Reversal of Fortune: A New Look at Concentrated Poverty in the 2000s

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-Patricia

Concentrated Poverty, Working Poor, Earned Income Tax Credit, U.S. Poverty, Inequality

Elizabeth Kneebone, Senior Research Analyst, Metropolitan Policy Program at Brookings
Alan Berube, Fellow, Metropolitan Policy Program

The Brookings Institution

August 08, 2008 —
An analysis of the changing geographic distribution of low-income workers and their families, measured by receipt of the federal Earned Income Tax Credit (EITC) in tax years 1999 and 2005, nationwide and in 58 major metropolitan areas across the country reveals that:

* The number of tax filers nationwide living in areas with high rates of working poverty increased by 40 percent, or 1.6 million filers, between tax years 1999 and 2005. By 2005, 12.3 percent of low-income working families lived in high-working-poverty communities—ZIP codes where more than 40 percent of taxpayers claimed the EITC—up from 10.4 percent in 1999.

* Of 58 large metropolitan areas studied, 34 experienced increased rates of concentrated working poverty (the share of EITC filers living in high-working-poverty communities) over the first half of the decade, while 24 showed declines. Older industrial metro areas including Detroit and Rochester exhibited the greatest increases in concentrated working poverty, while the Los Angeles and Phoenix metro areas experienced the largest declines.
* Major metropolitan areas in the Midwest and Northeast experienced substantial increases in concentrated working poverty over the first half of the decade, but Western metro areas saw steep declines. Metro areas in the Northeast and West had similar rates of concentrated working poverty in 1999 (13 percent), but by mid-decade, the rate had risen to 18 percent in the Northeast while it dropped to 7 percent in the West.

* Both central cities and suburbs saw an increase in high-working-poverty communities between tax years 1999 and 2005. The number of tax filers living in high-working-poverty areas in the central cities of major metropolitan areas across the country grew by 40 percent, while the surrounding suburbs experienced an increase of 36 percent. Still, central-city EITC recipients were five times as likely (25 percent) as suburban EITC recipients (5 percent) to live in high-working-poverty communities in 2005.

These trends suggest that the decline in concentrated poverty that occurred during the 1990s may be reversing over the course of this decade, particularly in regions hardest hit by the economic challenges of the early 2000s. Policies that foster stronger national and regional economic growth—together with targeted efforts to create and protect neighborhoods of choice and connection—may offer the best route to longer-term progress against concentrated poverty.