What we know about how poor neighborhoods become wealthier


(Photo by Spencer Platt/Getty Images)

Over the last 30 years, the poorest neighborhoods in urban America have largely remained that way. The depressing realities: Areas that had high unemployment and low average family incomes in 1980 are by and large the same places that had high unemployment and low average family incomes in 2008. Places that had high poverty then still have high poverty now. Places where few residents had college degrees a generation ago are still largely home to workers with only high school diplomas.

The below chart from a new analysis by the Federal Reserve Bank of Cleveland illustrates this troubling consistency, looking at census tracts within the 100 largest metropolitan statistical areas in the United States (as of 1980). The chart breaks down neighborhoods into average household income quartiles and shows the share of the poorest neighborhoods in 1980 that remained that way in 2008, relative to the rest of the income distribution:

Cleveland Fed
(Cleveland Fed)

Two-thirds of the neighborhoods in the bottom fourth of the national income distribution in 1980 were still at the bottom in 2008. Conversely, the wealthiest neighborhoods tended to stay that way, too.

"While it is possible for all neighborhoods to grow richer or poorer," write the study's authors, Dionissi Aliprantis, Kyle Fee and Nelson Oliver, "the rule tends to be one of persistence."

In thinking about how to change the fate of persistently poor neighborhoods, it's helpful to look more closely at what happened in the third of those neighborhoods that did see income growth over this time period. Why did some of these poor neighborhoods become better off while so many others did not?

In 1980, neighborhoods in the bottom quartile had an average household income (in 2009 dollars) of $30,394. That's compared to $59,672 in all of the remaining neighborhoods. The poorer neighborhoods had lower education levels and higher unemployment. They were also more densely populated in 1980 than other neighborhoods and geographically closer to central business districts. In the following three decades, population density in these poor areas would decline, and average household income there would grow much more slowly than elsewhere.

A third of these poor neighborhoods in 1980, however, saw real income growth of 50 percent or more by 2008. So, what was different about those places? Back in 1980, the demographic differences were small in poorer neighborhoods: High-school graduation rates, unemployment rates and household income were relatively similar in bottom-quartile neighborhoods that would become wealthier and those that would not.

The areas that saw income growth, however, had significantly higher population density. And by 2008, their total population and density would grow even more.

Looking at the metropolitan areas where these neighborhoods are located reveals some other patterns: The poor neighborhoods that saw the greatest gains in income were predominantly located in large, densely populated metro areas that have only grown larger and wealthier over the last three decades.


(Cleveland Fed)

The population of median low-income neighborhoods in high-growth metros grew by 10 percent from 1980 to 2010. In low-growth metros, the population in poor neighborhoods shrank by twice as much.

All of this is a complicated way of saying that poor neighborhoods in thriving cities fare better than poor neighborhoods in stagnant ones. That seems fairly self-evident. But this has a compelling implication.

"It is natural to wonder, given this evidence," the authors write, "whether forces larger than the those operating within neighborhoods could help explain which low-income neighborhoods experience significant income growth."

Your economic prospects as an individual are influenced by many factors outside of your control: your parents' income and education, the quality of your school district, the job market where you live. And the same is true for neighborhoods relative to larger economic trends at the metro level.

All of this raises one other question that is not so self-evident. Within these previously poor neighborhoods, who is benefiting from the gains in income? If income growth is closely related to population growth, does that mean that these poor neighborhoods have grown wealthier purely because higher-income residents have moved in?

"That's the holy grail that we’re trying to get at," says Fee, one of the study's authors.

This data can't really answer that question. It does appear that these neighborhoods have experienced some "residential sorting" -- but not of the type commonly associated with gentrification. Upper-income whites didn't move in. Hispanics did. In fact, these neighborhoods saw their share of black and white residents decline as they grew more diverse in other ways. If income gains here are attributable to new residents moving in, the authors write, "then Hispanic residents were an important part of the inflow."

Emily Badger is a reporter for Wonkblog covering urban policy. She was previously a staff writer at The Atlantic Cities.
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