Even As U.S. Reports Economic Upturns, Over 50 Million Still Live In Poverty

Poverty

By Financial Times
More than 50m Americans live in districts that are mired in a “deep ongoing recession”, with falling employment and a shrinking business base, according to a report that highlights the fractured nature of the US recovery.

According to research from the Economic Innovation Group think-tank, one in six Americans resides in a zip code it defines as a “distressed community”. These are areas with a falling number of businesses and in which the local population has low median income, poor labour force participation, high levels of poverty and low educational achievement.

Southern states, including Alabama, Arkansas and Louisiana, account for more than half the population in distressed communities, the report says. In Mississippi, the poorest performer, 43 per cent of the population lives in a distressed community, compared with less than 1 per cent in Utah.

The report divides the country’s 26,000 or so zip codes into quintiles, ranked from most prosperous to distressed. Distressed areas, which also suffer high housing vacancy rates, have seen a 6 per cent average fall in employment from 2011 to 2015, compared with a near 25 per cent surge in the country’s most prosperous areas.

The research highlights profound economic divisions, even at a time when the US is in its third-longest recovery on record and when median incomes have just seen the strongest two-year surge in modern times.

The country’s elite communities are enjoying “a spectacular degree of growth and prosperity”, the research finds, yet in the poorest-performing areas, “what little economic stability exists is quickly eroding beneath their feet”.

The problems in distressed communities have not developed overnight: most have seen zero net gains in employment and business creation over the whole of this century so far. But the report finds that the prospects of different areas are less likely to rise and fall together, as they once did.

“Not only is the gap large, but the trajectories are moving in opposite directions,” said John Lettieri, co-founder of EIG. “This is not what you would expect in a true national recovery.” Whereas prosperous communities added 188,000 businesses establishments from 2011 to 2015, distressed areas saw a net loss of 17,000. The best-off quintile of zip codes captured 57 per cent of the rise in business establishments over the five-year period — twice their share in 2011.  Those prosperous localities are home to 84.8m people, a larger group than any of the other five quintiles. They also host 45 per cent of the country’s advanced degree holders, more than the bottom three quintiles combined.

Donald Trump, US president, campaigned on fears that large parts of the country were being left behind in the recovery, and the research found that nearly a quarter of his votes came from counties with stagnant or falling numbers of business establishments, compared with just 16 per cent of Hillary Clinton’s. Strikingly, three-quarters of counties that flipped from backing Barack Obama twice to supporting Mr Trump suffered both job and business losses over the five-year period.

The research reveals a patchwork of fortunes between different states. In Utah, 47 per cent of the population lives in a prosperous zip code, compared with just 3.1 per cent of people in West Virginia.  Some of the country’s most economically successful states also suffer from striking levels of deprivation: more than 22 per cent of the Texas population live in distressed communities, nearly twice the proportion as New York or California.

The poor outcomes are mirrored in health. Mortality rates in distressed areas are 25 per cent higher than in prosperous districts, and mortality rates from mental health disorders and substance abuse are 64 per cent higher.  Meanwhile, demographic analysis shows stark racial divides. Blacks and Native Americans are three times more likely to live in a distressed community than a prosperous one. By contrast, Asians are nearly six times more likely to live in a top-tier community than a bottom-tier one.

Looking at large cities, the most distressed urban centres by share of population are Cleveland in Ohio, Newark in New Jersey and Buffalo in New York. Distress in the South tends to be found in rural areas, while suburban communities are overwhelmingly prosperous across all regions.  The big cities with the highest share of prosperous zip codes are large suburban communities near big metro areas — Gilbert in Arizona, Plano in Texas and Irvine in California. San Francisco ranks at number five. Read More

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