New Geography

Tag: middle class

  • Inequality of the Largest U.S. Metropolitan Areas

    We earlier mapped inequality of the US states. Now I show the geography of inequality for metropolitan areas over 1,000,000.  These measures of inequality are gini coefficients, calculated by the US Census Bureau for 2005-2009. These indicate how amazingly severe inequality, or the concentration of income and wealth at the top, has become.  The gini is a measure of the departure of a curve of accumulated income, ranking from the poorest to the richest. The current US gini is .467, up from .39 back in 1974, and much higher than other rich countries, such as Canada at .32, Germany at 27, France at .33, and Sweden at .23.

    Interpretation of these indices is relative. Even the lowest value, for Salt Lake City, is absolutely high compared to high-income-country norms, or even our own recent past. But in the contemporary US context, ginis from .41 to .44 are  low, between .44 and .447 medium low, .448 to .46 moderate, .46 to .47  moderately high,  and over .47 very high inequality.  Note that the US average is .467, and that most of the metropolitan areas are below that. This is a reflection of the demographic influence of the high levels of inequality of the following few large metropolitan areas:

    Region Population Gini  
    New York 18.9 million 0.502
    Miami 5.5 0.493
    LA 12.8 0.484
    Houston 5.6 0.478
    San Francisco   4.2 0.473

    These national or regional capitals are highly unequal because of the concentration of wealthy families or wealth-producing sectors like finance. Other contributors are a dearth of middle income jobs and large numbers of the poor. These higher than the US average metro areas are joined by three southern metropolitan areas, New Orleans, Memphis, and Birmingham, where in equality is more explainable instead by racial inequality.

    Metro areas around or just below the national average (in red) similarly include a mix of regional economic and financial capitals, along with southern large metros, including Chicago, Philadelphia,  Cleveland, Dallas, and Charlotte plus Oklahoma City and San Antonio.


    A handful of  metro areas, shown in yellow, are moderately lower than the national average and dominantly in the east central part of the country, and include a mix of sizes, from Detroit, St. Louis and Atlanta, Pittsburgh, Buffalo and Milwaukee, Nashville, Tampa, and Austin, with only Denver and San Diego in the west. 

    Less unequal areas, shown in green, are with the exception of Phoenix, all in the east, from Hartford and Providence, to Baltimore, Jacksonville and Orlando, and a cluster in the north central states, with Cincinnati, Columbus, Louisville, Indianapolis, and Grand Rapids. These mostly follow the pattern observed in our recent state analysis where inequality was generally lower across the northern tier of the country.

    The least unequal metro areas are even more focused on the Germanic belt that stretches across the Midwest to far west, with Minneapolis, Kansas City, Salt Lake, Seattle and Portland, Sacramento Las Vegas and Riverside-San Bernardino, plus some in the Atlantic states, including Rochester, Raleigh, Richmond  and the government dependent Washington DC and Virginia Beach-Norfolk. Salt Lake, influenced both by Mormonism and a moderately Scandinavian population, is the least unequal followed by Virginia Beach and Minneapolis.  Overall, with the exception of the Washington DC area,  the least  unequal metro areas tend to have the lowest shares of minority populations. Less unequal metros also tend to retain strong middle class industries, whether it’s Boeing in the Seattle area or the burgeoning tech and manufacturing industries found in places like the Salt Lake region.

    Highly unequal and less unequal may appear together on the map, suggesting lesser suburban or satellite inequality. Generally speaking, suburbanized, less dense (and often less globalized) areas tend to be more equal. We can see this in the difference between Los Angeles and Riverside-San Bernardino,    San Francisco as opposed to Sacramento, Boston vs. Providence, and Washington DC vs. Baltimore. Washington is especially interesting, as the city is extremely unequal, the wider metro area (more homogenous middle class suburbs) far less so. This is even more telling if we look at a more local geographic scale, with central cities marked by the juxtaposition of the very rich and very poor, while suburban cities tend to be dominated by similar middle class folks.

    Among metro areas under 1 million the most unequal is Bridgeport-Stamford, CT  ( those wealthy suburbanites next to historic industrial cities), while the least unequal are Ogden, UT, Appleton, WI, York, PA and Fairbanks, AK.

    Inequality in selected cities

    The most unequal cities (over 100,000) are all southern (Atlanta, #1, New Orleans, Washington, Miami, Gainesville, Ft. Lauderdale, Dallas and Baton Rouge), all except for mighty New York City. Race and ethnicity matter, as does the composition of the local economy. 

    The least unequal  cities are all suburban or satellite, except for Port St. Lucie (military and space), such as of Chicago (Elgin), Kansas City (Olathe), Salt Lake (West Valley, West Jordan), Sacramento (Elk Grove), Los Angeles (Norwalk), Phoenix (Gilbert) , Denver (Thornton) and North Las Vegas.

    Conclusion

    Inequality in distributions of income are high and have become higher in recent years in the United States. But there remains fascinating geographic variation, resulting from abiding racial differences, variation in industrial structure and class homogeneity, and in geographic situation, regionally and locally. This helps both to explain some of the drivers of inequality, but also the complexities of finding ways to alleviate it.

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist).

  • Book Review: ‘The End of the Suburbs,’ by Leigh Gallagher

    Suburbia has been a favorite whipping boy of urbane intellectuals, who have foretold its decline for decades. Leigh Gallagher’s “The End of the Suburbs” is the latest addition to this tired but tireless genre. The book lacks the sparkling prose and original insights one could find in the works of, say, Jane Jacobs or Lewis Mumford. Indeed, Ms. Gallagher’s book is little more than a distillation of the conventional wisdom that prevails at Sunday brunch in Manhattan.

    The author restages many of the old anti-suburban claims, and her introduction’s section headings easily give away the gist of the argument: “Millennials hate the burbs”; “Our households are shrinking”; “We are eco-obsessed”; “The suburbs are poorly designed to begin with”; and so on.

    Ms. Gallagher, an editor at Fortune magazine, fails to persuade. For starters, her focus on the recent past distorts her argument. She starts with reporting about a dismal home-building conference in Orlando in early 2012, when the housing market was still close to its post-bubble nadir. She portrays those dark times as the harbinger of a new reality that will see suburban living fade away. She quotes real-estate economist Robert Schiller saying that suburban home prices won’t recover “in our lifetime.” But given that prices have indeed risen, and are now reaching precrash levels in some markets, such predictions should be viewed skeptically.

    There isn’t much room for contrarian viewpoints here. All the usual anti-suburbanite suspects are marshaled to support the book’s thesis: Al Gore suggests suburbs will die because they aren’t green enough; the critic James Howard Kunstler makes exaggerated claims about how “peak oil”—the notion that we are running out of fossil fuels and that their cost will skyrocket—will bankrupt suburbanites; other experts claim that young people will desert suburbia for their entire lifetimes and that empty-nesters will abandon their stale suburban lives in favor of urban density.

    Today barely 11% of Americans live in densities of more than 10,000 people per square mile, which is about the level of an inner-ring San Fernando Valley suburb, one-seventh of the Manhattan level and almost one-third of the five boroughs. Four out of five prospective home buyers in the U.S. prefer single-family houses, according to a 2011 survey conducted by the National Association of Realtors and the advocacy group Smart Growth America. In short, most of America isn’t about to densify itself along Gothamite, or even Los Angeles, lines.

    The author ignores most of these findings. She believes cities are poised to become the main beneficiaries of the suburban decline she projects. “To see that cities are resurgent centers of wealth and culture, all you need to do is set foot in one,” she writes. To be sure, some American urban centers, most notably New York, San Francisco and Washington, have experienced modest population growth over the past decade or two, although still well below the national average. And even in these cities, there are many neighborhoods that sophisticated urbanites wouldn’t really want to “set foot in.” In newly hip, and now increasingly expensive, Brooklyn, nearly a quarter of residents live below the poverty line. The borough’s artisanal cheese shops and trendy restaurants are charming, but one in four Brooklynites receives food stamps. The urban renaissance is even less obvious in places like St. Louis, Cleveland and Detroit, which have lost residents in significant numbers over the past decade and whose gentrified zones are tiny.

    Having misunderstood the past, Ms. Gallagher is likely off in her predictions of a high-density future. She insists that young people overwhelmingly want to live “in urban areas and don’t want to own a car.” But most millennials entering their 30s, according to surveys, are likely to get married and eventually have children. That is when they will start to seek out single-family houses in lower-density areas. They may well experience suburbia differently than their parents. More of them will work at home or close to home, or drive fuel-efficient cars on their commutes. Even so, most aging millennials can be expected to seek out homes in affordable areas with decent schools, meaning either the suburbs of older cities or lower-cost, economically vibrant regions like the Southeast, the Gulf Coast or the Mountain West.

