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Middle-Class Areas Shrink as Income Gap Grows, New Report Finds

November 16, 2011 by Leave a Comment

The study, conducted by Stanford University and scheduled for release on Wednesday by the Russell Sage Foundation and Brown University, uses census data to examine family income at the neighborhood level in the country’s 117 biggest metropolitan areas.

The findings show a changed map of prosperity in the United States over the past four decades, with larger patches of affluence and poverty and a shrinking middle.

In 2007, the last year captured by the data, 44 percent of families lived in neighborhoods the study defined as middle-income, down from 65 percent of families in 1970. At the same time, a third of American families lived in areas of either affluence or poverty, up from just 15 percent of families in 1970.

The study comes at a time of growing concern about inequality and an ever-louder partisan debate over whether it matters. It raises, but does not answer, the question of whether increased economic inequality, and the resulting income segregation, impedes social mobility.

Much of the shift is the result of changing income structure in the United States. Part of the country’s middle class has slipped to the lower rungs of the income ladder as manufacturing and other middle-class jobs have dwindled, while the wealthy receive a bigger portion of the income pie. Put simply, there are fewer people in the middle.

But the shift is more than just changes in income. The study also found that there is more residential sorting by income, with the rich flocking together in new exurbs and gentrifying pockets where lower- and middle-income families cannot afford to live.

The study — part of US2010, a research project financed by Russell Sage and Brown University — identified the pattern in about 90 percent of large and medium-size metropolitan areas for 2000 to 2007. Detroit; Oklahoma City; Toledo, Ohio; and Greensboro, N.C., experienced the biggest rises in income segregation in the decade, while 13 areas, including Atlanta, had declines. Philadelphia and its suburbs registered the sharpest rise since 1970.

Sean F. Reardon, an author of the study and a sociologist at Stanford, argued that the shifts had far-reaching implications for the next generation. Children in mostly poor neighborhoods tend to have less access to high-quality schools, child care and preschool, as well as to support networks or educated and economically stable neighbors who might serve as role models.

The isolation of the prosperous, he said, means less interaction with people from other income groups and a greater risk to their support for policies and investments that benefit the broader public — like schools, parks and public transportation systems. About 14 percent of families lived in affluent neighborhoods in 2007, up from 7 percent in 1970, the study found.

The study groups neighborhoods into six income categories. Poor neighborhoods have median family incomes that are 67 percent or less of those of a given metropolitan area. Rich neighborhoods have median incomes of 150 percent or more. Middle-income neighborhoods are those in which the median income is between 80 percent and 125 percent.

The map of that change for Philadelphia is a red stripe of wealthy suburbs curving around a poor, blue urban center, broken by a few red dots of gentrification. It is the picture of the economic change that slammed into Philadelphia decades ago as its industrial base declined and left a shrunken middle class and a poorer urban core.

The Germantown neighborhood, once solidly middle class, is now mostly low income. Chelten Avenue, one of its main thoroughfares, is a hard-luck strip of check-cashing stores and takeout restaurants. The stone homes on side streets speak to a more affluent past, one that William Wilson, 95, a longtime resident, remembers fondly.

“It was real nice,” he said, shuffling along Chelten Avenue on Monday. Theaters thrived on the avenue, he said, as did a fancy department store. Now a Walgreens stands in its place. “Everything started going down in the dumps,” he said.

Philadelphia’s more recent history is one of gentrifying neighborhoods, like the Northern Liberties area, where affluence has rushed in, in the form of espresso shops, glass-walled apartments and a fancy supermarket, and prosperous new suburbs that have mushroomed in the far north and south of the metro area.

Lawrence Katz, an economist at Harvard, said the evidence for the presumed adverse effects of economic segregation was inconclusive. In a recent study of low-income families randomly assigned the opportunity to move out of concentrated poverty into mixed-income neighborhoods, Professor Katz and his collaborators found large improvements in physical and mental health, but little change in the families’ economic and educational fortunes.

But there is evidence that income differences are having an effect, beyond the context of neighborhood. One example, Professor Reardon said, is a growing gap in standardized test scores between rich and poor children, now 40 percent bigger than it was in 1970. That is double the testing gap between black and white children, he said.

