Two Indicators: unlikely economic relationships : Planet Money – NPR
(SOUNDBITE OF COIN SPINNING)
SYLVIE DOUGLIS, BYLINE: This is PLANET MONEY from NPR.
GREG ROSALSKY, HOST:
Like most gyms, InnerCity Weightlifting in Boston offers one-on-one training sessions for people to shed pounds and get ripped. But behind the dumbbells and the treadmills is a deeper purpose. The gym is a nonprofit, founded with the mission of providing opportunities to people at risk of poverty and incarceration, and helping them forge friendships with wealthier people who might be able to give them a helping hand.
DARIAN WOODS, HOST:
InnerCity Weightlifting does this by recruiting people who are economically disadvantaged, often fresh out of prison. And it offers them a pathway to become trainers, and then pairs these trainers with well-to-do clients. And its founder, Jon Feinman, says that they’re seeing amazing results with this model.
JON FEINMAN: Personal training does create this really unique setting that allows for those power dynamics to flip, for those really genuine relationships to form because the value is going both ways. And I think that really transcends a lot.
ROSALSKY: It’s no secret that it pays to have friends in high places or gym clients in high places, but a new, groundbreaking research project substantiates this in a profound way. It shows that relationships that cross class lines are crucial for low-income folks to climb the economic ladder. Hello and welcome to PLANET MONEY. I’m Greg Rosalsky.
WOODS: And I’m Darian Woods. Today on the show, we have two new studies that look at unexpected economic relationships. They’re brought to us by PLANET MONEY’s daily podcast, The Indicator. So first of all, what someone’s social networks can reveal about their chances at achieving the American dream, and then what the pop charts might be able to tell us about the state of the economy.
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RAJ CHETTY: Hey, Greg, how are you doing?
ROSALSKY: Hey. Good. How are you?
The Harvard economist Raj Chetty is, like, the closest thing we have to LeBron James in the econ world. I mean, he’s kind of a superstar. He crunches these gigantic data sets and offers compelling evidence to fix some of America’s most stubborn economic problems.
WOODS: And some years back, Raj Chetty and his team published this detailed, interactive map of America. It was based on extensive work analyzing millions of IRS tax records, and it shows the likelihood of kids climbing out of poverty in every zip code in the country. And they called it the Opportunity Atlas.
ROSALSKY: Ever since they built this map, Raj and his collaborators have been trying to figure out why it looks the way it does. Why is it that kids in places like the diverse D.C. suburb of Silver Spring, Md., have a much better shot of rising out of poverty than kids in places like Little Rock, Ark.?
CHETTY: And so the big question is, why is the American dream more alive in some places than others? And along the way, lots of folks talked about the idea that social capital – or who you’re friends with, who you’re interacting with – might be an important factor.
WOODS: Social capital – that generally refers to the value of our relationships with our family, with our friends, our broader community. Sociologists and political scientists have long found that these relationships matter a lot for our well-being. But which types of relationships might give us a boost economically? And how do you clearly and precisely measure that?
CHETTY: Lots of people have thought hard about these issues well before us and have just been hampered by a lack of data.
ROSALSKY: But now Raj and his team have found a solution – Facebook data. I mean, who knows more about your social network than the ultimate social network? In a pair of new studies published in the journal “Nature,” Raj and his team use Facebook data as a proxy to measure people’s real-world relationships.
CHETTY: Who would have thought 15 years ago that you’d be able to see 20 billion friendships and understand how people are interacting with each other?
WOODS: Raj and his team came up with various ways to measure social capital using data from Facebook, and they find that there is one particular measure that has a huge power in explaining upward mobility. And they call it economic connectedness, and that’s the rate that low-income folks are friends with high-income folks.
ROSALSKY: Raj and his team find that it’s the exact places that have more connections between low-income and high-income folks that have much greater rates of upward mobility. And they provide evidence that these cross-class relationships are the very reason why low-income folks are much more likely to climb the economic ladder.
CHETTY: So now, you know, you might then ask, well, what about the quality of schools? What about racial segregation? What about levels of inequality? There are many other variables for which you could do a similar analysis. And what we basically show is the economic connectedness variable continues to have very high explanatory power, even when you control for all of those things.
ROSALSKY: Raj and his team don’t have direct evidence to explain exactly what it is about having more connections between high- and low-income folks that causes greater rates of upward mobility. Maybe it’s because high-income people serve as role models or help their low-income friends get jobs. Maybe it’s because high-income people shape their friends’ aspirations or self-presentation or norms or behavior.
