Economic downturn will hit economically vulnerable communities hardest

While few will be able to escape the resulting hardships of the current economic downturn, America’s most economically vulnerable communities — those where household finances were already unstable and work scarce — will be hit hardest by the recession currently underway. The Economic Innovation Group recently began a research initiative called the Neighborhood Poverty Project which tracks changes in the number and composition of metropolitan high-poverty neighborhoods from 1980 to 2018 with the primary goal of substantiating the idea that returning to the pre-crisis “normal” of national growth is not enough to lift America’s highest-poverty neighborhoods. The project finds that the number of neighborhoods in which 30 percent or more of the population lives in poverty doubled from 1980 to 2010.

Although the last decade saw national economic growth, not all reaped the benefits. There are a number of inequalities that high-poverty neighborhoods face as compared to low-poverty places (defined here as places where less than 20 percent of residents are below the poverty line). For example, high-poverty neighborhoods have lower education levels (more than one-fourth of adults living in high-poverty places lack a high school diploma), lower household income, lower life expectancy due to uneven access to quality health care, and a higher likelihood to be out of work and rent-burdened.

EIG divided the project into two reports. The Expanded Geography of High-Poverty Neighborhoods addresses the escalation of high-poverty neighborhoods in the United States since 1980, despite the brief 4 percent reduction in the number of those neighborhoods by the year 2000, which resulted from the robust economic growth of the 1990s. The total population of those living in high-poverty neighborhoods doubled from 1980 to 2018, increasing from 12 million to 24 million. The number of high-poverty neighborhoods is growing in part because poor and non-poor populations are sorting into separate communities.

The income gap between high- and low- poverty neighborhoods increased by more than one-quarter from 1980 to 2018. The current environment of social distancing and stay-at-home orders has only worsened the economic fallout of high-poverty neighborhoods, as 14 percent of the population work in the accommodation, food service, entertainment, and related industry sectors, compared to 9 percent of individuals living in low-poverty neighborhoods.

EIG’s second report, The Persistence of Neighborhood Poverty, focuses on metropolitan areas that are at a particular disadvantage due to the current crisis as well as the fact that these areas are where the majority of high-poverty neighborhoods are located. Two-thirds of urban neighborhoods that were classified as high-poverty in 1980 were still high poverty in 2018, 38 years later. Additionally, the report finds that it is highly unlikely for a high-poverty neighborhood to ever transition into low poverty — from 1980 to 2018, only 14 percent of high-poverty neighborhoods had flipped to low poverty. Two-thirds of today’s high-poverty neighborhoods are new arrivals that fell through the cracks of a growing national economy.