroll such as simplifying applications, providing outreach, reducing paperwork, and reducing recertification requirements.

Additionally, there can be challenges for families once they enroll in programs if a raise or a new job leads to them facing a benefit cliff because of which their additional income will not cover their loss in benefits. If a family faces a benefit cliff when one member starts earning more, they will essentially be penalized for earning more, which would paradoxically inhibit their own economic mobility. Policymakers in charge of social benefits programs could address the severity of benefit cliffs by staggering income eligibility limits across programs to ensure that cutoffs in eligibility do not occur simultaneously (e.g., so that a person doesn’t lose eligibility to SNAP and TANF at the same income level). Additionally, adjusting the benefit reduction rate so that there is a gradual decline in benefits could eliminate benefit cliffs altogether. Although both solutions could increase program costs, they might help reduce the work disincentives that large benefit cliffs produce and encourage economic mobility for program participants.