Vast New Study Shows a Key to Reducing Poverty: More Friendships Between Rich and Poor | Big Indy News
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Vast New Study Shows a Key to Reducing Poverty: More Friendships Between Rich and Poor



Jimarielle Bowie at her alma mater, Angelo Rodriguez High School, in Fairfield, Calif. A lawyer, she credits some of her success to the friendships she made in high school.

Marissa Leshnov for The New York Times

Over the last four decades, the financial circumstances into which children have been born have increasingly determined where they have ended up as adults. But an expansive new study, based on billions of social media connections, has uncovered a powerful exception to that pattern that helps explain why certain places offer a path out of poverty.

For poor children, living in an area where people have more friendships that cut across class lines significantly increases how much they earn in adulthood, the new research found.

The study, published Monday in Nature, analyzed the Facebook friendships of 72 million people, amounting to 84 percent of U.S. adults aged 25 to 44.

Previously, it was clear that some neighborhoods were much better than others at removing barriers to climbing the income ladder, but it wasn’t clear why. The new analysis — the biggest of its kind — found the degree to which the rich and poor were connected explained why a neighborhood’s children did better later in life, more than any other factor.

The effect was profound. The study found that if poor children grew up in neighborhoods where 70 percent of their friends were wealthy — the typical rate of friendship for higher-income children — it would increase their future incomes by 20 percent, on average.

These cross-class friendships — what the researchers called economic connectedness — had a stronger impact than school quality, family structure, job availability or a community’s racial composition. The people you know, the study suggests, open up opportunities, and the growing class divide in the United States closes them off.

“Growing up in a community connected across class lines improves kids’ outcomes and gives them a better shot at rising out of poverty,” said Raj Chetty, an economist at Harvard and the director of Opportunity Insights, which studies the roots of inequality and the contributors to economic mobility. He was one of the study’s four principal authors, with Johannes Stroebel and Theresa Kuchler of N.Y.U. and Matthew O. Jackson of Stanford and the Santa Fe Institute.

The findings show the limitations of many attempts to increase diversity — like school busing, multifamily zoning and affirmative action. Bringing people together is not enough on its own to increase opportunity, the study suggests. Whether they form relationships matters just as much.

“People interested in creating economic connectedness should equally focus on getting people with different incomes to interact,” Professor Stroebel said.

Growing up, Jimarielle Bowie says, her family was lower-middle class. Her parents divorced, lost jobs and lost homes in the housing crisis of the late 2000s. So when she made friends in high school with girls who lived on the rich side of town, their lifestyles intrigued her. Their houses were bigger; they ate different foods; and their parents — doctors, lawyers and pastors — had different goals and plans for their children, including applying for college.

“My mom really instilled working hard in us — being knowledgeable about our family history, you have to be better, you have to do better,” said Ms. Bowie, 24, who goes by Mari. “But I didn’t know anything about the SAT, and my friends’ parents signed up for this class, so I thought I should do that. I had friends’ parents look at my personal statements.”

Ms. Bowie became the first person in her family to get a postgraduate degree. She’s now a criminal defense lawyer — a job she found through a friend of one of those high school friends.

“My experience meeting people who were more affluent, I got to get in those circles, understand how those people think,” she said. “I absolutely think it made a significant difference.”

Birds of a feather

Social capital, the network of people’s relationships and how they’re influenced by them, has long intrigued social scientists. The first known use of the phrase was in 1916, by L.J. Hanifan, a school administrator in West Virginia. Since then, researchers have found that ties to more educated or affluent people, starting in childhood, can shape aspirations, college-going and career paths.

But the new study is the first to show that living in a place that fosters these connections causes better economic outcomes, using a significantly larger data set than other studies, covering 21 billion Facebook friendships.

The researchers limited the data, which did not include names, to active Facebook users. They estimated users’ incomes based on their ZIP codes, college, phone model, age and other characteristics.

For each low-income Facebook user, the researchers determined where the person was currently living, and how many high-income friends they had. That gave them a measure of how economically connected each neighborhood was. Then they compared the new data with earlier research that used tax records to measure how much a particular neighborhood raised low-income children’s economic prospects.

The researchers were also able to link almost 20 million users to both their high school and to their parents on Facebook. Using those ties, they repeated their analysis, this time on high school connections between children of rich and poor parents, to measure the impact of relationships made early in life. They did a similar analysis for teenage Instagram users. And they built on an earlier analysis of siblings who moved at different ages to show that it was the place that made a difference, versus something about the families who moved to those places.

