Today we begin our new blog series – “Eye on the Economy: How can local governments improve economic outcomes for residents?”

Part One: Boom or Bust. The Case for Being Left Behind

The media is broadcasting that the unemployment rate is the lowest it has been since the 1950s, stock prices are rising, and private investment is at an all time high; even the so called “liberal media,” CNN, has published an article titled Trump’s right: The economy is doing well and he deserves some credit. However, not everyone is better off. The GOP tax cut, which was proposed as benefitting the middle class, is estimated to further increase the debt by 2.3 trillion dollars during the next decade. And the current presidential administration is enacting policies that largely ignore the concerns of working and middle class Americans, who are the backbone of the economy. Although key indicators, like the unemployment rate and stock market values, are important, it is crucial to understand the changes the economy has been through and how it is impacting the current labor force and future generations.

Income inequality has been growing in the United States since the 1970s. By one critical measure and reported by US census bureau, the gini coefficient, summarize the dispersion of income across the entire income distribution, it is a value between 0 and 1 with 0 being perfect equality and 1 being perfect inequality. The divide is greater in the US than in other developed nations as it  increased from 0.346 in 1979 to 0.415 in 2016.

Issues like income inequality are generally discussed in terms of their effect on the middle class, which may be defined according to income, educational attainment, or occupation. One of ways the growing inequality is manifesting itself is through real wages as it remains stagnant, and have actually decreased for African Americans, furthermore increasing the gap with White Americans. These issues can be compounded by race – middle class African Americans tend to have low wealth, which can serve as a buffer to shocks like job loss. Studies have revealed that African Americans with a college degree have less wealth than white Americans who dropped out of high school, and that income and wealth are not necessarily related. Education accessibility is not equal across racial groups, as 32.8% of white Americans have a bachelor’s degree in comparison to 22.5% of African Americans.  Since African Americans are less likely to have a bachelor’s degree, the effect of the recovery since the recession has been disproportionate. High school diploma holders or those with less educational attainment lost 5.6 million jobs in comparison to 187 thousand jobs gained by bachelor’s degree holders or higher.

There are discrepancies by age as well: Median wealth for households headed by people 65 years and older has increased by 52% in 2016 compared to 1989, while median wealth for households headed by 65 years old and younger has decreased on average during the same period. Housing affordability is also in the news, but there is not much discussion of how that breaks down between renters and homeowners. Rent has increased by 64% since 1960 while household income has increased by 18%, which can hurt millennials more than other generations because millennials tend to rent rather than own their home. The issues above build on each other creating a poverty trap that affects the most vulnerable group of society.

The good news is that local and state governments can enact data and evidence-informed policies that are responsive to regional needs. In this series, we will examine local-level policies that can improve labor force outcomes for residents. Stay tuned for our first piece on increasing the minimum wage.