    Much the same can be said about the other key emerging demographic group, immigrants and their offspring. Nationwide over the past decade, the Asian population in suburbs grew by almost 2.8 million, or 53%, while that of core cities grew 770,000, or 28%. In Los Angeles, the region with the nation’s largest Asian population, the suburbs added roughly five times as many Asians as the core city.

    One reason: Immigrants are more likely to have families than the native-born. They don’t share the conviction, held by many anti-suburbanites such as Ms. Gallagher, that we are seeing “the end of the nuclear family.” The family, like suburbia, has been written off numerous times. But as Margaret Mead once observed, it “always comes back.” High-density cities generally repel families, and they aren’t conducive to middle-class aspirations. In New York City and Los Angeles, for example, the homeownership rate is 20% less than the national figure of 65%. Things are even worse for working-class and minority households. Metropolitan Atlanta’s African-American homeownership rate is approximately 40% above those of San Jose and Los Angeles, approximately 50% higher than Boston’s, San Francisco’s and Portland’s, and nearly 60% higher than New York’s.

    Many of those migrating to Atlanta, Houston, Dallas-Fort Worth and other low-density, lower-cost cities come from denser, more expensive areas. Between 2000 and 2010, 1.9 million net domestic migrants left the New York area, 1.3 million left Los Angeles and 340,000 left San Francisco, while 230,000 left San Jose and Boston, according to Census Bureau data. The death of the suburbs may suggest a pleasant prospect for the New York and D.C. urbanist crowd, but for most, the American dream remains a suburban one. As long as the American family and the national aspiration for a better life persist, the suburbs are likely to retain their pre-eminent role.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Wall Street Journal.

  • The Emerging Geography of Inequality

    Since the 1970s there has been a well-documented and persistent increase in income inequality in the United States. As the country slowly emerges out of a deep recession, it is instructive to seek out the geographic variation by states in the degree of inequality and the variation in both median and mean incomes.

    Data in this article are for households (basically IRS data), for 2009-2011. Median household income is considered the “typical” income of an area. The mean income is the aggregate income of all households in an area, divided by the number of households. This latter measure can be heavily influenced by high numbers of very affluent as well as poor households.

    Inequality is a measure of how far the distribution of incomes differs from if all households had the same income.  The gini coefficient is the most popular measure of income inequality.  But for my maps I instead use a simple measure of the difference between the median and mean, divided by the median, or the percent by which the mean is higher (or lower) than the median. Values above .39 (the figure for the US as a whole) are considered quite high. It should be noted that areas of highest or lowest incomes are not necessarily very unequal, if mostly all are rich or all are poor. Rather it is the juxtaposition of poor and rich households in the same state or area that best demonstrates the true geography of inequality.

    Median income is the best descriptive measure of the relative income of areas.  The state map is often reproduced and will not surprise the informed reader.  The highest median incomes, in descending order, are in Connecticut, New Jersey. Maryland, Alaska, Hawaii, Massachusetts, New Hampshire, Virginia and California, all over $60,000.  All but the far western AK, HI, and CA are parts of Megalopolis (minus the NY and PA core!).  The next “richest” (over $55,000) are selected northern and western states with large metropolitan populations: Washington, DC;  Delaware; Washington; Minnesota; Colorado; Utah; Nevada; Illinois; and New York.   

    States with median incomes from $50,000 to $55,000 are the ”typical” US set ( the US median income  is $51,914) and include Arizona, Pennsylvania, Rhode Island, Vermont, Wisconsin and Wyoming – but no state from the Old Confederacy outside Virginia. The 16 states with median incomes between $45,000 and $50,000 include the remaining big metropolitan states of the northeast, Indiana, Michigan, Missouri, Ohio, some more agricultural states in the Midwest, such as Iowa, Nebraska, North and South Dakota,  and the most sophisticated, metropolitan southern states , Georgia, Texas, Florida and North Carolina.

    Lower down on the income totem pole are six southern states, including Kentucky, South Carolina, Oklahoma, Alabama, Tennessee and Louisiana, and two western states, Montana and New Mexico, with median incomes between $40,000 and $45,000. Three states, Arkansas, Mississippi, and West Virginia, are at the bottom with median incomes under $40,000.  These states lack large urban areas, and in the case of Arkansas and Mississippi, retain a large and mostly poor African-American population.

    Inequality

    With the exception of New York, and its spillover to Connecticut, the northern part of the country has much lower inequality than the southern half, presumably because of a less severe racial and ethnic history, but also because of the differential history of unionization and welfare measures between north and south. The most egalitarian states are also in the North, establishing a band of lower inequality from Wisconsin through Iowa, Nebraska, Wyoming to Utah, northern New England (Maine, Vermont and New Hampshire), as well as the newest states, Hawaii, and Alaska.

    Then these are abutted by the relatively more equal states (in yellow) across the northern tier from Oregon and Washington to Indiana, Ohio, West Virginia, Maryland, and Delaware. There may be several historic  reasons for this greater degree of equality ranging from relatively low percentages of  poorer minorities such as African-Americans and Latinos; the presence of large Scandinavian and German descendants who have a historic attachment to egalitarian notions; and in some states, the strong influence of private sector unions.

    The middle set of states, orange on the map, sort of take a middle position geographically too, comprising in the east the highly urbanized  states of Massachusetts, New Jersey, Pennsylvania and Virginia, the Mid-America  trio of Missouri, Illinois and Kentucky,  and then the western redoubts of Colorado, Arizona, and New Mexico, affected by Hispanic and American Indian populations.  I can’t say why South Carolina is more equal (slightly) than any other state in the deeper South.  

    The states in green with higher inequality are a contiguous set across the traditional South, a region united by a difficult history of race relations and underdevelopment, as well as hostility to unions and public intervention on economic issues. The exception to the rule, Connecticut is due to its proximity to New York, bringing exceptionally wealthy households, overcoming otherwise more egalitarian institutions.

    Only four states, New York, California, Texas, and  Florida, plus Washington, DC have inequality above the national average of .39, indicating both their very large populations, their very complex ethnicity, and large metropolitan economies rich in high income earners, entrenched concentrations of poverty, and high levels of immigration. Surprisingly, these states are even more unequal than the poorest states with the most difficult racial history and delayed development: Mississippi, Alabama, Arkansas, and Louisiana.

    Poverty

    How does the level of poverty relate to income levels and the geography of inequality?  Consider first these simple correlations: Median income and poverty, -.62, mean income and poverty, -.44, and poverty and inequality, .57.  These relations reflect the complex patterns of income, inequality, and poverty across the states. While richer states tend to have lower levels of poverty, the weaker relation with mean rather than with median income reflects the fact that some richer states, especially New York and California, have moderately high poverty, which in turn is related to their high degree of inequality.  The moderate positive correlation of poverty and inequality is most evident in the giant states of New York, California, Texas and. Florida (and Washington DC) as well as in the deep south states of Louisiana, Mississippi, Alabama, and Georgia. In contrast there is relatively low rates of both poverty and  inequality in the same northern tier (Plains, Midwest, and Mountain) states of Wisconsin, Minnesota, Iowa, Nebraska, Wyoming, and Utah, plus the northern New England states of Vermont and New Hampshire.

    The geography of poverty, even more than that of inequality is reflective in large part of the deep and abiding income and education divide between whites and Asians versus Blacks and Hispanics. But the poverty of West Virginia and perhaps of Kentucky, and even Tennessee and Indiana also reflects an    alternative Appalachian history of settlement and culture that is largely white. At the opposite end the low poverty of Maryland, despite a high minority population, perhaps reflects the importance of federal employment.

    Conclusion

    For an old Roosevelt Democrat, the persistence of widespread poverty and deepening inequality, even while the extremely rich capture ever higher shares of income and wealth, is outrageous. It brings the United States back to the degree of inequality last recorded in 1929. It is ironic that the lowest degree of inequality in American history was 39 years ago in 1974, during a Republican administration, and fifty years after the great March on Washington.  These new maps are not pretty, and sadly there is little prospect for improvement.

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist).

  • Southern California’s Road Back

    If the prospects for the United States remain relatively bright – despite two failed administrations – how about Southern California? Once a region that epitomized our country’s promise, the area still maintains enormous competitive advantages, if it ever gathers the wits to take advantage of them.