WOODS: But what Raj was able to document is that if you plop a kid from a disadvantaged background into a community with more economic connectedness, their income in adulthood will be, on average, 20% higher. That’s huge.
CHETTY: Social interaction across class lines is a key factor that predicts upward mobility out of poverty.
ROSALSKY: But there’s a problem. Raj and his team find that there are many communities across America that just aren’t very connected across class lines.
WOODS: In a second study, Raj and his team looked at why. They find it boils down to two main things – first of all, exposure.
ROSALSKY: Exposure just means how much lower-income folks are interacting with higher-income folks in an area. Do they live in a mixed-income neighborhood where they’re able to bump into higher-income folks at, like, the supermarket or their schools or churches or rec centers?
WOODS: But Raj says that cross-class encounters are not enough to form relationships. Even if these groups do encounter each other, there’s a tendency for them to not necessarily become friends. Raj calls this friending bias – you know, the people who kind of stay in their own cliques.
ROSALSKY: Raj says there are some settings where this friending bias is really high. One prime example is people’s neighborhoods. Like, I don’t know. Darian, like, when you’re walking down the street in New York City, like, are you saying hi to everybody?
WOODS: No. Maybe I should, but no, I don’t.
ROSALSKY: Anyway, there are other settings where friendships really thrive – for example, churches, mosques and synagogues.
CHETTY: So it seems like something about the relationships people form in religious groups as opposed to neighborhoods, which shows that the settings, the structure of the institutions in which we’re meeting people might be the key factor that governs bias, not just preferences that people have.
WOODS: In other words, friending bias can be overcome. Raj says that what institutions can do really matters for forging cross-class friendships. So they had to look at high schools across the country. And some are really cliquey. And we’re not just talking about jocks and nerds and freaks and geeks; we’re talking about how wealthy or not wealthy your parents are.
ROSALSKY: For example, schools with multiple cafeterias often see richer kids go to one cafeteria, and poorer kids go to another. Raj and his team say there are real things that schools and other institutions can do to encourage more diverse social circles.
WOODS: Yeah, like, maybe just have one cafeteria or, like, Pizza Fridays where all kinds of different kids all come together.
ROSALSKY: Raj says there’s much the government could do to revitalize the American dream, like building affordable housing in high-income areas or helping low-income kids go to high-income schools and thinking deliberately about how to foster friendships in various places. But what’s also exciting about this new research project is it points to practical steps we can make in our own communities to make a difference.
WOODS: Steps like the one taken by InnerCity Weightlifting in Boston. Raj and his colleagues actually shout out this nonprofit gym at the end of one of their new papers. And this gym has been operating for over a decade. And the founder, Jon Feinman, says that it is showing a lot of signs of success. Like, there’s much lower rates of recidivism and higher rates of upward economic mobility for its trainers.
FEINMAN: But to me, honestly, the biggest successes we see in this organization, it’s those day-to-day interactions. It’s our trainers having conversations with someone who they might not otherwise cross paths with and, vice versa, that person now having a genuine friend who can advance them as just a human being, never mind their fitness goals, but as a citizen in this society.
ROSALSKY: Jon says one of their trainers bought a house with his earnings. One is now building houses for his former clients. Another uses gym connections to help him navigate electrician school. They’ve even had clients pay for their trainers’ kids to go to summer camp with their own kids – not bad for a gym.
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WOODS: That was PLANET MONEY newsletter writer Greg Rosalsky. And if you want to hear more economic insights like the one featured in that episode, check out the newsletter at npr.org/planetmoneynewsletter. And up next, we’re going to hear from me and my Indicator colleague Adrian Ma about another recent study. This one’s about recessions and whether, just maybe, we might be able to sum up the mood of the economy through Harry Styles. What can’t that man do? That’s all coming up after this short break.
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WOODS: Are we in a recession? That is a question we’ve heard a lot recently on the Indicator.
ADRIAN MA, BYLINE: And in the voice in my brain.
WOODS: Yes, because the data is really confusing. The jobs market has been running really hot, but output growth is falling a little. The world looks really scary. We’ve even heard the word stagflation, a stagnant economy with high inflation. Is that what’s happening?
MA: The last time we felt like this was, like, 1980. At the time, the Fed chair, Paul Volcker, was really unapologetic about needing to jack up the interest rates and cause short-term economic damage to fight inflation.
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PAUL VOLCKER: But, you know, you can’t deal with that problem by simply saying we’re going to let inflation go ahead.