And the gap between rich and poor in college completion — one of the single most important predictors of economic success — has grown by more than 50 percent since the 1990s, said Martha J. Bailey, an economist at the University of Michigan. More than half of children from high-income families finish college, up from about a third 20 years ago. Fewer than 10 percent of low-income children finish, up from 5 percent.

William Julius Wilson, a sociologist at Harvard who has seen the study, argues that “rising inequality is beginning to produce a two-tiered society in America in which the more affluent citizens live lives fundamentally different from the middle- and lower-income groups. This divide decreases a sense of community.”

Article source: http://feeds.nytimes.com/click.phdo?i=5fa47495262ffc041b19d91a318dc92c

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Economix Blog: Nancy Folbre: The Green Jobs Numbers

September 12, 2011 by Leave a Comment

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Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

Now, more than ever, prospects for “green jobs” are being treated as a red flag in partisan debate.

Today’s Economist

Perspectives from expert contributors.

Media Matters, a nonprofit watchdog group, has documented a Fox News report proclaiming that the costs of green jobs exceed the benefits. A recent New York Times article, pointing to lackluster programs in California, concluded that “public efforts to stimulate creation of green jobs have largely failed.” A column by David Brooks in The New York Times was pointedly titled “Where the Jobs Aren’t.”

In reaching for bipartisan support in his jobs speech on Thursday, President Obama avoided the word “green” altogether, though his proposed increase in infrastructure spending could involve investments in improved energy efficiency.

But green jobs still hold considerable promise. While it’s not hard to find examples of programs that haven’t lived up to expectations, considerable evidence demonstrates the actual and potential employment impact of efforts to improve environmental sustainability.

Not that green jobs are easy to define. The Bureau of Labor Statistics is currently in the process of developing an official measure, but employment that either saves energy or increases use of energy generated from renewable sources clearly falls into the category.

In February, the Economic Policy Institute and the Blue-Green Alliance released a comprehensive analysis of the employment impact of American Recovery and Reinvestment Act expenditures aimed in this direction, dominated by efforts to improve energy efficiency in buildings and to promote low-carbon transportation.

The study estimates an increase in direct employment of about 367,000 jobs, while indirect employment effects came to about one million – not a cure-all for an economy with more than 14 million unemployed, but a significant contribution.

The cost per job created varied considerably, and not all programs have moved forward as quickly as they should have. But as a report from Think Progress carefully documents, sensationalized assertions of a million dollars or more spent per job are misleading. Overall, the costs of green jobs creation, whether funded with public or private dollars, are lower than those in most other sectors of the economy, at an average of about $60,000 each. These jobs are likely to last for years, generating private cost-savings and important public benefits.

Retrofits to improve the energy efficiency of our existing building stock offer a particularly high rate of return.

A recent Brookings Institution report calls for broader attention to “clean jobs,” defined as those in establishments that produce or add value to goods and services with an environmental benefit, such as reducing pollution or natural resource depletion.

By this definition, the clean economy is a pretty small slice of the United States economy, accounting for only about 2 percent of all jobs. But it’s now bigger than the dirtiest slice, related to production of fossil-fuel based energy.

The analysis by Brookings of employment trends on the county level between 2003 and 2010 shows that jobs in wind energy and solar photovoltaics represent a small but rapidly expanding part of the larger clean economy.

The report also points to a growing share of private venture capital moving in this direction: 16 percent in 2010, from 2 percent in 1995.

So why not rely entirely on the private sector? The biggest gains from investments in new renewable-energy technologies are not easily captured in private transactions, because they produce environmental services that are largely unpriced. Companies can sell consumers with a conscience a “share” in global greenhouse gas reduction – that’s what the growing business of carbon offsets is all about. But consumers who don’t pay also get the benefits, creating a strong temptation to free ride.

Companies can’t market to the consumers likely to benefit most, because they haven’t yet been born. Conventional fossil fuels are cost-effective now only because the environmental costs are dumped into a global commons that imposes costs on other people and future generations.

Public policies could remedy this problem, by imposing a tax on carbon emissions so that their market price better approximates their social cost. Adopting clean-energy standards would also increase demand for clean and green production, giving private companies greater incentive to invest.

The Brookings report explains that Germany, carrying out such policies, attracted investments from major American corporations including Google, First Solar and Good Energies. Between 2004 and 2009, German employment in renewable energy increased to more than 300,000 from 160,000.