    We are going to have to play catch-up. I have been doing regional rankings on such things as jobs, opportunities and family-friendliness for publications such as Forbes and the Daily Beast. In most of the surveys, Los Angeles-Orange County does very poorly, often even worse than much-maligned Riverside and San Bernardino. For example, in a list looking at “aspirational cities” – that is places to move to for better opportunities – L.A.-Orange County ranked dead last, scoring well below average in everything from unemployment to job creation, congestion and housing costs relative to incomes.

    Yet, Southern California possesses unique advantages that include, but don’t end at, our still-formidable climatic and scenic advantages. The region is home to the country’s strongest ethnic economy, a still-potent industrial-technological complex and the largest culture industry in North America, if not the world.

    In identifying these assets, we have to understand what we are not: Silicon Valley-San Francisco, or New York, where a relative cadre of the ultrarich, fueled by tech IPOs or Wall Street can sustain the local economy. Unlike the Bay Area, in particular, our economy must accommodate a much larger proportion of poorly educated people – almost a quarter of our adult population lacks a high school degree. This means our economy has to provide opportunities for a broader range of skills.

    Nor are we a corporate center such as New York, Houston, Dallas or Chicago. We remain fundamentally a hub for small and ethnic businesses, home to a vast cadre of independent craftspeople and skilled workers, many of whom work for themselves. In fact, our region – L.A.-Orange and Riverside-San Bernardino – boasts the highest percentage of self-employed people of any major metropolitan area in the country, well ahead of the Bay Area, New York and Chicago.

    Policy from Washington has not been favorable to this grass-roots economy. The “free money for the rich” policy of the Bernanke Federal Reserve has proven a huge boom to stock-jobbers and venture firms but has not done much to increase capital for small-scale firms. Yet it is to these small firms – dispersed, highly diverse and stubbornly individualistic – that remain our key long-term asset, and they need to become the primary focus on regional policy-makers.

    Ethnic Networks

    Immigration has slowed in recent years but the decades-long surge of migration, largely from Asia and Mexico, has transformed the area into one of the most diverse in the world. More to the point, Southern California has what one can call diversity in depth, that is, huge concentrations of key immigrant populations – Korean, Chinese, Mexican, Salvadoran, Filipino, Israeli, Russian – that are as large or larger than anywhere outside the respective homelands. Foreigners also account for many of our richest people, with five of 11 of L.A.’s wealthiest being born abroad.

    These networks are critical in a place lacking a strong corporate presence. Our international connections come largely as the result of both the ethnic communities as well as our status as the largest port center in North America, which creates a market for everything from assembly of foreign-made parts to trade finance and real estate investment. Southern California may be a bit of a desert when it comes to big money-center banks, but it’s home to scores of ethnic banks, mainly Korean and Chinese, but also those serving Israeli, Armenian and other groups.

    For the immigrants, what appeals about Southern California is that we offer a diverse, and dispersed, array of single-family neighborhoods. Both national and local data finds immigrants increasingly flocking to suburbs. Places like the San Gabriel Valley’s 626 area, Cerritos, Westminster, Garden Grove, Fullerton and, more recently, Irvine, have expanded the region’s geography of ethnic enclaves.

    These enclaves drive whole economies, such as Mexicans in the wholesale produce industry or the development of electronics assembly and other trade-related industry by migrants largely from Taiwan. Global ties are critical here. Korean-Americans started largely in ethnic middleman businesses, but have been moving upscale, as their children acquire education. They, in turn, have helped attract investment from South Korea’s rising global corporations, including a new $200 million headquarters for Hyundai in Fountain Valley, as well as a $1 billion, 73-story new tower being built by Korean Air in downtown Los Angeles.

    Tech Industrial Base

    During the Cold War, Southern California sported one of the largest concentrations of scientists and engineers in the world. The end of the Cold War, at the beginning of the 1990s, severely reduced the region’s technical workforce, a process further accelerated by the movement out of the region of such large aerospace firms as Lockheed and Northrop. The region has roughly 300,000 fewer manufacturing jobs than it had a decade ago, largely due to losses in aerospace as well as in the garment industry.

    Yet, despite the decades-long erosion, Southern California still enjoys the largest engineering workforce – some 70,000 people – in the country. It also graduates the most new engineers, although the vast majority of them appear to leave for greener pastures. One looming problem: a paucity of venture capital, where the region lags behind not just the Bay Area, but also San Diego and New York. This can be seen in the relative dearth of high-profile start-ups, particularly in fields like social media, now dominated by the Bay Area.

    But the process of recovery in Southern California does not require imitating Silicon Valley. Instead we need to leverage our existing talent base – and recent graduates – and focus on the region’s traditional strength in the application of technology. A recent analysis of manufacturing by the economic modeling firm EMSI found strong growth in some very promising sectors, including the manufacturing of surgical and medical equipment, space vehicles and a wide array of food processing, an industry tied closely to the immigrant networks.

    Cultural Complex

    For most Americans, and even more so among foreigners, the image of Southern California is shaped by its cultural exports, not only in film and television but in fashion and design. This third sector epitomizes the uniqueness of the region, and provides an economic allure that can withstand both the generally poor business climate and the incentives offered by other regions.

    After a period of some stagnation, Hollywood again is increasing employment. Roughly 130,000 people work in film-related industries in Los Angeles, which is now headed back to levels last seen a decade earlier but still well below the 146,000 jobs that existed in 1999.

    At the same time, the sportswear and jeans business in Los Angeles, and the surfwear industry in Orange County, remain national leaders. Overall, the area’s fashion industry has retained a skilled production base – over twice that of rival New York’s – and has been aided, in part, by access to Hollywood, lower rents and labor costs than in New York.

    Taken together, these sectors – ethnic business, sophisticated manufacturing and culture – could provide the basis for a renaissance in the local economy. The smaller firms in these fields, in particular, need a friendlier business climate, a more evolved skills-training program from local schools and a better-maintained infrastructure. More than anything, though, they require an understanding on the part of both government and business that their success remains the best means to reverse decades of relative decline.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Orange County Register.

  • Rust Belt Chic And The Keys To Reviving The Great Lakes

    Over four decades, the Great Lakes states have been the sad sack of American geography. This perception has been reinforced by Detroit’s bankruptcy filing and the descent of Chicago, the region’s poster child for gentrification, toward insolvency.

    Yet despite these problems, the Great Lakes’ future may be far brighter than many think. But this can only be accomplished by doubling down on the essential DNA of the region: engineering, manufacturing, logistics, a reasonable cost of living and bountiful natural resources. This approach builds off what some local urbanists, notably Jim Russell, have dubbed “rust belt chic.”

    With a population of 58 million, the Lakes region boasts a $2.6 trillion economy equal to that of France and far larger than the West Coast’s. (We define the region geographically as comprising the western ends of New York and Pennsylvania, northeastern Minnesota, and Ohio, Indiana, Illinois, Michigan and Wisconsin.) Despite the growth in auto manufacturing in the South, the Great Lakes region still accounts for the vast majority of jobs in the resurgent industry, now operating at record levels of capacity.

    Since 2007, Michigan, Indiana, Ohio and Wisconsin have ranked among the top five states for growth in industrial jobs, adding a half million new manufacturing jobs since 2009.

    To build on this progress the region needs to focus on its human assets. This starts with by far the nation’s largest concentration of engineers, some 318,000, which stems from the oft unappreciated fact that manufacturing employs the majority of scientists and engineers in the nation. It also accounts for almost 70% of corporate research and development. This includes disciplines such as mechanical engineering, which according to a recent EMSI study, has enjoyed steady job and income growth over the past 20 years.

    Another critical asset is the concentration of skilled trades, the workers most sought after by employers, according to a recent Manpower survey. To keep this advantage, the area needs to focus on educating its workforce — particularly in neglected inner city neighborhoods — with skill training for jobs that actually exist and are expected to grow. This is already occurring in some states, such as Ohio.

    To be sure, traditional manufacturing jobs, particularly for the unskilled and semi-skilled, likely will never come back in large numbers. But the earnings level for skilled workers will remain well above the national average, and may increase even further as shortages develop.

    Some dismiss such blue-collar strengths as a critical weakness. They suggest that area residents might decamp for places like Silicon Valley where they can find livelihoods cutting hair and providing other personal services for the digerati.

    Of course, no sane Great Lakes leader would endorse this approach in public, but many, instead of embracing “rustbelt chic” prefer to recreate a faux version of America’s left coast. This obsession goes back at least a decade, reaching its most risible level during the time of former Michigan Gov. Jennifer Granholm. Her strategy focused on turning its cities — including Detroit — into “cool” burgs.