Each analysis had the same result: The more connections between the rich and poor, the better the neighborhood was at lifting children from poverty. After accounting for these connections, other characteristics that the researchers analyzed — including the neighborhood’s racial composition, poverty level and school quality — mattered less for upward mobility, or not at all.

“It’s a big deal because I think what we lack in America today, and what’s been dropping catastrophically over the last 50 years, is what I call ‘bridging social capital’ — informal ties that lead us to people who are unlike us,” said Robert Putnam, the political scientist at Harvard who wrote “Bowling Alone” and “Our Kids,” about the decline of social capital in the United States. “And it’s a really big deal because it provides a number of avenues or clues by which we might begin to move this country in a better direction.”

Other kinds of social capital matter, too, like rates of volunteering in a community and friendships with people from similar backgrounds. Yet the new study shows that even in places lacking in other kinds of social capital, an increase in cross-class relationships is enough to benefit children’s economic prospects. And it’s this kind of social capital that has decreased as the country has become more segregated by class. In recent decades, people have become more likely to live in neighborhoods and attend schools with people of similar economic status — behavior that social scientists say is driven by anxiety about falling down the income ladder in an age of growing inequality.

“The pressure that parents feel to try to give their kids a competitive advantage is amplified when society is unequal and there’s more to be lost,” said Jessica Calarco, a sociologist at Indiana University who studies inequality in schools and among families. “Our society is structured in ways that discourage these kinds of cross-class friendships from happening, and many parents, often white, are making choices about where to live and what extracurriculars to put their kids into that make those connections less likely to happen.”

As a result, rich people have mostly rich friends, and poor people have mostly poor friends.

Who’s Friends With Whom, by Income Group

Low-income people are far more likely than high-income people to make friends in their neighborhoods, the study found. But in poorer areas, there are fewer rich people nearby to befriend.

It’s human nature to befriend people who are similar, which is why most cultures have a phrase like “birds of a feather flock together,” Professor Putnam said. Even when people do form cross-class connections, there is evidence in this and other research that they gravitate toward people of the same race.

Ms. Bowie, who is Black and Japanese, said that the friends she made from wealthier families were also Black.

“Just being with Black people who had money was a culture shock,” she said. “But white people with money had a completely different lifestyle. At least with Black people, we had the same sayings, we saw the same movies, our grandparents had the same beliefs.”

The analysis did not directly measure the role of race, which was not provided in the Facebook data. (Though there are techniques researchers use to guess race, the authors of the new study did not use them.) But in more racially diverse places, the study found fewer cross-class relationships.

Race is clearly associated with levels of mobility, a variety of research has shown, including by Professor Chetty’s team. In general, Black people in segregated areas are more likely to experience concentrated poverty and have worse economic outcomes.

“There was speculation that maybe it was about differences in resources, quality of schools, social norms,” he said. “What we show here is places that have large Black populations tend to be more economically disconnected — both Black and white people living there have fewer high-income friends.”

It’s clear that other factors also influence outcomes for Black people in both segregated and integrated areas, he said, including racial discrimination in the labor market and mass incarceration.

But the researchers say their findings on the importance of cross-class relationships are true regardless of race. They found the same relationship — high economic connectedness leading to higher economic mobility — in neighborhoods that were nearly entirely white, Black or Hispanic.

‘A culture of success’

The researchers focused on high schools, one of the few settings where people of all classes make friends at similar rates, and a place where people form lifelong friendships before they start making decisions that may determine their economic trajectories.

Where People Make Friends,
By Income Rank

In college

The richest Americans make far more of their friends in college than low-income individuals do.

At work

Middle-class Americans tend to make more of their friends through their work.

In high school

Americans make relatively similar shares of their friends in high school regardless of socioeconomic status.

Through religious groups

People with lower incomes make slightly more of their friends in religious settings.

In the neighborhood

Neighborhoods play a much larger role in defining the friendships of the lowest-income Americans.

Angelo Rodriguez High School in Fairfield, Calif., which Ms. Bowie attended, had more cross-class friendships than the average large public high school.

