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February 13, 2007

Poverty In The Suburbs

I'm a little slow in noticing, but Garth Brazelton at Reviving Economics was all over this story at the MSNBC/Newsweek website:

Once prized as a leafy haven from the social ills of urban life, the suburbs are now grappling with a new outbreak of an old problem: poverty. Currently, 38 million Americans live below the poverty line, which the federal government defines as an annual income of $20,000 or less for a family of four. But for the first time in history, more of America's poor are living in the suburbs than the cities—1.2 million more, according to a 2005 survey. "The suburbs have reached a tipping point," says Brookings Institution analyst Alan Berube, who compiled the data.

Cleveland, as it turns out, is chosen as the poster city for suburban poverty:

Six years ago, Brian Lavelle moved out of the city of Cleveland to the nearby suburb of Lakewood for what he thought would be a better life... Then, three years ago, the steel mill closed and Lavelle found that the life he dreamed of was just that, a dream. The suburbs, he quickly learned, are a tough place to live if you're poor.

... five years ago, a Hunger Network food pantry in Bedford Heights, a struggling suburb of Cleveland, served 50 families a month. Now more than 700 families depend on it for food.

Howard and Jane Pettry, of Middleburg Heights, Ohio [another Cleveland suburb], see themselves as working-class—just facing hard times. In December, Jane was laid off from her job at a local supermarket, and a week later Howard had a heart attack and missed a month of work from his job at a grain mill. Now Jane's collecting unemployment and they're staring at the poverty line as they struggle to pay the mortgage and the bills.

Is it really the case that the suburbs are increasingly poverty-ridden?  I'm suspicious.  Not too long ago, my colleagues Mark Schweitzer and Brian Rudick examined the case of Cleveland specifically:

Cleveland is the poorest big city in the United States, according to the Census Bureau, with nearly a third of the city’s residents living in poverty. The city’s poverty rate also rose since it was last measured. These numbers have received a lot of attention since they were released, but unfortunately, they are easily misinterpreted.

The numbers tell us that Cleveland has many poor people. But the numbers don’t tell us that Clevelanders have become worse off, that the region’s economy has deteriorated, or even that there are more poor people in the city than before.

A closer look at the American Community Survey results suggests that Cleveland’s poverty rate reflects the fact that the region’s poor are concentrated in the central city, while the wealthier live in the suburbs. The rate may have risen because people are moving out of the city, and those that leave are disproportionately better-off than those that stay behind. Neither of these facts on its own says anything about the economic health of the region, but they do say something about the relative desirability of living in the city versus its outskirts.

The definition of the Cleveland MSA has recently changed to exclude Ashtabula County, but under either the old or new definition, poverty is far lower outside the city than inside it.

... Looking at the poverty rate of the MSA [metropolitan statistical area] reveals that Cleveland (officially the Cleveland-Lorain-Elyria MSA) is not too different from other U.S. cities. The poverty rate of the Cleveland MSA is just a little above the average for all metropolitan areas in the United States. And like other cities in the country, Cleveland’s suburbs have far lower poverty than the city itself.

...the 2005 rise in metro area poverty figures seen in this figure is almost entirely accounted for by the increase in the number of poor people in the city of Cleveland, rather than in the suburbs. In the 2004-2005 shift that boosted the poverty rate for the MSA, for example, the number of poor people in the MSA grew by 43,540, but 36,991 of that increase occurred in the city.

It is true that the number of poor people in the suburbs is larger than the number of poor people in the city -- according to Schweitzer and Rudick "about two-thirds of the metro area’s poor live outside the city of Cleveland" -- but this is simply a function of the fact that the population of the MSA is heavily concentrated outside of the city.  In terms of poverty trends, there just isn't that much happening in the suburbs:




If one wants to use Cleveland to tell a story about poverty -- especially concentrated poverty -- the action is still in the central city.

February 13, 2007 in Inequality | Permalink


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I hate to be cynical about these types of stories. My heart goes out to people that truly need help. However, I am reminded about something Milton Friedman said. If you offer something for free, people will take it and use more of it than is available. He was talking about welfare. He also said, "There is no free lunch."

I am worried about the compunction of the people that are receiving the free stuff. Do they really need it? Or are they just taking it because it is free?

Like I said, I hate to be a cynic, but there is so much to be cynical about, it is too bad that we have to ask the question.