    This clearly did little to turn around either already beleaguered state or cities; “cool” did not save Detroit from bankruptcy. Indeed cool represents just one variation in a myriad of Rust Belt elixirs, including casinos, convention centers, “and creative class oriented arts districts. Virtually all the strategies being adopted in Detroit have already been applied in Cleveland, including by the same entrepreneur, Quicken Loans Chairman Dan Gilbert, with very little tangible economic benefit.

    Yet despite this history, Detroit — the poster child of public malfeasance — once again is pinning its hopes on luring the “creative class” to Motor City. It starts with the usual stab at subsidizing housing, office and retail around the central core. This is being jump-started by taking Quicken Loans jobs already in the area’s suburbs, meaning little net regional advantage.

    Even more absurd, Michigan taxpayers are being asked to pony up to as much as $440 million for a new stadium in Detroit for the Red Wings hockey team. In contrast to this beneficence, many remaining established, older smaller neighborhood businesses — many of them deeply entrenched in the Rust Belt economy — get stuck with ever higher tax bills and reduced levels of public service.

    To be sure, this approach can succeed in building hipster cordon sanitaire — a miniaturized but utterly derivative urban district — that can be shown to investors and visiting, and usually core-centric, journalists. It also can enrich speculators and those politicians who service them, but represents a marginally effective means of reviving the city, much less the regional, economy.

    Instead of chasing hipsters , Cleveland urban strategist Richey Piiparinen suggests cities such as his rebuild their economies from the ground up, tapping the strong industrial skills, work ethic and resilient culture deeply embedded in the region. Large factories may not return en masse to Cleveland, Detroit or Chicago, but a strong industrial economy and a culture embracing hard work could stir growth in service-related fields as well.

    Geography and location provide other opportunities . The area’s natural resources — the Great Lakes contain one-fifth of the world’s supply of fresh water — constitute a profound competitive advantage against drought stricken economies in the Inland West, the southern Great Plains and parts of the Southeast. Water is an essential element in many industrial processes, including fracking, a serious issue in parts of the Rust Belt. Miles of attractive coastline could be used to lure not only factories, but high-tech businesses, tourists and educated professionals who can choose their location.

    The Great Lakes also are a natural conduit for the $250 billion trade with Canada, with its vast resource-based economy and growing population . Instead of funding better bars, art galleries and sports venues, or hoping to attract tourists and conventioneers to traipse to Cleveland in December, what the region really needs, noted a recent Brookings report, is better infrastructure, such as bridges, ports, freight rail and roads.

    Critical too are the region’s strong engineering schools. Of the nation’s top 10, four — Carnegie Mellon, Purdue, the University of Michigan, and the University of Illinois at Champagne-Urbana — are located in the Rust Belt. The Great Lakes may not be home to the Ivy League, but it remains the nursery of practical applied intelligence.

    Emerging demographic trends could also play a positive role. The millennial generation will soon be approaching the age when they wish to start businesses, get married, have children and buy homes. A good target would be those seeking a single-family home and a reasonable cost of living; both are increasingly difficult to attain in much of the Northeast and coastal California where the cost of housing, even adjusted to income, can be easily two to three times higher.

    Indeed, despite decades of demographic stagnation, the region already boasts higher percentages of people under 15 than the Northwest, the Northeast (including New York) and has about the same percentage of kids as the rapidly growing Southeast. For a new generation, the Great Lakes could emerge as a destination, not a place to avoid.

    This requires the region becoming more attractive to newcomers, whether from abroad or within the country. As urban analyst Aaron Renn suggests, the Great Lakes has to become more culturally open to outsiders and immigrants. Cities such as Cleveland, Chicago, and Detroit were once magnets for immigrants from Europe and people coming from America’s rural hinterlands, notably the south.

    Restoring appeal to outsiders does not mean denying the region’s proud past, and throwing away its historic assets, but instead focusing on its core values. For many reasons — geography, weather, history — the region cannot remake itself into California, the Pacific Northwest or the Northeast Corridor. Instead the Great Lakes can best restore its legacy as an aspirational region by focusing on the very real things that constitute its historic DNA.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.

    Great Lakes map by BigStock.

  • Mobility for the Poor: Car-Sharing, Car Loans, and the Limits of Public Transit

    Public transit systems intend to enhance local economies by linking people to their occupations. This presents problems for many  low-income families  dependent on transit for commuting. With rising prices at the gas pump, much hope has been placed on an influx of investment into public transit to help low-income households. But does public transit really help the poor? While the effect of transit access on job attainment is murky, several alternatives such as car loans and car-sharing programs have seen real results in closing the income gap. For Christina Hubbert, emancipation from public transit has been a change for the better. NBC News reports:

    A car means Hubbert no longer spends two hours each way to and from work in suburban Atlanta. It means spending more time with her 3-year-old daughter — and no longer having to wake her up at 5 every morning so she can be in the office by 8. It also means saving hundreds of dollars each week in day care late fees she incurred when she couldn’t get to the center before its 6:30 p.m. closing time.

    Research finds that car-ownership is positively correlated with job opportunities while no such relationship exists with access to transit stations. Furthermore, increased transit mobility has been proven to have no effect on employment outcomes for welfare recipients. The notion that newer and nearer public transit creates benefits for all is inaccurate; it only creates opportunities for those who live near the transit stations, and those opportunities are limited. A study by the Brookings Institute finds that, among the ten leading metropolitan areas in the US, less than 10% of jobs in a metropolitan area are within 45 minutes of travel by transit modes. Moreover, 36% of the entry-level jobs are completely inaccessible by public transit. This is not surprising given the fact that suburbia houses two-thirds of all new jobs.

    The mismatch between people and jobs can be reconciled in two ways: car loans and car-sharing services. Basic car-sharing involves several people using the same car or a fleet of cars, as with the ZipCar. The concept has branched out to on-demand car sharing services, such as Lyft, mobile apps which link riders with drivers.

    Car loans on the other hand have been around for a while and offer affordable financing for a car without a required down payment. Ways to Work, one of the largest loan providers in the U.S., includes courses on personal finance and credit counseling. By making vehicle travel more attractive, these two disruptive innovations threaten the expansion of public transit – and its powerful associated lobbies – in three ways:

    1. It’s more cost-efficient and time-efficient.

    To improve the way we move people, transit developments must save both time and money. Sadly, transit lines are notorious for their extraordinary costs and long delays. Data from the 2010 Census reveals that people living in central cities with a higher proportion of transit riders experience longer commutes. And since transit riders have more cumbersome commutes, they are much more likely to be tardy or absent from work.

    The hefty price tag of transit projects also triggers concern. For example, the cost per new passenger of the Washington Metro line to Dulles Airport was estimated at $15,000 annually. That’s about the same as the current poverty threshold for a household of two.

    Car-loan programs on the other hand are largely cost-efficient, producing real fiscal benefits to borrowers, employers, and taxpayers. A survey of 4,771 borrowers and their employers finds that borrowers have greater job security as a result of access to vehicles. With access to credit, borrowers increase their purchasing power by an average of $2,900 each year and save about $250 by avoiding payday loans and checks-for-cash outlets. Employers gain as well through cost savings due to increase retention and reduced absenteeism and tardiness, which amount to $817 and $1130 per borrower respectively. In large part, providing vehicle financing is a smart investment since it reduces the number of low-income families on social welfare – an annual cost savings of $2,900 for each borrower coming off public assistance.

    Given its clear advantages, car sharing is increasing. Recent reports find that shared-use vehicle organizations have been lucrative. Between August 2012 and July 2013, car-sharing ridership grew by 112 percent and the number of vehicles increased by 52 percent. And although car-sharing is not typically used to transport the poor, having on-demand car service makes it so that door-to-door access is more available and affordable. If car-sharing continues to grow at its current rate, it’s reasonable then to assume that these pseudo-taxi services will be eventually be affordable enough so that people would choose to be chauffeured rather than drive their own vehicles.

    2. Vehicle ownership provides greater access to jobs and economic opportunities.

    Instead of being limited to a few areas that are transit-oriented, families with cars have access to more jobs and economic opportunities. Public transit lines are limited in their geographical coverage and take time to make often numerous stops.  Transfers are inefficient and time-consuming, making much of that coverage impractical. Also regular transit riders have limited employment options since they’re only able to consider jobs in the vicinity of transit stops and stations.

