The geography of US economic inequality

Why does it matter where you live? Or where a child grows up? Neighborhoods are a primary non-familial context by which lives are shaped—residential context plays a significant role in access to education and other public services, opportunities for social interactions, labor market prospects, the frequency and nature of encounters with the police, and the freedom enabled by one’s real or perceived physical safety.

The geography of economic inequality refers to the spatial sorting of individuals by income, and the correlated patterning of economic resources and opportunities. The ability to pay has always determined the latitude of one’s residential choices as well as one’s capacity to afford certain neighborhoods. Research shows, however, that residential sorting by income has significantly increased over the past 45 years.1 This sorting has resulted in more Americans living in communities that represent the poles of the income distribution rather than the middle. In 1970, two-thirds of families in large metropolitan areas lived in middle-income neighborhoods. By 2012, just 40 percent of families lived in such neighborhoods.

Similarly, the percentage of families living in affluent or poor neighborhoods more than doubled from 15 percent to 34 percent over that same time period.2 This pattern is particularly problematic for lower income individuals. The most recent American Community Survey data show that approximately 12 percent of all poor individuals, and nearly a quarter of poor individuals in urban areas, live in “distressed” neighborhoods, defined as census tracts with poverty rates greater than 40 percent. This means that more than five million Americans face the double disadvantage of individual and contextual poverty.

The spatial sorting of economic resources results from many regional factors, including income inequality, suburbanization patterns, the age and quality of housing stock, school and municipal boundaries, zoning and land-use regulation, and current and historical housing policies.4 Income segregation is more pronounced among families with children than it is among the general population, and most of the increase in income segregation that has occurred since 1990 can be accounted for by the residential choices of parents.5 This means that children, in particular, experience stratified residential contexts, and that parents are increasingly choosing to live with others similar to themselves.6

It is common sense that the lived experiences of people in neighborhoods characterized by high poverty rates, low employment rates, and routine violence are dramatically different than those of people in wealthy, protected neighborhoods. The concentration of social, financial, and environmental resources and hazards form the context in which children develop and adults live, which not only affects day-to-day experience but also is thought to affect educational achievement and attainment, adult earnings, mental and physical health, and attitudes toward society and the government.

In addition to the direct effects of neighborhood conditions, highly segregated neighborhoods make it less likely that advantages afforded by those with more resources will be shared, or will spill over, to those who are less fortunate. Economically heterogeneous schools, for example, ensure that the time and money that middle- and upper-class families have to invest in their children’s schools, such as through the parent-teacher association, fund-raising, event planning, and curricular decisions, will also benefit children with fewer resources who share that educational environment.

There is great interest among social scientists and policymakers in understanding how residential context matters, especially for the trajectory of children. Understanding the link between neighborhoods and individual or distributional outcomes is challenging—people are not randomly assigned to residential location, and the degree of segregation in a city or metropolitan area is likely related to characteristics of the area itself. But using high-quality research designs such as controlled and natural experiments, longitudinal analyses, and carefully crafted observational studies, there is an ever-growing and improving body of evidence on whether, how, and under what conditions neighborhoods affect individual and distributional outcomes, net of personal characteristics. In these studies, disadvantaged neighborhood contexts are defined by the concentration of poverty, but also sometimes by other indicators of neighborhood advantage or disadvantage, such as rates of unemployment, educational attainment, family structure, and welfare receipt.

Educational outcomes are probably the most-frequently studied outcome relating to neighborhood composition. In these studies, the authors seek to understand how neighborhood poverty affects the lives of individuals (as opposed to trying to understand the effect of the distribution of income across neighborhoods). Evidence suggests that exposure to a disadvantaged neighborhood context negatively affects educational outcomes such as high school graduation rates and test scores, and reduces children’s verbal ability by as much as one year of learning.7 Long-term residence in the most disadvantaged neighborhoods, as compared to the most advantaged ones, severely reduces the odds of graduating from high school, and these conditions have a larger depressive effect on educational attainment for African American children than they do for other children.8 The effects of neighborhood disadvantage on high school graduation rates appear to be especially acute during adolescence, and are most harmful for those children who face the double disadvantage of family and neighborhood poverty.9 A number of other studies have shown that episodes of neighborhood violence reduce performance on academic tests and diminish the attention span and impulse control of children.10

Experimental evidence from housing programs on the effect of neighborhood composition has been more mixed. The well-known Moving to Opportunity study, for example, offered a random sample of participants a voucher to induce them to move to more advantaged neighborhoods. Comparisons between those who received the voucher and those who did not showed few long-term differences, which led people to conclude that neighborhoods, in and of themselves, had limited effects on individuals.11