MA: And as a result, unemployment would reach nearly 8%, more than double what we have today.
WOODS: Really tough times. And so you would think people would be sitting around listening to sad ballads to go with the sad times.
(SOUNDBITE OF QUEEN SONG, “CRAZY LITTLE THING CALLED LOVE”)
WOODS: But that is actually not the case.
(SOUNDBITE OF SONG, “CRAZY LITTLE THING CALLED LOVE”)
QUEEN: (Singing) This thing called love…
MA: Aw, yeah. In that year, 1980, Queen was No. 1 on the charts with “Crazy Little Thing Called Love.” It’s a snappy, infectious ditty. It’s happy music, which, it turns out, is not unusual for a recession. A new paper in the Journal of Cultural Economics shows when the economy is crumbling, we’re actually a little more likely to want to listen to happy music.
WOODS: Marco Palomeque is a doctoral candidate in economics at the University of Alcala in Spain. He plays guitar, bass. He sings. And he studied drums professionally.
MARCO PALOMEQUE: This is a box. We use it in flamenco music.
WOODS: Would you be able to play a couple of beats on that box?
PALOMEQUE: Let’s try. (Plays cajon).
WOODS: That’s so cool.
And Marco has managed to combine his love for music and economics.
PALOMEQUE: As a musician, I always notice that music help people to be more happy when they are sad and all of that.
WOODS: And so Marco paired up with a co-author, Juan de Lucio, and they went out to see whether there was any link between the mood of popular music with the booms and the busts in the economy. Marco and his co-author made a data set of all the songs on America’s main singles charts, the Billboard Hot 100, every week from 1958 to 2019. Marco and his co-author used artificial intelligence software to classify whether the song was positive or negative based on its lyrics. And then, they matched these songs against weekly unemployment claims.
PALOMEQUE: And I was thinking that when the situation is bad, people will search for music that express their feelings. But I found the opposite.
WOODS: So Diana Ross, “Ain’t No Mountain High Enough”…
(SOUNDBITE OF SONG, “AIN’T NO MOUNTAIN HIGH ENOUGH”)
DIANA ROSS: (Singing) Ain’t no mountain high enough…
WOODS: This was No. 1 on the singles charts in the 1970 recession. You also had “Step By Step” by New Kids On The Block.
(SOUNDBITE OF SONG, “STEP BY STEP”)
NEW KIDS ON THE BLOCK: (Singing) Step by step. Ooh, baby.
WOODS: This was a single during the 1990 recession. Janet Jackson, “All For You” in 2001.
(SOUNDBITE OF SONG, “ALL FOR YOU”)
JANET JACKSON: (Singing) If you really want it. It’s all for you.
WOODS: And all of these singles are upbeat, positive songs. And to be clear, Marco and his co-authors only found a really small effect. But the relationship held up. It was statistically significant. And this is similar to broader findings that during recessions, people might buy or do more inexpensive things that give them a little bit of joy. A recent paper found evidence of more spending on lipstick during the 2008 recession. So, you know, this is a cheap way to heighten your look when money is tight. And this is known in economics as the lipstick effect.
PALOMEQUE: And in this case, music nowadays, with Spotify, it’s almost free. So it’s a great good to consume when you have no money.
WOODS: So given Marco’s finding, we have developed a one-off quiz show for Marco and INDICATOR listeners at home – you can play along. We are naming it Hits of the Depths. We’re going to play clips of singles that were No. 1 on the charts at some point during a recession.
(SOUNDBITE OF MUSIC)
WOODS: And you have to guess which recession the single was from. How are you feeling, Marco?
PALOMEQUE: It’s going to be hot.
(SOUNDBITE OF SONG, “PHYSICAL”)
OLIVIA NEWTON-JOHN: (Singing) I want to get physical. Let’s get into physical. Let me hear your body talk.
PALOMEQUE: Maybe the oil recession in ’74?
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WOODS: You know, this one’s a little bit later. This is in 1992. This is Olivia Newton-John, “Physical.” So this is the second of two recessions in the early ’80s. So Paul Volcker had already sparked one downturn in 1980, but inflation wasn’t going down enough. So the Fed had raised interest rates even higher to fight inflation even though many people were losing their jobs. You know, interest rates were around 20% at the time. Unemployment was high. But they were listening to Olivia Newton-John, “Physical,” which – I don’t know. It’s quite a happy song.
WOODS: All right. Next song and next recession.
