Philadelphians have a harder time climbing up the economic ladder. Researchers wanted to find out why

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Philadelphia’s unemployment is near the lowest it’s been in three decades while the poverty rate is on the decline. Still, there has been little economic mobility for low-income households – so the Federal Reserve Bank of Philadelphia wanted to understand economic mobility in the city better.

Philadelphia ranked last in the nation for the ability of children to earn more than their parents once they become adults, according to Harvard University’s Opportunity Insights research. And it’s gotten worse for Millennials than it was for Gen X, data shows.

Low-income children in the city born in 1978 earned on average $31,200 annually by the age of 27. But those born 15 years later in 1992 earned on average $27,200 a year.

That’s a decline of $4,000 between one generation and the next, or a 12.7% drop. Nationwide, the average change was a 4.2% decline.

“Economic mobility is important to the overall economy because it really indicates the ways in which people earn, save and spend and that’s what drives the U.S. economy, it drives the Philadelphia economy,” said Theresa Singleton, senior vice president of the Community Development and Regional Outreach department at the Federal Reserve Bank of Philadelphia.

The study’s results were shared during the Economic Mobility Summit in Philadelphia hosted by the Federal Reserve, The Pew Charitable Trusts, Philadelphia Foundation and the Urban Institute.

Over a six-month stint, Federal Reserve researchers contacted more than 500 residents across the city and asked them to track how much they earned each month among other questions for the survey of economic mobility in 2024. Plus, they held five focus groups with dozens of participants.

The goal was to connect with low- to middle-income residents recruited from zip codes in the city where the poverty rate was at least 10% or higher, but all income levels were represented in the study.

They found that Philadelphians said they find it difficult to move up the economic ladder when they are focused on treading water to pay their bills.

“People are really thinking about economic stability before they think about upward mobility. You need to have a stable floor if you’re going to build a ladder,” said Ashley Putnam, director of the economic growth and mobility project. “They were really trying to make ends meet, to pay the bills, just to get by. Many people are also worried about moving down the economic ladder.”

The participants were also split into two groups, one that was above and below the ALICE threshold, which stands for Asset Limited Income Constrained and Employed.

These are households that earn more than the federal poverty level so they don’t qualify for financial assistance but don’t earn enough to meet basic household needs.

Some barriers to upward economic mobility include lack of access to reliable caregivers, transportation, health care costs, poor health, scarcity of high wage jobs and age discrimination. To cope, participants said they budgeted, cut costs and took on gig work. To earn more money, most respondents said they would switch jobs in the same field or obtain a certificate.

Some struggled with the public benefits cliff, that’s when households earn too much money to qualify for benefits, but the value of the loss is greater than the income gain.

The majority of respondents said their income changed by more than 25% over six months but it’s not because they switched jobs.

“We were really surprised by this, it’s often about people who do shift work or gig work, where the hours that they have are inconsistent month to month,” Putnam said. “They’re really experiencing these ups and downs that make life feel a lot more unstable and a lot less predictable in order to balance the budget and figure out how to pay the bills.”

To help individuals see what’s possible in their career and the path to get there, the Federal Reserve Bank of Philadelphia created an occupational mobility explorer.

Editor’s Note: The Philadelphia Foundation is a WHYY supporter. WHYY News produces independent, fact-based news content for audiences in Greater Philadelphia, Delaware and South Jersey.