Why cities must confront poverty

Editor’s Note: Rodrick Miller, a Harvard graduate and past Fulbright scholar, is the former president and CEO of the Detroit Economic Growth Corporation, the city’s main economic development engine. In this column written for The PuLSE Institute, Miller takes a dive into why America’s cities cannot escape poverty and why they must deal with the growing crisis of inequality. For submission inquiries email info@thepulseinstitute.org

By Rodrick Miller

Cities have been major population centers throughout history, but cities today are reinventing themselves with suburbanites leaving their mini-mansions for the allure of walkability and chic shops and restaurants, tech firms full of hipsters trying to create the next Google or Amazon, and urban farms offering organic sprouts and cucumbers.

But that isn’t all that cities today represent. Depending on one’s physical location in a city, familial class at birth, and racial/ethnic background, cities can either represent bastions of economic opportunity and quality of life or disconnected wastelands of poverty and crime.

During the 20th Century, industrialization created the middle class and improved quality of life for many families.  Cities throughout the United States prospered as they led much of the world in driving innovation in production and manufacturing. People flocked to large American cities from around the country and globe.

Cities stood out as hubs of jobs, entrepreneurship, and culture. However, as the information age arose and globalization facilitated increased economic participation by emerging markets, U.S. cities lost their position as the epicenter of opportunity and new global markets developed as the hot spots for innovation and growth.

Many US cities experienced tremendous job loss, outmigration, and rapid decay due to lost revenues and failing infrastructure. As a result, deep economic divisions along the lines of race and class materialized.

Today, urban poverty is a tremendous burden limiting the overall productivity of American society and constraining opportunities for many talented young people to contribute and innovate. In fact, it is a consistent thorn that sows seeds of social unrest and spurs crime.

Between 2000 and 2015, poverty in major urban markets rose by 20%.  43.1 million Americans were poor in 2015, 37 million were poor pre-recession in 2007 pre-recession and roughly 32 million in 2000. As the proliferation of poverty continues to accelerate, so does the gap between the wealthy and poor in our society.

According to research by the Brookings Institute, in most cities, income earners in the top 5% continue to experience growing wages while those in the bottom 20% experience stagnant or diminishing wages.  Wages of top income earners in cities is often 14 times or more that of those in the bottom 20%.

For example, Atlanta’s income inequality ratio is 18.1, with residents at the 20th percentile earning $16,927 per year compared with $306,307 for the 95th percentile. In Boston, residents in the bottom 20 percent earn a median household income of $17,734, while those in the top 95th percentile earn $261,973.

Impoverished Americans are not able to fully participate in the economic opportunities presented by the national economic expansion and ultimately represent missed societal productivity and innovation.

We live in a global economy where cities, states, and countries are in a perpetual competition for investment, jobs, and quality of life. If measures are not taken to increase opportunities for the poorest in our society, the economic trajectory for everyone is limited. This is particularly true as demographic shifts will lead to the U.S. to being a country comprised of mostly people of color by the year 2044.

People of color, en masse, are more likely to be poor, less educated, and have less access to jobs and entrepreneurial opportunities. In the long-term, this means that the U.S. will be poorer, less educated, and struggle to maintain its global economic strength strides are not made to increase access.

The root causes and anchors of poverty are diverse and multifaceted and include societal status at birth, institutional racism and discrimination, lack of education, environmental barriers, and much more. That said, cities are among the best-positioned entities to alleviate poverty and create economic opportunity.

In 2010-14, cities posted a concentrated poverty rate of 25.5 percent, compared to 13.7 percent in small metro areas, and 7.1 percent in both suburbs and rural communities. In other words, cities have more concentrated poverty than suburban and rural communities and should exploit these economies of scale to have optimal impact.

Last year, cities around the country clamored to compete for Amazon’s highly promoted HQ2 offering billions in incentives in an effort to lure the more than 50,000 new jobs averaging over $100K/year to their city.  Ultimately, New York and Northern Virginia won the competition.

In any case, the aggressive packages offered to Amazon by many of the cities not only included cash but investments in education and workforce development, transportation infrastructure, site improvements, and additional fiber-optic capacity.
Cities’ speed in identifying resources, novel solutions, and creative financing for this corporate expansion demonstrate their ability to marshal support and make transformative investments when desired.  This same type of energy needs to be applied to reducing poverty through the creation of new economic opportunities.

Cities can directly confront many of the institutional, social, and physical barriers that lead to entrenched poverty through strategic investments in infrastructure, targeted workforce development programs, and progressive public policy to eliminate systemic barriers to economic growth.  For example, in Newark, New Jersey, potentially hundreds of millions of dollars in new real estate development projects are slated to occur over the next 5-10 years.

Mayor Ras Baraka and the Newark Community and Economic Development Corporation have launched an aggressive initiative aimed at increasing the capacity and number of developers, construction firms, and professional service firms of color. They aim to ensure that there is an opportunity for people of color who comprise roughly 80% of the city’s population to gain wealth and create job opportunities for Newark residents.

Meanwhile, the city of Atlanta has proven that cities can lead in creating economic opportunities through the assertive procurement policies that they employed in the 1970s and 1980s which led to the creation and expansion of hundreds of minority-owned and women-owned firms. Between 1974 and 1981, contracts awarded by the city to women and minorities increased from 1% to an average of 24%, worth more than $600 million to entrepreneurs of color and women-owned firms.

Collectively, these firms now represent thousands of new jobs for residents in the Atlanta area. These examples are not a comprehensive list of approaches that can be taken but demonstrate that progress can be made when city leadership is committed to the expansion of economic opportunities for all residents, especially the poor and disenfranchised.

Now is the time for major cities to take the challenges of poverty seriously and confront them directly, not only through increased social programs but through tools and policy that ensure access to economic opportunities for all.

 
Rodrick Miller, an economic development leader, is the president and CEO of Ascendant Global Consulting. 

2 comments

  1. The voice of Rod Miller adds authenticity to Pulse. So often, the political aspects of poverty overshadow the economic realities of inequality. The realities of poverty revolve around gainful employment but economic development as a public sector initiative per se is purely a manifestation of the will of leadership in public and private sectors. Rod bridges these sectors and has experienced the conflict and tests of will between them.

  2. One thing overlooked in the article is the obvious criminal conspiracy of the rich white supremacist who perpetuate poverty for their own gain and actually revel in the despair of the poor.

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