Inequality Is Bad for the Economy

2.21.13 | When speaking of regional resilience, let’s take the concept a step further and consider national resilience (or, put another way, regionalism on a global scale). That’s just what Equity and the Future of the American Economy (pdf), a new report from PolicyLink, does, positing that inequity is bad for economic health, and regions with high inequality grow less rapidly over time.

The paper, which BRR network member Manuel Pastor helped along, takes as its starting point the coalition that elected and reelected President Barack Obama. The country’s long-forecast multiracial, multicultural future is here, and governments’ economic policies must reflect greater equity as a goal if the nation is to thrive. (The paper addresses federal policy, but I think its principal conclusions apply to state and local governments, too.)

The paper’s policy agenda to achieve greater economic equity is a blueprint for progressive Democrats, which—at best—means a very bumpy ride in the current Congress. But the basic premise is difficult to dispute: “America’s transformation into a world nation inside its borders can help it better connect to—and succeed in—the global marketplace. Diverse perspectives help teams solve problems, create stronger organizations, and can foster the innovation needed to grow the economy.”

For more watch this panel on Equity and the Future of the American Economy hosted by PolicyLink and SEIU earlier this month.

Another side of equitable growth is evident in the darker side to economic bounce-backs: the growing costs of place, which were studied last year by the Center for Housing Policy (the National Housing Conference‘s research arm) and the Center for Neighborhood Technology. Their report, Losing Ground: The Struggle of Moderate-Income Households to Afford the Rising Costs of Housing and Transportation, draws troubling conclusions:

  • Incomes have not kept pace with the 44 percent surge in combined housing and transportation costs since 2000 in the nation’s 25 largest metropolitan regions.
  • Middle-income households bear a disproportionate share of this burden: “For households earning 50 to 100 percent of the median income of their metropolitan area, nearly three-fifths (59 percent) of income goes to housing and transportation costs.” The problem is even worse for middle-income homeowners (vs. renters) paying mortgages—housing and transportation costs average 72 percent of income.
  • This burden is greatest “where costs are out of sync with local incomes,” which are not always the areas with the highest absolute costs.

Their proposed solutions include greater state and local government support for location-efficient housing, preserving existing affordable housing units, improving transit service and walkability “for compact areas where housing prices are already relatively affordable,” and value-capture policies designed to support location-efficient affordable housing.

Those steps should become critical in coming years as Boomers continue their march to AARP (the number of those aged 65+ is forecast to double by 2030), and the hazards of a “let the market handle it all” approach to retirement savings continues to resonate in the post-Great Recession recovery. When that cost-income-affordable housing disparity gets out of hand, you get situations like this.

San Francisco may be the stereotype of high housing costs, but the convergence of homelessness, a rapidly aging population, a frayed social safety net, and what I consider a sustained attack on the very idea that we’re all in this together, is already affecting or will affect every city and region of the country.

How regions will deal with economic and income disparities, affordable housing, and transportation remains to be seen, but deal with those issues they must. If regions within the country lose resilience, the United States will lose resilience in the global economy.

Comments are closed.