May 5, 2020 - Economy

Coronavirus crisis expected to drag neighborhoods deeper into poverty

A mother and son walk in a Stockton, Calif., neighborhood

A mother and son walk through a neighborhood in Stockton, Calif. Photo by Nick Otto/AFP via Getty Images

The number of high-poverty neighborhoods in the U.S. has increased at an alarming rate over the past 38 years, according to a new report out Tuesday from the Economic Innovation Group.

Why it matters: The analysis found that more and more neighborhoods that fall into poverty end up staying there. Stagnant wage growth in these places has made it very difficult for them to improve their fortunes even in good times — and that was before the severe economic crisis brought on by coronavirus.

By the numbers: Two-thirds of metropolitan neighborhoods that were high poverty — a 30% poverty rate or higher — in 1980 were still high poverty in 2018.

  • Nationally, only 14% of neighborhoods that were high poverty in 1980 had turned around to become low poverty —a poverty rate of less than 20% — by 2018.
  • "In the end, for every one high-poverty neighborhood that dramatically improved, there were five low-poverty ones that suffered dramatic deterioration," per the report.
Reproduced from EIG analysis of U.S. Census Bureau data and American Community Survey 5-year estimates. Note: EIG defines Newly poor as rate < 20 % in 1980, >=30% in 2018, Deepening poverty as rate >=20% and <30% in 1980, >=30% in 2018, Persistent poverty as rate >=30% in 1980, >=30% in 2018 and Turned around as rate >=30% in 1980, <20% in 2018; Chart: Axios Visuals

What's happening: Persistently poor neighborhoods tend to be clustered near city centers in the Northeast and South — in cities like Newark, Baltimore, Memphis and Atlanta.

  • Newly poor neighborhoods tend to be further away from urban cores and near persistently poor neighborhoods in Rust Belt cities like Cleveland and Detroit or high-growth Sun Belt hubs like Phoenix and Houston.

Turnaround neighborhoods — those that went from high poverty in 1980 to low poverty in 2018 — are rare. New York, Chicago and Los Angeles accounted for one-third of all such neighborhoods in the U.S.

  • In most cities, the few neighborhoods that did manage to climb out of poverty were in or near downtown districts.
  • Nearly half of the country's 100 most populous cities had no turnaround neighborhoods at all, partly because many had so few high-poverty areas in 1980.
  • For example, Las Vegas had a single high-poverty neighborhood in 1980. Now, it has 23 new high-poverty neighborhoods.

Between the lines: In 1980, poor Americans were as likely to live in low-poverty communities as in high-poverty ones. Now, there's a much higher chance that poor Americans live in high-poverty neighborhoods, meaning their exposure to economic opportunity and the social capital that fuels upward income mobility tends to be limited, said Kenan Fikri, one of the authors of the report.

  • "Combine that with the increasing income segregation that we're seeing, and you have a picture of an economic opportunity crisis that was bad while the tape was playing. Now the tape has run out, and it's poised to get significantly worse," he added.

The bottom line: The well-intentioned policy efforts to help pull neighborhoods out of poverty have been "piecemeal and inadequate," the report concludes, and the current economic crisis will drag even more communities deeper into poverty without intervention.

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