    3. Travel by car  is responsive to current travel patterns

    • A common misperception is that low-income people do not have cars. In reality, 86% of the poor have cars, compared to 95% of the entire population. The high percentage of poor families with cars reveals how automobile culture has become fixed into American ideals of economic well-being and prosperity. And contrary to stereotypes, the poor and the rich similarly spend about 94% of their transportation costs on vehicle travel versus public transit, challenging the notion that low-income travel behavior is unlike that of the rest of the population. As such, providing the poor with cars dramatically levels the playing field as they are the ones who would gain the most from increased access to employment destinations and education facilities.

    A strong argument posited by public transit advocates is that as more cars use the road, congestion and pollution will intensify. And to be sure, public transit is more environmentally friendly than motor vehicles. The Amalgamated Transit Union (ATU), the largest union representing transit workers in North America, reports that one full bus eases the road of thirty-five cars, and that existing transit usage cuts national gasoline consumption by 1.4 billion gallons annually. Yet, on average, this result can only   be achieved if buses were always full, which they are not – authorities from the Los Angeles Metro estimate that their buses run at an average of 42% capacity.

    But is it equitable to ask the poor to forgo mobility and economic gain for the environment? Considering that most Americans experience some degree of social mobility via vehicle ownership, it’s far more reasonable to allow  low-income families greater access to opportunity. In addition, new fuel efficiency standards for cars set by the Obama administration will decrease overall GHG emissions substantially; according to forecasts by the Department of Energy, carbon emissions from light-duty vehicles will drop 21% between 2010 and 2040 in spite of a 40% increase in driving. This shows that, even with more cars on the road, environmental goals can be accomplished.

    Although the eligibility requirements are stricter in some areas than others, every state in the U.S. has a program for low-income residents to have access to car loans. Car-sharing is also rapidly expanding, but  marketing now is geared towards millennials on a budget rather than low-income families. Both innovations, however, respond to new demands faced by future workers, who are likely to find employment in dispersed locations and may make more trips per workday since many may have multiple part-time jobs. With more efficient ways of getting people to work, it’s time to challenge the assumption that the expansion of public transit is the best way to meet the needs of America’s hard-pressed working class.

    Jeff Khau graduated from Chapman University with a degree in business entrepreneurship. Currently, he resides in Los Angeles where he is pursuing his dual-masters in urban planning and public policy at the University of Southern California.

    Photo by Romana Klee, #113 zipcar.

  • What Detroit Has Really Taught America

    Nothing. Seriously. Not a damn thing.

    Oh, the occasion is being used to opine on our state of affairs, but nothing is structurally taking shape in America to prevent the next Detroit from occurring. In fact, Detroit is occurring every day inside most of us. We are all getting bankrupt in so many little ways.

    America is in a precarious position. Our economy is based on consumption. Our consumption is based on our livelihood. Our livelihood is based on our employment, and in our jobless “recovery”, there just aren’t many decent jobs. With technological advances, it is likely to get worse. Writes columnist Bill McClellan in the St. Louis Dispatch:

    [T]he day is coming when trucks will drive themselves. People in the trucking industry say it is inevitable. Within a decade or so, truck drivers will be obsolete. There are currently 5.7 million truck drivers.

    McLellan continues, discussing an email he received from a reader:

    Pat B. is a conservative businessman. He wrote, “Regarding the truck drivers, I think the bigger issue is how society is going to deal with nonproductive people vs. productive people. Automation will allow ‘productive’ people to be much, much more productive than the ‘nonproductive’ people. Theoretically, a very small segment of the population could produce almost everything. How will we deal with this?”

    Good question. Currently, Detroit is ground zero of it. So much busted there, so many poor, so many with blue- and white-collar skills in the new no-collar economy. Do we let the city die on the vine? Au revoir Rust Belt?

    Well, a consensus is becoming clear. We need to “First World” Detroit. Get it and other post-industrial cities on the right path.

    Enter New York.

    Courtesy of Smithsonian

    In the late 1970′s, New York City was in trouble: the threat of bankruptcy, and the Bronx was on fire, literally, with broadcaster Howard Cosell famously being attributed to saying “There it is ladies and gentleman, The Bronx is burning” as cameras panned to a fire in an abandoned elementary school during Game 2 of the 1977 World Series. Put simply, the 1970’s NYC was not unlike the modern day Detroit—insolvent fiscally, aesthetically, and, in many respects, sociologically. “Broken youth stumbling into the home of broken age,” wrote Frank Rose in the Village Voice.

    But with crisis comes opportunity, particularly for those who can afford to be opportunistic. Specifically, in the book by Paul Harvey entitled The Brief History of Neoliberalism, the crossroads of NYC’s late-70’s fiscal crisis gets center stage. Here, the groundwork for the city’s co-optation had been laid for some time, with the 1960’s urban crisis increasing municipal desperation. Financial institutions smelled blood, and they saw occasion. What happened dictates urban redevelopment to this day. Writes Harvey (h/t Cleveland Frowns):

    At first financial institutions were prepared to bridge the gap, but in 1975 a powerful cabal of investment bankers (led by Walter Wriston of Citibank) refused to roll over the debt and pushed the city into technical bankruptcy. The bail-out that followed entailed the construction of new institutions that took over the management of the city budget.

    Harvey states that the new budget strategy amounted to “a coup by the financial institutions against the democratically elected government”, one that would subsequently de-emphasize social and physical infrastructure for the priority of a “good business climate”. Harvey continues:

    But the New York investment bankers did not walk away from the city. They seized the opportunity to restructure it in ways that suited their agenda…This meant using public resources to build appropriate infrastructures for business…coupled with subsidies and tax incentives for capitalist enterprises…[T]he investment bankers reconstructed the city economy around financial activities, ancillary services such as legal services and the media…and diversified consumerism (with gentrification and neighborhood ‘restoration’ playing a prominent and profitable role). City government was more and more construed as entrepreneurial rather than a social democratic or even managerial entity.

    Fast forward to now and you can see how this framework has made modern day New York. A billionaire mayor. Impressive wealth accumulation. Lower crime. Gentrifying areas that are spreading into many parts of the city. The scene in the Bronx:

    The South Bronx is on the upswing and this new project proves it,” said Kathy Zamechansky, President of KZA Realty Group. “A gleaming new building is just what this area needs to add life and vitality to a neighborhood…

    All good, right?

    Not exactly. Commoditizing public welfare has come with very personal costs. Particularly, New York City’s economic sphere epitomizes the worsening two-tier system in America, with one study finding that “three of the four most [income] segregated metropolitan areas [in the country] are in the New York City region”. In the city itself, the income disparity rates from subway stop to subway stop are at Namibian levels. “Get off at Chambers St., and you’re averaging $205,192,” writes Fishbowl NY. “Hop off at Kingsbridge Rd., and you’re at $18,610”.

    Income Disparity New York

    There is cost to personal freedom as well, with Mayor Bloomberg’s “stop-and-frisk” tactics ruled as a violation to the constitutional rights of minorities. The increase in police stops have been significant since Bloomberg took office, going from 160,851 in 2003 to 685,724 in 2011. In a 195-page response just released, the federal judge wrote: “No one should live in fear of being stopped whenever he leaves his home to go about the activities of daily life”.

    Heck, there’s even consternation from the city’s creative types. Specifically, New York’s legacy of nurturing the next generation of thought is being homogenized by the fact that elites talking to elites creates for shitty cultural capital. Writes Gawker’s Hamiliton Nolan on how the influx of money is turning the city into “a game of urban Candy Crush”, “Everything is an orgy of destruction! Who’s hip now? Nobody!” Echoes creative class troubadour Lena Dunham:

    It’s news to no one that the middle class and up-and-coming talent struggle in this city. As a result, New York is seeing an exodus of its creative population. As Dunham says, “If they struggle for too long, they’re leaving New York for Seattle, Chicago, Austin, and in some cases, even Tampa. We can’t have our generation’s Patti Smith moving to Tampa. That’s going to seriously f*ck our shit up.

    But the bridge had been crossed. Not simply for the reasons Dunham fingers, but because New York City is the head of a teetering set of bones. Writes eminent economic scholar Joseph Stiglitz in a recent essay entitled “The Wrong Lesson from Detroit’s Bankruptcy”:

    Rather than deal purposefully with this changing economic landscape with useful policies encouraging the growth of other industries, our government spent decades papering over the growing weaknesses by allowing the financial sector to run amok, creating “growth” based on bubbles. We didn’t just let the market run its course. We made an active choice to embrace short-term profits and large-scale inefficiency.

