Educational attainment helps drive community prosperity

Despite an uneven economic recovery, fewer Americans are living in distressed communities and more are living in prosperous ones, according to a recent report from the Economic Innovation Group (EIG), a Washington, D.C.-based policy and advocacy organization. Comprised of seven factors measuring socioeconomic health, the Distressed Community Index (DCI) divides the country’s zip codes (communities) into five quintiles — prosperous, comfortable, mid-tier, at-risk, and distressed — and tells the story of the country’s economic health across two time periods, the recession years of 2007 to 2011 and the recovery years of 2012 to 2016. EIG finds that the employment and business establishment growth during the economic recovery has been mostly limited to prosperous communities, where the population tends to be more educated and the housing vacancy rate may be lower.

More than 20 million people live in prosperous communities than communities labeled comfortable, the second largest quintile by population. As the chart below shows, essentially the entire population difference across quintiles can be accounted for by individuals with at least a bachelor’s degree. Each of the five quintiles has roughly the same number of adults with less than a bachelor’s degree, however, the vast majority of better-educated adults live in prosperous zip codes. The authors note that college-education was second only to housing-vacancy rate as a predictor of community well-being.

Economic distress became overwhelmingly rural between the two time-periods, as the interactive maps show. Utah leads all states in community prosperity, and its population share in prosperous zip codes increased the most between the two periods. Conversely, more than one-third of West Virginia’s population lives in a distressed zip code, and its population became considerably more distressed during the two periods.

At the metropolitan level, Minneapolis-St. Paul, Madison, and Provo had the highest concentration of residents in prosperous zip codes. Bakersfield, California, McAllen, Texas, and Memphis, Tennessee, have the highest concentration of residents in distressed zip codes.

Across racial lines, Native Americans were the only group to become more concentrated in distressed areas and less concentrated in prosperous ones. The share of Asian-Americans residing in prosperous areas grew faster than any other race, while the share of Hispanics residing in distressed areas declined the most of any race.

One area that is worthy of additional attention in the report is the section on community mobility across quintiles and between periods, which is highlighted in the chart below. The most stable quintiles were those at either end of the distressed community index spectrum. However, notable lessons could be learned by getting a better understanding of the characteristics that predict community improvement and decline.

The authors conclude with words of encouragement — that it is, indeed, a good thing that a large and growing share lives in prosperous communities — but also a warning that the structural challenges facing America’s economy are still mighty. In order to encourage economic dynamism and opportunity, the report concludes that policymakers should recommit to investing in communities and core engines of prosperity: entrepreneurship, education, competition, and place making.