Globally, the green jobs numbers look pretty strong. Unfortunately, in the United States, the possibilities for bipartisan collaboration still look very weak. Flag-waving is so much easier.

Article source: http://feeds.nytimes.com/click.phdo?i=34d29c9f3ea730561612cbf0a31eef71

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You’re the Boss: Debating Whether Businesses Will Continue to Offer Health Insurance

June 24, 2011 by Leave a Comment

The Agenda

Two weeks ago, the international consulting firm McKinsey Company threw itself into the rancorous partisan debate over the 2010 health care overhaul by publishing research that appeared to predict that many employers would dump their health insurance plans when the new law fully took effect in 2014. The new law offers subsidies to help low-income people purchase health insurance from state-run exchanges, and it also penalizes companies with more than 50 employees when they fail to offer those employees affordable coverage. As McKinsey notes, paying the penalty will cost less than providing the insurance, so companies could profit by socializing that cost.

Nonetheless, the finding was surprising, and controversial, because, as The Agenda reported in April 2010 (and also in 2009), most economists say they believe that a mix of market pressures, a tax incentive and the penalty will deter all but a relative handful of employers from casting off their health insurance plans. The Obama administration slammed McKinsey’s apparent prediction, and Senate Democrats demanded that the consultants release the proprietary methodology behind it. For several days, McKinsey refused.

I say “appeared to predict” because on Monday, when McKinsey finally released the methodology, it came with a statement insisting that the survey had done no such thing. Rather, “it captured the attitudes of employers and provided an understanding of the factors that could influence decision-making related to employee health benefits.” Two paragraphs later, the statement continued, “We understand how the language in the article could lead the reader to think the research was a prediction, but it is not.”

The Agenda understands, too: The original article was titled “How U.S. Health Care Reform Will Affect Employee Benefits.” Its second sentence declared, “While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.” One word that appears frequently throughout the article is the future-tense “will,” not the conditional “could” — as in, “30 percent of employers will definitely or probably stop offering E.S.I.” — employer-sponsored insurance — “in the years after 2014.” (The Times reported Tuesday that Democrats were not impressed by McKinsey’s explanation.)

Still, the distinction between making predictions and capturing present attitudes — or, really, aspirations — is important. It should come as no surprise that employers, given their choice, would rather focus on their business than go through the administrative hassle of arranging health insurance for their work force. Companies probably wouldn’t offer it now if their employees didn’t demand it and weren’t willing to trade away a portion of their wages to have it. (Economists say that, contrary to broad public perception, employers don’t pay more to offer health insurance. Instead, insurance is merely a component of total pay — and employers that stopped offering it would have to provide some other, well, compensating compensation.)

Strikingly, the overall impression from the McKinsey article is that employees’ views count for little in the coming debate over whether employers will provide health care — or that they’ll accept whatever employers choose to offer. Here, for example, are two findings from McKinsey, based on separately conducted consumer research: 85 to 90 percent of employees would still work for their current company even after it dropped health insurance coverage, but only 60 percent would demand increased compensation to make up for it. That may, or may not, be true in 2011 — we’ll leave it to others to assess the soundness of McKinsey’s survey techniques — when the prospect of an employer dropping health insurance is too abstract for many in the work force to think seriously about what their coverage is worth. But who can say how they’ll think in 2014, as the new system is put in place — accompanied, no doubt, by extensive media coverage?

Employers might see an opportunity to shed their insurance burden once 2014 arrives, but the system that’s coming is so new and different — and complicated — that it seems foolish to presume this will happen right away, if at all. The new law could ultimately dismantle the underpinnings of workplace-provided insurance, but employees, too, will probably have something to say about this. It could take years, maybe even a generation, for people to grow comfortable with buying insurance on their own, and if they continue to insist on insurance from their employer, or prospective employer, in the meantime, companies are likely to comply. That’s what happened in Massachusetts after that state passed its own health care reform in 2006, as health economist Jonathan Gruber told The Agenda the last time we looked at this. There, employer-sponsored coverage actually increased.

Article source: http://feeds.nytimes.com/click.phdo?i=e8000b752a5b4107ee5af9e0adfba251

Filed Under: Small Business Tagged With: , ,