(SOUNDBITE OF SONG, “CAN’T GET ENOUGH OF YOUR LOVE BABY”)
BARRY WHITE: (Singing) Look what you got me doing. Darling, I, I can’t get enough of your love, babe. Girl, I don’t know, I don’t know, I don’t know why…
PALOMEQUE: I don’t know. Maybe ’60s.
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WOODS: A little bit later.
PALOMEQUE: Yeah – ’73, ’74, somewhere near there?
WOODS: Correct, ’74. Yeah. So ’73 to ’75, in the U.S., there was a big recession.
PALOMEQUE: OK. The oil crisis?
WOODS: The oil crisis.
(SOUNDBITE OF VICTORY TONE)
WOODS: Correct, yeah. Unemployment was rising. It would get up to 9% by 1975. And yeah, we’ve got Barry White crooning about love with his song “Can’t Get Enough Of Your Love, Babe” (ph).
PALOMEQUE: (Laughter) Well, we can always talk about love. I mean (laughter)…
WOODS: Yeah, yeah, totally. OK, let’s see what you think about one.
(SOUNDBITE OF SONG, “SINGLE LADIES (PUT A RING ON IT)”)
BEYONCE: (Singing) All the single ladies. All the single ladies. All the single ladies.
PALOMEQUE: This is Beyonce, right?
MA: Yes, correct.
PALOMEQUE: Yes. I’m going to say the Great Recession maybe. This was the ’90s?
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WOODS: You got it. Beyonce, “Single Ladies”…
PALOMEQUE: All right.
WOODS: …Seems to have been the soundtrack of the global financial crisis.
PALOMEQUE: Who would say? (Laughter).
WOODS: Yeah. You know, this, at the time, was the worst recession since the Great Depression. Unemployment was shooting up fast, homes getting foreclosed everywhere. And, yeah, we had this very cheery song.
PALOMEQUE: Yeah, it’s curious, right?
WOODS: It’s a bit weird, isn’t it? OK. So that’s the past. But I want to see a diagnosis ’cause a lot of people at the moment are thinking, are we in a recession in the U.S.? And different indicators have been saying different things. And our official organization that calls recessions, the NBER, has not yet said that there is a recession. By other measures, you could say that there is – two quarters of GDP contractions. But then again, the labor market’s doing really well.
So I want to play a song which was the hit of the summer. This song stayed in the No. 1 of the Billboard Hot 100. And so I’m wondering what you think about this, like, whether this kind of is the kind of song we’d hear, you know, more often in a recession or more often in a boom. I’ll play it for you.
(SOUNDBITE OF SONG, “AS IT WAS”)
HARRY STYLES: (Singing) It’s not the same as it was, as it was.
WOODS: You got Harry Styles, “As It Was.” What are your thoughts?
PALOMEQUE: Yeah, it’s a pretty melancholic song, right?
PALOMEQUE: So according to this study, you are not in a recession.
WOODS: Great. I mean, not in a recession is good – like, sad song’s potentially good news. But I don’t know. There are some parts of the song that are giving me pause, right? Like, the lyrics are pretty sad.
(SOUNDBITE OF SONG, “AS IT WAS”)
STYLES: (Singing) In this world, it’s just us.
WOODS: Good for the economy, potentially. But the keyboard melody is pretty bouncy.
(SOUNDBITE OF SONG, “AS IT WAS”)
STYLES: (Singing) As it was, as it was.
WOODS: Like, it’s kind of these mixed messages in the song. Like, I mean, it’s a little bit like our economy today – like, good jobs market, for example, but, you know, a falling stock market.
PALOMEQUE: Yeah, it’s kind of funny. Like, if – it seemed to match pretty well with the situation.
WOODS: Yeah. There you go – Harry Styles, “As It Was,” kind of symbolic of the mixed signals we’re getting in the economy at the moment.
(SOUNDBITE OF HARRY STYLES SONG, “AS IT WAS”)
WOODS: Marco Palomeque, it’s so great to have you on the show. Thanks for joining THE INDICATOR.
PALOMEQUE: Thank you so much. This have been a pleasure.
WOODS: That’s all, folks, for Hits of the Depths. Thank you, and good night.
(SOUNDBITE OF MUSIC)
WOODS: We made a musical playlist of recessions past, which you can check out in the show notes at npr.org/money. These original INDICATOR episodes were produced by Corey Bridges with engineering from Robert Rodriguez. They were fact-checked by Jamila Huxtable and Kathryn Yang. Viet Le is our senior producer. Kate Concannon edits the show. I’m Darian Woods. This is NPR. Thanks for listening.
(SOUNDBITE OF MUSIC)
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