Better and Richer and Fuller for Everyone: Disparity and Regional Growth

7.24.13 | Washington DC’s recent effort to institute a living wage law is not only important to low-wage workers struggling to get by, but to regional competitiveness as well. As Building Resilient Region’s Manuel Pastor and Chris Brenner find in their recent BRR working paper, inequality is strongly tied to a region’s ability to sustain growth.

 

PolicyLink’s America Tomorrow has a great Q&A with Brenner about the findings. Here are some highlights:

    • Inequality was the most important predictor of whether a region was likely to fall out of a growth spell.
    • The larger the populations in middle-income categories, the less likely the region was to fall into a recession.
    • The larger the disparity between the city and the surrounding suburbs, the more likely the region was to fall into a recession. Higher ratios of suburban-city poverty levels were also associated with shorter growth spells.

The bottom line? Programs and policies that make sure the rising tide really does lift all boats are critical to economic growth.

Policies prioritizing equality are more crucial than ever.

Income disparity is at an all time high in the US, or “Of the 1%, by the 1%, and for the 1%,” as Joseph Stiglitz famously put it in Vanity Fair.  The top one percent control 40 percent of the wealth, while 25 years ago, the top 12 percent controlled 33 percent. As Stiglitz explains, people in the top one percent have seen their income rise 18 percent over the past decade, while men with only high-school degrees have seen a 12 percent decline in the 25 years.

US income disparity is one of the highest of any developed nation. According to the Global Posts’ nifty interactive feature, the Los Angeles region has an income disparity equivalent to the Dominican Republic; DC’s is nearly equivalent to Moscow’s. These record-breaking disparities are perhaps most evident in cities, where the very wealthy and those struggling often live just blocks apart.

So if everything points to growth being more easily sustained without this kind of disparity, the question is how to widen the middle? One important effort is the “living wage” movement, which aims to strengthen the middle class and allow full-time employees to live out of poverty.

Last week, McDonalds and Visa came under fire for publishing a sample budget for their employees based on a McDonald’s employees’ hourly salary. But it neglected to account for heat, groceries, and gas. And it assumed the employee had a second job. As the Atlantic points out, when fast food chains and big-box retailers make a profit by paying their employees unlivable wages that require them to need food stamps or Medicare, tax payers end up subsidizing companies’ bottom lines.

Not only do we need policies that help individuals and families—not just corporations’ profit margins—but we need smart planning to ensure that some neighborhoods in a city or some communities in a region aren’t left behind. Brenner points to Oklahoma City as a city that has prioritized equity. The last four consecutive Republican mayors, as well as many business leaders, have supported an increased sales tax that was used to fund redevelopment projects like libraries, a downtown arena, and school infrastructure.

As Brenner explains, “A commitment to place has trumped a commitment to ideology. There are still high levels of poverty, but this shows the value of an integrated regional perspective.”

It takes effective planning and strong cooperation across governments and jurisdictions to ensure that efforts like those in Oklahoma City happen. “It’s about collaboration—discovering unusual allies, talking to those who you don’t usually talk to, and finding common ground. Those in the equity arena should be thinking about growth strategies. They need to figure out how to talk to business leaders and the chambers of commerce,” Brenner explains.

But, as BRR director Margaret Weir and her coauthors found in “Collaboration is Not Enough: Virtuous Cycles of Reform in Transportation Policy,” when trying to implement regional change, “no matter how inclusive and collaborative the networks or innovative the plans for regional transportation, they will produce little real change if not backed by vertical power.” In other words, “power brokers” need to be at the table, listening and understanding what’s at stake: their region’s growth.

As facets of the economy begin to edge towards recovery, encouraging equity as a strategy for growth can ensure more Americans are brought along. As the historian James Truslow Adams wrote when he coined the term “American dream,” at the depths of the Great Depression: what we seek is “a land in which life should be better and richer and fuller for everyone.”

Photo/ Dion Hinchcliffe

 

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