The gap between poor and rich neighbourhoods is growing

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THE seizing of opportunity is a recurring theme in American culture, from “Little House on the Prairie” to “The Gold Rush”. Historically, it has been a force for reducing income inequality. But two new reports that look at changing local fortunes in America over the last decade and over the past 35 years suggest that opportunities for poor Americans are diminishing. Both report that there has been no recent progress in achieving regional income equality. They also find evidence of decreased worker mobility, suggesting that poor people are increasingly stuck in poor places.

The Economic Innovation Group’s Distressed Communities Index combines measures of education, income, employment, housing and business growth into a measure of community economic wellbeing at the level of 25,800 zip codes. From the Brooking Institution the Hamilton Project’s vitality index similarly includes measures of income, employment and housing at the county level but adds life expectancy while excluding business growth and education.

Both reports highlight the continuing disparity of outcomes across regions of America. The Hamilton project finds that median income is twice as high in the richest one fifth of counties as in the poorest fifth, while unemployment is twice as high in the worst-performing counties as the best performing. Life expectancy between top and bottom of county quintiles varies by six years. The Economic Innovation Group’s measure, meanwhile, suggests that across quintiles of zip codes divided by their index score the percentage of adults without a high school diploma ranges from 22% at the bottom to 5% in the top quintile, poverty rates from 26% to 6% and business establishment creation from 5% to 11%. 

The data also suggests that regional income inequality has stopped falling—over the past three decades, there is evidence of dramatically slowing convergence. Between 1930 and 1980, incomes in the south-east rose from 50% to 86% of average national income, and other historically poorer regions also caught up. The same result held at the county level. But in 1980 that trend halted. Between 1980 and 2016 at both the regional and country level there is no evidence that poorer areas saw faster growth in median household income than richer areas.

The economic crisis and recovery made matters worse, affecting struggling and successful neighborhoods very differently. Every quintile of zip codes tracked by the Economic Innovation Group’s data saw the number of jobs decline between 2007 and 2010. But distressed quintiles effectively saw no recovery and still had 1.4% fewer jobs in 2016 than they did in 2007. This compares to a rise of over 3.6m jobs in the richest quintile over that same period. The poorest quintile of zip codes had fewer businesses in 2016 than 2012 while the richest quintile added 180,100 net new businesses between 2012 and 2016—more than the other 80% of zip codes combined.

Both reports suggest the role played by education. The Hamilton Project data suggest that counties that had more college-educated workers in 1980 saw a faster growth in their college-educated workforce than those already behind in 1980—and these were the areas that stayed richer. The Economic Innovation Group found that prosperous zip codes contain six times the number of people with a bachelor’s degree than distressed zip codes do.

Given Americans’ freedom to move around the country, an obvious solution for people living in unsuccessful neighborhoods with low employment is to relocate to richer areas with plentiful jobs. But that is happening less often than it used to. The Hamilton Project’s data suggest that the migration rate at the country level averaged about 4% a year in 1987 but had fallen below 2.5% by 2017. 

Why is this happening? Foreign-born immigrants move to more prosperous areas—they are twice as likely to live in the top quintile of zip codes than in the lowest quintile according to the Economic Innovation Group. Immigrants have already left home, of course; it could be that one of the factors that keep poor native-born people in impoverished places is neighborhood ties including family and friends. 

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