The Economy Is Growing, But Many People Aren't Feeling the Benefits

Median earnings, poverty and employment rates have stagnated, and racial gaps have worsened, according to a new Brookings report. Five cities, however, are bucking these trends.
by | April 3, 2019 AT 4:00 AM
Black panhandler holding a sign in front of a grocery cart.
The racial gap in median earnings and poverty rates increased in many metro areas over the last decade. (AP/David Zalubowski)

SPEED READ:

  • The Brookings Institution released a new Metro Monitor report.
  • Median earnings, poverty and employment rates largely recovered from the recession but have stagnated.
  • Most of the progress in narrowing racial gaps is in employment rates, not median earnings or poverty rates.
 

In the decade since the Great Recession, most cities have recovered. But even in places that have bounced back -- some stronger than before -- many people are still struggling.

A new report by the Brookings Institution outlines how the economic expansion over the last decade has been a lopsided one marked by growing income inequality, wage stagnation and racial divides.

The report's approach, says co-author Chad Shearer, is more holistic than most because it looks at not just growth and prosperity but how they translate to individuals.

“[America's] economic growth has benefitted some more than others,” he says, “so we think it’s important to focus on how inclusion metrics are changing by race and ethnicity.”

Inclusion metrics measure changes in median earnings, poverty and employment rates. Without accounting for race, those three metrics largely recovered from the recession by 2015, says Shearer, but they have stagnated since then.

For example, Tulsa, Okla.'s median wage increased by nearly 15 percent between 2010 and 2015 while its relative poverty declined by 5.4 percent. Between 2016 and 2017, its poverty rate still improved, but median earnings fell.

The main reason for this stagnation is that big increases in employment rates have usually come from job gains in low-paying sectors like retail and hospitality. While that’s a positive for job growth, particularly for lower-skilled workers, these jobs tend to have lower wages.

“So as you’re adding these jobs and improving your employment rate, you’re lowering your median earnings,” says Shearer. “That kind of job growth can be a drag on the inclusion indicator.”

 

Racial Gaps

With respect to race, the Brookings report shows that dozens of places made progress in overall racial inclusivity over the last decade. But, the gains were largely limited to narrowing the racial gap between employment rates. The racial gap in median earnings decreased in as many areas as it increased; and the racial gap in poverty rates increased in 54 out of 100 metro areas.

Narrowing the prosperity gap between whites and people of color has proven to be one of the most elusive tasks over the last decade. Silicon Valley is a classic example.

The San Jose metro area scores among the nation's highest for growth in jobs, wages and economic output. But it scores dead last on racial inclusivity. When compared with people of color, whites in the region now earn nearly $9,000 more a year on average and have a lower poverty rate and unemployment rate.

It's not surprising then that nearly two-thirds of Bay Area residents say the quality of life there has worsened over the last five years, according to a recent poll.

 

Outliers

A few places are bucking these trends.

The metro areas of Chattanooga and Knoxville, Tenn.; El Paso, Texas; and Los Angeles made consistent progress in all areas except entrepreneurship, according to Brookings. And Denver made across-the-board improvements for all types of economic growth -- the only metro area to achieve this over the past decade.

The five cities have at least one thing in common: They tend to attract younger workers and are in states that rank high in Fitch Rating’s measurements for working-age populations and productivity. Experts say growth in the working population -- particularly skilled labor -- is a key ingredient to economic growth.

 

Looking Ahead

If cities want true, inclusive growth, Shearer says they need a long-term vision focused on making that happen through the development of industries that fuel growth. 

Denver’s already thinking like that.

For the past three years, local officials collected public input and used those comments to draft their 20-year plan for inclusive growth. The latest draft was released this month and is heavily focused on promoting health and social equity through land use and zoning, housing affordability, mobility and community amenities. Among other things, the plan calls for increasing access to healthy food through community-supported agriculture, farmers’ markets and incentives to build grocery stores in so-called food deserts.

 

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