Fairfield, midway between Sacramento and San Francisco, is an unusually diverse area, racially and economically, and three-quarters of Rodriguez’s student body of around 2,000 are students of color. The school, which opened in 2001, had a catchment area shaped like a reverse C, drawing from neighborhoods on the far sides of town — which is how Ms. Bowie ended up commuting to a wealthier area for school. It also allows some students outside the boundary to attend.

In general, larger and more diverse schools — both economically and racially — have a smaller share of cross-class connections. It can be harder to make friends in large groups, and there are more chances to form cliques with people from similar backgrounds. But Rodriguez High nurtured cross-class friendships in ways both planned and unintentional.

“Being at Rod, you become friends with everybody,” Ms. Bowie said. “Literally that’s what that school does.”

Ms. Bowie, third from left, with friends at prom her senior year at Angelo Rodriguez High School.

Photo supplied by Jimarielle Bowie

One thing that may have helped was the school’s campus layout, with a promenade around a central library, outdoor stage and quad. That was deliberate, said John Diffenderfer, president of Aedis Architects, which designed the campus: “Accidental unstructured interactions between students was a very high priority.”

Rodriguez High has a block schedule in which classes meet for two hours each, every other day. This creates small, diverse groups that spend a lot of time together. When large institutions do this, it helps foster cross-class friendships, the research found. Separating students based on academic achievement, through gifted or international baccalaureate programs, has the opposite effect.

Extracurricular activities and interest clubs also play a big role in bringing together students from different backgrounds, said Catie Coniconde, a Rodriguez school counselor who also graduated from the school, in 2006. Half the student body is enrolled in them.

“Kids get identified by their extracurriculars, more than race or socioeconomic status,” she said. “There’s the athletes, the band kids, the kids who are interested in anime.”

Timothy Malacarne, a sociologist at Nevada State College, has found that the arts in particular seem to foster friendships across racial and economic lines. “Anytime people do something hard together, they’re more likely to feel a sense of kinship that’s not based on the identity of your racial or socioeconomic group,” he said.

Athletics is another avenue, but sports are becoming more segregated as expensive club sports have overtaken recreational or school teams. Some school districts have begun offering free transportation, physical exams and equipment to allow more students to participate.

While pursuing shared extracurricular interests, the students begin to share aspirations, Ms. Coniconde said. Scoring well on the SAT and attending a four-year college are common goals at Rodriguez, she said. The students from the wealthier part of town usually arrive with those goals, while many students from lower-income families hadn’t considered them before.

“It just seemed like a culture of success,” she said. “The four-year push was huge at Rod, and it still is to this day.”

The power of friends

These ideas can be applied beyond high schools, the researchers said.

Colleges, for instance, could place incoming students with small groups of roommates from a variety of backgrounds, instead of randomly assigning them roommates or allowing them to choose their own. Yale does this, and the small groups generally live in the same dorms all four years. Its low-income students have unusually high levels of cross-class friendships. (It has fewer total such friendships, because low-income students are a minority, though it has committed to increasing the share to one-fifth by 2025.)

Large state colleges, where students can choose their roommates or sort into fraternities or sororities or off-campus housing, tend to have fewer friendships across class lines. The University of Mississippi, where more than a third of undergraduates participate in Greek life, has one of the lowest rates of cross-class friendships of any large public university.

Cities could prioritize centrally located parks and other communal spaces, especially those that are free. Libraries could host radio studios, writing centers, cafes, maker spaces, tool libraries and other programming that appeals to wealthier residents while continuing to offer critical services to low-income residents, bringing both groups together in one physical space.

And mentorship programs can build cross-class relationships, by pairing people from different socioeconomic backgrounds for extended periods. Friends of the Children matches at-risk children with paid professional mentors who spend four hours a week with them from kindergarten through high school graduation. Becoming a Man enrolls boys in school-based counseling groups and matches them with young professionals as mentors. Both have been shown to have powerful effects on children’s outcomes.

Ms. Bowie still lives in Fairfield and remains close with both sets of friends — those from her neighborhood and those she met in high school. Their trajectories have differed. Most of her neighborhood friends went to community college, live near home and are still figuring out what to do, she said. Her high school friends left town for four-year colleges and are pursuing careers in medicine and design.

Her experience straddling both worlds, she said, has been essential for her professional success.

“I got a lot of in-depth knowledge about cultures that I wouldn’t have gotten, not in college, law school or now, because of my high school experience,” she said. “Had I not had those experiences, I might have been really culture shocked by going into these spaces as an attorney.”

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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