Posted by: jeff | February 14, 2007 at 04:22 PM

Jeff. That wasn't cynical, this excerpt from a 2/07/07 Mish post is cynical. (Dave, excuse the length but I, a true cynic, loved it.)
Thursday, February 08, 2007 Mike Shedlock Counterfeiting Money - Crime or Good Economics?
Did you ever think that a counterfeiting money could be good for the economy and that the counterfeiter could be considered an economic genius or even a national hero? I received an Email from Nic Corsetti, a friend of mine, describing exactly how that might happen. Here goes from Nic:
Let’s say that I invent a printing press that allows me to produce counterfeit money (let’s say US dollars) by the trillions – these dollars look EXACTLY like real ones, so no one can tell the difference, not even the government or the bank. So I start off the first year by counterfeiting $3 trillion dollars.
I use $1 trillion to buy stocks (jump starting the bull market)
I use $1 Trillion to buy U.S. Treasury bonds (thus driving bond prices higher and interest rates lower)
I use $1 Trillion to go around to every neighborhood in every major city of the U.S. and start buying houses for 10% higher than the listed price
Obviously, this is a lot of work, so I hire a whole network of employees and consultants to help me achieve those lofty goals in a reasonable time period. The apparent benefits would be huge.
This will create jobs, since lots of employees and consultants will be needed to spend $3 trillion.
The stock market indices will soar. Everyone's 401(k) and day-trading portfolios will increase in value.
Home prices will increase by 10% overnight.
Interest rates will fall which will make it even cheaper for everyone to borrow money to buy new cars, upgrade into a bigger homes, and buy new gas plasma TVs every year hoping against hope of getting to watch the CUBs someday play in the World Series.
The lifeblood of America, vastly underpaid Real Estate Agents, will get a much needed and well deserved infusion of cash.
The economy will be humming so fine that no one will care about the loss of jobs to India and China.
Cheap goods will continue to pour into the US and the CPI will show only a modest 2% rise in the price of goods.
Additional Printing Presses
This is such a good plan, I decide to let some of my best friends in on the action. So I pick twelve of my closest cronies and give them identical printing presses, and instruct each of them to buy stocks, bonds and real estate with their counterfeit money. I tell them to loan the money to anyone who asks. Now we are really getting somewhere.
The stock market will rise 30%-50% every couple years
By buying massive amounts of treasuries, interest rates will stay at historic lows
Everyone's net worth will double every few years if they just buy more real estate
There will be no reason to save money, because assets will just keep skyrocketing in value.
Wave after wave of immigration proves adequate enough to supply the homebuilding industry with enough manpower to get the job done.
So much money is made in the stock market that $50 billion in bonuses can be distributed.
Home prices start rising so fast that people start buying two or even three of them. It's a "can't lose" venture.
There is so much money floating around that credit standards drop and everyone who wants a home gets one.
So many homes are being bought that massive numbers of jobs are created in the mortgage industry, home builders, architects, real estate agents, title insurance, property insurance, home decoration, lumber, copper, cement, truck manufacturers, granite miners, brick layers, roofing, repairmen, industry analysts, home flippers, internet bloggers, internet site maintenance, newspaper ads, Wall Street specialists(to create RMBS, CDO, CDS, Index swaps), hedge fund employees (someone has to trade all these securities, and accountants and lawyers to keep track of all of the above.
There are additional profits to be made on Wall Street by investing in IPOs, private equity LBOs, M&A, trading, mutual funds, and hedge funds.
There is job growth in investment advisers, investment analysts, day-traders, media cheerleaders, SEC regulators, state regulators, New York D.A. office, and accountants and lawyers to keep track of everything.
Government jobs explode. State and local governments get all sorts of funding for projects of all types – big and small. This creates still more jobs.
Everyone needs a place to spend their money. Shopping malls, strip malls, big box stores, specialty stores, boutiques and nail salons spring up everywhere.
People are so busy shopping they do not have time to cook. This creates a need for more restaurants or coffee shops on every corner.
Even with all of that there is STILL NO INFLATION!

Posted by: bailey | February 14, 2007 at 06:54 PM

Rising poverty in the suburbs would not be surprising given the revitilization of many central cities around the country. I think Cleveland may be a bad comparison of city versus suburb. If one looks around to other cities where baby boomers have migrated downtown and away from their suburban life for a higher quality of life in the city. Cities are the lifeblood, creativity and growth engines of the 21st century. While suburbs offer a quieter lifestyle, they also offer less in terms in new economic opportunity, entrepreneurialism, culture, diversity and personal growth than the city. These are the traits that give rise to a stronger, differentiated America for the 21st century global economy. Globalization will force more poverty into the suburbs as this is where most that work at globalized corporations tend to live. A service oriented economy will be the economy of the future, giving rise to localization as a means for economic growth.

Posted by: Casual Suburbanite | February 18, 2007 at 12:36 PM

I have a question for Bailey, about the long post about spending $3 trillion. How does he figure that there would be no inflation? First of all, if he buys things at 10% above price, wouldn't this translate to 10% inflation? Secondly, with that immediate influx of cash, people will be willing to pay more money for the same number of items- meaning prices will rise. I am student and have only taken one very basic economics class, but I am imagining the Supply-Demand diagram from Econ 101; if the supply curve remains unchanged and the demand curve moves up, doesn't this mean prices will rise?

Posted by: Kevin | February 21, 2007 at 10:12 PM

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