    America does have an urban renewal program, but it is aimed more at restoring buildings and gentrification than at maintaining and restoring communities, and even at that, it is languishing.

    Which brings us back to Detroit. Consider it America’s “Back to the Future” moment. There is municipal bankruptcy. There is fiscal management being taken away from an elected government. There are financial institutions wreaking havoc on the middle class via a collective Alfred E. Neuman-like exasperation. There is the subsidy environment going full bore in the midst of economic trauma, with the Governor of Michigan giving the okay to Detroit billionaire Mitch Ilitch on his $650 million dollar publicly-subsidized hockey arena one day after signing off on the country’s largest city bankruptcy filing. And then there’s the gentrification-as-economic-development silver bullet, with real estate developer Dan Gilbert buying up downtown properties for the price of a song and then using the spatial grease of placemaking to fill his square feet with the rise of the creative class. “Stand up and gentrify: 7 days in Detroit” reads a series running in the The Windsor Star.


    “It was a face that didn’t have a care in the world, except mischief.” Quote from Mad editor Harvey Kurtzman.

    Taken together, the framework of Detroit’s progression is to simply go forth into who we are as a country—a group of people on a collision course with the inevitable failings of economic disparity, or more generally: a nation without good jobs.

    Should Detroiters be worried?

    Maybe. Reads the New York Observer: “Bloomberg Warns the Next Mayor Could Follow Detroit Into Bankruptcy”.

    Back to the future indeed.

    Richey Piiparinen is a writer and policy researcher based in Cleveland. He is co-editor of Rust Belt Chic: The Cleveland Anthology. Read more from him at his blog and at Rust Belt Chic.

    Lead photo courtesy of Vice.

  • Here’s a Way to Flood the US Housing Market with One Trillion Dollars

    Members of the millennial generation – born between 1982 and 2003 – carry a student debt burden of close to one trillion dollars. This is the group that includes many just entering the stage in life when people tend to settle down and start families. Even though Millennials are marrying later than previous generations, they would still be the prime market for sales of single family starter homes, if only they could afford them. As interest rates rise along with home  prices, the only way this key consumer segment will be able to afford to buy a house is if the nation, out of its own self-interest, finds a way to relieve Millennials of their crushing student loan obligations.

    Millennials are the first generation in American history that has been asked to self-finance the cost of the education needed for America to be economically successful. Shortly after the ratification of the Constitution, Congress passed legislation setting aside land in the new territories for the establishment of the iconic one room school houses to assure its newest citizens had the skills required to be good farmers and domestic servants. Even as the country was engaged in a devastating Civil War, a state-by-state movement to mandate universal and free primary education for every child swept the nation and became a permanent part of American society. Then, when the Industrial Revolution generated a demand for factory and office workers with a high school education, the nation expanded the concept to make such an education available equally to young men and women without any requirement to pay tuition.      

    The situation has changed, but the need for an educated young generation has not. The difference is that at least two years of post-secondary education has become a must-have ticket for a young generation seeking to make its way in the world. Yet we have suddenly yanked the universal, free education rug out from under them and asked them to pay for it by not only going into debt, but assuming a debt that is not even dischargeable in bankruptcy court.

    The result is a rising tide of student debt that threatens to undermine the economic vitality of the nation. According to the Federal Reserve, student debt rose by a factor of more than eight between 2001 and 2012, twice as fast as home loans and far in excess of the modest increases in other forms of indebtedness during the same time period. A recently released report by the Consumer Financial Protection Bureau indicates that about one in four student loans is now either in default or in programs designed to help borrowers in distress. This analysis looked only at loans made through the direct student loan program totaling about $570 million, not older ones that may have been offered by banks and other private sector lenders. If borrowers are unable to repay their loans in the long run, the federal government and taxpayers will have to absorb the losses. Why, then, not recognize the problem now and bail out the borrowers so that they can put the windfall to good use in an economy desperately needing a new boost in consumer spending?

    The Great Recession seriously disrupted household formation and consumer spending.  According to an analysis by Merrill Lynch, in the decade before the financial markets’ collapse in 2008, one-third of all housing turnovers came from homeowners older than  55, and about one-third of those sales were to buyers under 34. Since then sales of homes have fallen by about two million units, leaving the economy 2.5 million households below normal levels. Millennials represent about 22% of the US population and control $200 billion of direct purchasing power, not counting their influence on their parent’s spending decisions. Over the next five years, a quarter of Millennials will enter their peak spending years, making them the best hope for reviving the housing market.

    Millennials have expressed a strong preference for living in the type of suburban communities in which they grew up, especially when it’s time, as it is for many of them now, to raise a family. Their first home needn’t be “move in ready;” about a third of them say they would prefer a “fixer upper.” And more than 80% of the generation believe they would find a way to pay for the cost of any repairs themselves rather than borrow the money from their parents. A wave of new home buying would not only give a sharp boost to the durable goods industry that depends on new household formation for its growth, but would also provide a ready-made army to fix up some of the country’s declining, inner ring suburban housing stock.

    There are legitimate public policy issues about how to fix the problem of financing American higher education. Some might argue that we should tackle that problem before dealing with student loan debtors. But with the economic recovery still proceeding at too slow a pace for most middle class Americans, an equally good case can be made that the country should deal with student loan debt either first or as part of a comprehensive reform of  financing higher education. The economy could use the boost, as could the morale of America’s largest and most diverse generation.

    Morley Winograd and Michael D. Hais are co-authors of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellows of NDN and the New Policy Institute.

    New home photo by BigStockPhoto.com.

  • California Homes Require Real Reach

    In the 1950s and 1960s, Southern California was ground zero for the “American Dream” of owning a house. From tony Newport Beach and Bel-Air to the more middle-class suburbs of the San Fernando Valley and Garden Grove to working-class Lakewood, our region created a vast geography of opportunity for prospective homeowners.

    Today, with house prices again skyrocketing, Southern California is morphing into something that more resembles a geography of inequality. Now, even the middle class is forced into either being “house poor” or completely shut out of homeownership, or may simply be obliged to leave the area. Even more troubling is that the working class and the poor suffer from the kind of crowded, overpriced housing conditions sadly reminiscent of those experienced during the Depression and the Second World War.

    Judged by the “median multiple” – the median income divided by the median house price – California’s prices for a generation have soared well above the national averages. Demographer Wendell Cox notes that, until the early 1970s, California’s house prices were similar to those in the rest of the United States. National Association of Realtors data indicate that the median house price in California at that time was 7 percent above the national average. By 2013, the price differential had risen to 109 percent.

    This has little to do with such things as construction costs, which have not risen as quickly in most of California as elsewhere, but are largely the result of soaring land costs and stiff fees imposed on housing. Attributable largely to regulatory factors that restrict building in many areas, the cost of finished land for comparably priced houses has increased nine times as much in California as in the rest of the nation since 1970. Portland State University economist Gerald Mildner refers to this as “Economics 101,” indicating that “as the demand for property in a region grows, the increase in demand translates into some combination of more space and high prices, depending upon the elasticity of supply.”

    Beside regulatory restraints, California housing prices are driven up by the highest impact fees in the nation. An annual survey by Duncan and Associates shows that the average impact fee in California for single-family residence in 2012 was $31,100 per unit, nearly 90 percent higher than the next most expensive state and 265 percent higher than the norm among jurisdictions that levy such fees, which typically pay for capital improvements, like water and wastewater facilities, required by a new development. Many states and localities on the other side of the Sierras do not.

    These fees also impact multifamily housing; the state’s fees on multifamily units averaged $18,800, 290 percent above the average outside the state.

    Construction penalized

    California’s emerging housing crisis, then, is not, as some suggest, a reflection of the state’s constrained geography or economic superiority. The two most-recent spikes in housing costs have occurred as the state’s median income has dropped from well above to just about the national average. Neither can we blame a huge surge of new residents, since California’s once-buoyant population growth has slowed to levels similar to those of the rest of the country.

    Instead, the roots of our state’s massive social regression lie in political choices made by the state, counties and cities. This trend likely will intensify, as regulators interpret the state’s climate-change legislation to further penalize construction of single-family houses preferred by most California families. Particularly vulnerable will be the starter-home market, once the engine of California’s egalitarian middle-class culture.

    Some “new urbanists” and greens argue that such restrictions will eliminate wasteful “McMansions” and spur construction of more “sustainable” dense housing for the working masses. Yet, in reality, the impact of highly restrictive housing polices tend to be felt most by both middle-class families and the least-affluent, who find themselves unable to buy housing or, in some cases, are forced to spend huge percentages of their income on rent.