Yet recently completed, longer-term evidence from the Moving to Opportunity data show that children who moved to low-poverty neighborhoods before the age of 13 have reaped significant benefits. They were more likely to attend college, had significantly higher earnings by their mid-20s, and lived in less disadvantaged neighborhoods as adults—all compared to those who did not receive the voucher in the experimental project. Results for children who moved after the age of 13 were nil or even negative, suggesting that stability and consistent social environments may be more important in late adolescence.12

Finally, a study of a housing program in Montgomery County, MD found significantly higher academic achievement among low-income students who lived in low-poverty school zones, compared to similar peers in high-poverty school zones.13 Taken together, there is a fairly strong body of evidence supporting the fact that childhood neighborhood context matters for contemporaneous and long-term outcomes, but that the effects differ by family income, race/ethnicity, and age.

There is less evidence on the consequences of economic segregation itself, a characteristic not of individual neighborhoods but of the arrangement of neighborhoods in a city. The existing research has demonstrated that metropolitan- and state-level income segregation increases inequality of educational attainment and infant health outcomes and shows that income segregation in U.S. metropolitan areas weakens economic mobility, establishing an important link between the geography of economic inequality and intergenerational mobility.14

The spatial dimension of economic inequality is a persistent feature of U.S. cities and communities. The magnitude of residential sorting continues to increase, closely tracking the steady rise in income inequality. Over one third of all families in large metropolitan areas now live in relatively poor, or relatively affluent, neighborhoods—neighborhoods that affect our understanding of America as a country of the middle class. Three additional points bear mention in this short brief.

First, neighborhood disadvantage is durable. Segregated neighborhoods are difficult to escape, especially for African Americans. Nearly three quarters of African American children who grow up in America’s poorest neighborhoods live in similar neighborhoods as adults.15 A lack of sufficient resources in the poorest neighborhoods, such as high-quality schools, contributes to the intergenerational transmission of individual poverty and neighborhood disadvantage.16

Second, the concentration of affluence deserves more attention. The geographic isolation of the affluent is connected to the geographic isolation of the poor. Recent American Community Survey data show that, nationally, the school district at the 10th percentile of the income distribution has a median household income of $34,000 while the 90th percentile district has a median income of $74,000. The median household incomes in the very wealthiest districts exceed $200,000, and fall below $20,000 in the very poorest.17 These income gaps are not the whole story, but the gaps are representative of bundles of advantages and disadvantages comprised of parental education levels and employment status, teacher quality, school facilities, and safety. This matters, in part, because children from poor and affluent neighborhoods are competing for the same seats at elite colleges and universities, and for the opportunity to be leaders in politics, business, academic research, and the arts. The presence of highly polarized neighborhoods ensures that children spend important developmental years in severely unequal environments.

Third, the vast majority of research on the causes and consequences of neighborhood poverty and economic segregation relies exclusively on income as a metric for financial resources. Wealth data are harder to obtain, but it is even more unequally distributed than income and it can be a major factor in residential choice. In 2010, 44 percent of all income in the United States went to the highest-earning 10 percent of the workforce, whereas the top 10 percent of wealth holders controlled 74 percent of all U.S. wealth. Similarly, the income-based Gini coefficient (a widely used measure of inequality in which 1 signifies absolute inequality and zero absolute equality) was 0.55 but the wealth-based figure was 0.87.18 Wealth segregation may be relatively severe due to the extreme level of wealth inequality in the United States, but less is known about the degree to which families are spatially separated by wealth.

How can public policy address the geography of economic inequality? I offer two brief comments. First, economic segregation and the concentration of poverty are not narrowly local issues. They are regional issues that need regional solutions. This may require collaboration across multiple municipalities, or the formation of regional governance structures that have the authority and mandate to address the division of resources that occurs through municipal fragmentation. Policy tack and the appropriate level of government intervention depend on the boundaries of the geographic inequality—across neighborhoods within a municipality, across schools within a school district, across municipalities and school districts within a metropolitan area, or even between cities or counties within a state or nationwide.

Second, there are remedies for the problem itself, and there are ways to mitigate its negative effects. Policies that encourage mixed-income communities or reduce income inequality refer to the former, while school integration programs and monetary redistribution refer to the latter. These types of policies are not mutually exclusive—society can both pursue bold long-term plans to equalize children’s neighborhood contexts while also embracing short-term programs to mitigate the effects of segregation and concentrated poverty.