    The growing affordability crisis seems likely to worsen as the housing market recovers. Given the paucity of new home construction, and ever-tightening regulation, California’s housing market is particularly vulnerable to wild swings in prices; the year-on-year median house price increase as of May 2013 was the greatest since 1980, even greater than in any of the past decade’s “bubble” years. Overall, price gains in the state were two to three times stronger than that in the rest of the nation.

    This process has been further accelerated by the presence of investors in the local market. Investors, many from Asia, now account for upward of one in four home purchasers in the state.

    Among the biggest losers here is California’s middle class, particularly young families without large family endowments. Some 60 percent of U.S. households can now afford to buy a house, according to the National Association of Home Builders / Wells Fargo Housing Opportunity Index, but that percentage has dropped even in the Riverside-San Bernardino (40 percent) and Sacramento (50 percent) metropolitan areas, while San Jose, Los Angeles and San Diego had affordability levels of 20 percent to 30 percent. The lowest level, 17 percent, was found in the San Francisco metropolitan area. We can expect these numbers to worsen in the immediate future.

    These numbers will impact a wide range of people, including many with skills desired by employers. According to an analysis of Orange County average salaries for National Core, a nonprofit housing developer based in Rancho Cucamonga, even a biomedical engineer or a nurse in O.C. does not earn enough to buy a house there. As economist and author Claude Gruen has suggested, more restrictive land-use regulation “is to the middle class what the economic disaster of slum clearance was to the poor.”

    Renters don’t escape

    Nor will the poor, or renters, benefit from these policies. The nation, and the state, have had programs to help lower-income residents, but these programs meet only a fraction of the need. Los Angeles County had a waiting list 17 times its potential supply of housing, according to a 2004 report by the National Low Income Housing Coalition. With relatively little new product being produced, it’s unlikely this situation can improve, as potential homeowners are shoved into the rental market, boosting rents higher.

    The net result is that more Californians are becoming house poor or “rent” poor. According to American Community Survey data analysis done for National Core by this author and demographer Wendell Cox, this state has four of the six major metropolitan areas with the largest share of renters spending more than 30 percent of their income on rent – led by Riverside-San Bernardino, Los Angeles-Orange County, Sacramento and San Diego – are located in the Golden State. This includes a majority of renter household in the cities of Los Angeles, Glendale, Anaheim and Santa Ana.

    Even more troubling is a growing percentage of working households suffering housing-expense burdens of 50 percent or more of income. California again leads the way, according the National Housing Conference, with Los Angeles and San Diego among the top five major metro areas.

    This emerging social disaster has received little attention from the so-called progressives, whose policies in part are responsible for the state’s growing housing crisis. In large part due to housing, and lack of good middle-class jobs, California now has the highest poverty rate (when adjusted for the cost of housing) of any state.

    Not only are working-class Californians poorer, they also are subject to ever-higher levels of overcrowding. On a percentage basis, four California major metropolitan areas are in the 10 regions in the country with the most families doubling up. The top two are Riverside-San Bernardino and Los Angeles, followed by San Jose and San Diego.

    Overcrowding is particularly tough on children, who suffer greater problems with health and academic performance. Another study associated psychological problems with children from overcrowded housing.

    Long drives to work

    Finally, the housing crisis also creates significant environmental problems. The unaffordability of housing has forced many Californians to seek shelter far from work. Among commuters traveling 60 minutes or more to work, Riverside-San Bernardino is third-highest, followed by Los Angeles, eighth, and San Francisco, ninth. Among major metropolitan areas with the highest share of commuters traveling 90 or more minutes one way, Riverside-San Bernardino ranks second, in a virtual tie with New York, followed by Sacramento, seventh, and Los Angeles, eighth.

    For both California’s middle- and working-class, our housing regulatory regime serves as a kind of tax – a nearly confiscatory one – that works particularly against families, the poor and those who do not possess considerable family wealth. The result is a California that is increasingly out of sync with the very dream that has brought millions from all over the country.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Orange County Register.

    Photo of Los Angeles housing by Wendell Cox.

  • Distortions and Reality about Income Mobility

    A ground-breaking study of intergenerational income mobility has the enemies of suburbia falling all over themselves to distort the findings. The study, The Spatial Impacts of Tax Expenditures: Evidence from Spatial Variation Across the U.S. (by economists Raj Chetty and Nathaniel Hendren of Harvard University and Patrick Kline and Emmanuel Saez of the University of California, Berkeley). Chetty, et al. examined income mobility by comparing the income quintiles (20 percent) of households with children (between 1996 and 2000) compared to their own household income quintiles as adults in 2010/1. The children were all born in 1980 or 1981. The authors summarize their research as follows:

    “We measure intergenerational mobility at the local (census commuting zone) level based on the correlation between parents’ and children’s earnings. We show that the level of local tax expenditures (as a percentage of AGI) is positively correlated with intergenerational mobility.”

    The Over-Reach

    One of their findings was that children born in the Atlanta area had less upward income mobility than in most other metropolitan areas (Note 1). This provided all that was needed for a spin by others that distorted the findings into a completely different story than supported by the data.

    New York Times reporter David Leonhart started it, sprucing up the conclusions to produce anti-sprawl tome. He accomplishes this by unearthing anecdotes about the difficulty low income workers face getting to work in Atlanta, and blaming that urban area’s lower density suburbanization. However, the same anecdotes could have been woven from every metropolitan area in the nation (Note 2), regardless of their extent of suburbanization. More importantly, the research is not about sprawl.

    Nonetheless, Nobel Laureate Paul Krugman then piled on, writing in The New York Times that Leonhart’s article had shown “how sprawl seems to hurt social mobility.” Krugman continued the next day with his “sprawl-caused-Detroit’s bankruptcy” thesis, which relied on an apples-to-oranges comparison (See: Detroit Bankruptcy: Missing the Point). Then on July 28, Krugman wrote: “…in one important respect booming Atlanta looks just like Detroit gone bust: both are places where the American dream seems to be dying” (Note 3).  Krugman calls Atlanta the “Sultan of Sprawl.”

    Professor Steven Conn of Ohio State University took it a bit further in the Huffington Post, saying that: “One of their findings is that mobility is more restricted in places defined by suburban sprawl — like Atlanta and Columbus, Ohio — than in denser, more urban places like San Francisco and Boston. Far from being good for the nation, our love affair with the car, and the sprawl it has produced, keeps people from moving up the economic ladder.”

    The Research

    The authors of the report reached their conclusions using regression analyses and controlling for demographic factors, with the objective of identifying associations between upward income mobility and tax expenditures, not suburbanization. In fact, the very issue of transportation and density was simply not a factor.

    The authors provided additional information with 25 separate, simple correlation analyses between 25 individual variables and economic mobility (demographic factors were not controlled). Co-Author Raj Chetty described this supplemental research in a PBS interview, citing income segregation, school quality, two-parent families and measures, civic engagement, religiosity and community cohesiveness. The authors urged caution in interpreting these correlations: “For instance, areas with high rates of segregation may also have other differences that could be the root cause driving the differences in children’s outcomes.”

    Rational Responses

    The overreach was challenged by Columbia University urban planning professor David King, who pointed out that the best ranked cities in the upward mobility analysis were all “sprawling,” including Salt Lake City, Santa Barbara and Bakersfield, which he referred to as a “poster child for sprawl.” He further noted that: “…snapshot correlations really don’t mean anything and will provide evidence for whatever point of view is desired.”

    Randal O’Toole of the Cato Institute similarly questions the unfounded interpretations of the study and notes that Atlanta has invested billions in new transit systems over recent decades, but with no appreciable impact on how the poorest citizens did there.

    University of Southern California economics professor Peter Gordon suggested that: “In the fast-and-loose manner that some have digested the Chetty et al. study, we could conclude that sprawl causes upward mobility.”

    Pinnacles of Prosperity

    Interestingly, if, as Krugman alleges, Atlanta is the Sultan of Sprawl, then similarly sprawling Hartford is the “Pinnacle of Prosperity.” Hartford has the highest per capita gross domestic product of any metropolitan area in the world. Yet, the urban area density of Hartford is 1,791 per square mile (692 per square kilometer), little above Atlanta (1,707 and 659), but two-thirds less than less affluent New York (5,319 and 2,054) and three-quarters less than less affluent Los Angeles (6,999 and 2,702), according to the 2010 census (Note 4).

    The reality is that the US has the world’s most sprawling cities, yet the 50 most affluent metropolitan areas per capita in the world include 38 in the United States. This includes the top eight, such as lower density Bridgeport (urban density 1,660 per square mile/641 per square kilometer), Boston (2,232/862) and Durham (1,913/739), as well as metropolitan areas with higher urban densities, San Francisco (6,266/2,419) and San Jose (5,820/2,247). Neither high-density New York nor Los Angeles makes the top 10. America’s greater dispersal is associated with the shortest commute times in the high income world, the least intense traffic congestion and some of the most affordable housing, if metropolitan areas subject to urban containment (smart growth) policies are excluded.

    Moreover, the Chetty, et al data gives little comfort to any whose conception of good and evil depends on sprawl. The research aggregates upward mobility data for all counties within each commuting zone. Among major metropolitan areas, that includes counties from the most dense (New York County at 71,000 per square mile or 27,000 per square kilometer) to Skamania County in the Portland area, with a density of 7 per square mile or 3 per square kilometer. County level analysis could make a difference.

    This is illustrated by the New York metropolitan area, which Chetty, et al divide into multiple commuting zones. The Tom’s River commuting zone, made up of outer suburban Monmouth and Ocean counties in New Jersey showed better upward income mobility (10.4 percent) than the New York commuting zone (9.7 percent) which included the city of New York, Nassau, Suffolk and Westchester counties. It might be interesting, for example, to compare the data, say for highly urban The Bronx to suburban Suffolk County, but the data does not permit that. This is not to criticize the Chetty, et al work; it is rather to suggest caution in inventing conclusions.

    Smaller May be Better

    Further, commuting zones with smaller populations have generally better upward income mobility.  Rather than an ode to bigness, the study found that commuting zones with less than 100,000 population average have higher than average upward income mobility. Virtually all of the smaller areas are low density and have little or no transit. Indeed, the best performers were in the Great Plains, in a swath from West Texas, through Oklahoma, Kansas, Nebraska and reaching a zenith in South Dakota and North Dakota, which is about as far from dense urbanization as it is possible to get. Further, a large majority of the highest scoring commuting zones with larger populations, like Bakersfield and Des Moines, are highly dispersed (Table below). This could be an area for further research.

    Geographical Income Mobility
    Population of Commuting Zone Upward Mobility Cases
    Over 1,000,000 7.5% 62
    500,000 to 1,000,000 7.6% 60
    250,000 – 500,000 8.6% 89
    100,000-250,000 9.0% 167
    50,000-100,000 10.4% 129
    25,000-50,000 13.0% 88
    Under 25,000 13.9% 146
    Average/Total 9.5% 741
    Upward mobility: 30/31 year olds reaching top income quintile by 2010/1, from households in the bottom quintile in 1996-2000
    Commuting zones are similar to metropolitan areas

     

    Additional Caveats

    There is no question but that this is ground-breaking research. The authors deserve considerable credit for the unprecedented scale of their analysis, which included over 6.2 million observations. However, the available data had an important limitation. The IRS data set they used does not go back far enough to make similarly robust findings about peak adult earnings. Age 30 or 31 may premature for predicting longer run income mobility. At that age, many who will eventually earn much more are not far into their careers. This would include people who have spent longer in higher education, such as those who have earned professional degrees. Finally, the median income of households in the 30 to 31 age category is barely 1/2 of their parents in the same, which, again, is not likely to be representative of their eventual income and quintile ranking over their adult lives.

    The findings would be appropriately characterized as relating to young adult income upward mobility. Conclusions about lifetime upward mobility or peak earnings upward mobility will need to wait a decade or more.

    The Second Half of the Story: Where People Moved

    The authors use the childhood residence in the study, both for the child and the adult. This means, for example, that if a child lived in the New York metropolitan area and moved to Atlanta by 2010 or 2011, he or she would be counted in the New York data. Where people lived as children is the first half of the story. The second half is where they moved.

    This is important, because so many people moved away from places like New York, San Francisco, Los Angeles, Boston, and San Jose during the period the study covers. Approximately 10 percent of the residents of New York and Los Angeles moved elsewhere between 2000 and 2010. Approximately 8 percent left San Francisco, 13 percent left San Jose and 5 percent left Boston. These are not small numbers and indicate that more people left than moved in. A net 1.9 million left New York, 1.3 million left Los Angeles, 340,000 left San Francisco, while 230,000 left San Jose and Boston.

    Some of the metropolitan areas that have gained the most domestic migrants scored below average on upward income mobility. For example, migration from other parts of the nation added 24 percent to Raleigh’s population in the 2000s, 17 percent to Charlotte, 11 percent to Tampa-St. Petersburg, and 10 percent to Atlanta (Note 5).

    None of this contradicts the Chetty, et al findings, which did not address the question of why some many people have moved. It can be assumed that people who are doing well economically will probably stay where they are. On the other hand, most who leave might be thought of as seeking better opportunities that might elude them in the richer, slower growing, far more expensive metropolitan areas of their childhood. The idea that people left New York, Boston or Los Angeles for a less rewarding life in Atlanta, Charlotte, or Raleigh violates everything we know about human nature.

    Seeking Prosperity

    Throughout history, and especially over the last 200 years, cities have drawn people from elsewhere by facilitating opportunity. It is no different today. People move to satisfy their aspirations. This was the point of our recent "Aspirational Cities" report in The Daily Beast.

    Chetty et al conclude: “What is clear from this research is that there is substantial variation in the United States in the prospects for escaping poverty.” True. It is also clear from actual behavior that, for many, the best prospect for escaping poverty may be the better opportunities that attract them to an aspirational city.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.

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    Note 1: Chetty, et al use “commuting zone” as their unit of geographical analysis. These areas are generally similar to metropolitan areas, but there are some important differences. For example, the New York metropolitan area is divided into three parts (New York Newark and Tom’s River). The Dallas-Fort Worth metropolitan area is divided into two. Los Angeles, Riverside-San Bernardino and Oxnard are combined as are Rochester and Buffalo. All of Connecticut, which has four metropolitan areas, is a single commuting zone. Areas outside metropolitan areas are also divided into commuting zones.

    Note 2: The overwhelming share of low income workers drive to work (see How Lower Income Citizens Commute). Even, in metropolitan Boston, with its better than average transit system, few of the city’s low income residents can reach suburban job locations in less than one hour (the average commute time for all residents is less than one-half that). Despite popular impressions to the contrary, most jobs cannot be reached in a reasonable period of time by transit in any metropolitan area, nor is there any practical (affordable) way to change that.  

    Note 3: To the contrary, the American Dream is alive and well in Atlanta. Atlanta’s housing affordability is unrivaled by nearly all major metropolitan areas. Housing is four times as expensive relative to incomes in San Francisco and San Jose as in Atlanta (measured by the “median multiple”) three times as high in New York and Los Angeles and twice as costly in Portland. This makes housing more affordable for low income households. Not surprisingly, Atlanta households with less than $20,000 in annual income (approximately the lowest quintile) have a higher home ownership rate than in New York, Los Angeles, San Francisco, San Jose, Boston and Portland. Further, the gap with respect to African-American home-ownership is substantial. Atlanta’s African-American home ownership rate is approximately 40 percent above those of San Jose and Los Angeles, approximately 50 percent higher than Boston, San Francisco and Portland and nearly 60 percent higher than New York (American Community Survey, 2011).

    Note 4: These are US Bureau of the Census urban area density figures, based upon continuous urban areas (“built-up” areas). Urban area densities are calculated using census blocks, and contain no rural land. As a result, their population densities are not distorted by jurisdictional borders. This is to be distinguished from any metropolitan area based measure. All metropolitan areas include urban areas as well as rural areas that are economically connected to the urban area. The extent of rural areas within a metropolitan area is driven by the geographical size of counties and thus varies widely. The largest major metropolitan area county, San Bernardino (California) is nearly 1,000 times as large as the smallest, New York County. If metropolitan area criteria were applied at the census block level, as is the case in urban areas, large swaths rural swaths would be removed from metropolitan areas, changing the density distribution. However, even if metropolitan areas were more appropriately defined, any measure of metropolitan density would remain a mixed urban-rural metric, not a measure of urban density. Here are the 2010 criteria for defining urban areas and metropolitan areas.

    Note 5: There is less black-white racial segregation in Atlanta than in New York, Los Angeles, San Francisco, Boston, and most other major metropolitan areas, according to 2010 data compiled by William Frey of the Brookings Institution.