Lessons Learned

A booming economy in the late 1990s brought higher incomes for U.S. jobholders. Poverty declined nationwide, both in cities and rural areas, as the economy grew at an annual rate of 4.1 percent, the highest since the 1960s. The number of people living in high-poverty communities fell by 25 percent. By 2000, unemployment dipped below 4 percent—the lowest it had reached in 30 years. The economy was effectively operating at full employment, meaning that everyone or nearly everyone who wants a job can find one.

The late 1990s showed us how to reduce concentrated poverty: keep the economy at full employment. This solution seems almost too simplistic; it doesn’t require a sophisticated understanding of economics. But how can it be accomplished?

High-Poverty Neighborhoods and High-Poverty Neighborhood Population, U.S. Metropolitan Areas, 1970-2000

An important factor in the booming economy of the 1990s was the maturing of technology investments made by government and the private sector a decade or two earlier, primarily in electronics and telecommunications. These investments finally began to pay off with economy-wide increases in productivity.

Now, policymakers and the private sector are hoping technology innovation can spur economic growth as it did in the 1990s. New investments to upgrade the nation’s energy infrastructure are projected to create millions of new jobs and help the United States become more energy independent.¹ The real value of these investments, however, won’t be clear for some time, perhaps not for decades. For now, there will be no swift return to full employment. But what happens over a longer time period depends on policy decisions being made today.

There is a caveat to the good news from the late 1990s. In 2000, concentrated poverty was lower than in 1990 but still higher than in either 1970 or 1980. From 1970 to 1990, the number of people living in high-poverty communities doubled.² Over this same period, rates of individual and family-level poverty scarcely changed at all.³

The late 90s was only a brief respite in a trend that indicates poverty is becoming more concentrated. Since 2000, both overall poverty and concentrated poverty have been rising again. The gains achieved in the late 1990s have already been erased by the recession that started in 2007. At this point, no one knows how many people will be living in poverty at the end of 2010, but the projections are very disturbing. Based on simulations he has done, the Economic Policy Institute’s Lawrence Mishel thinks that child poverty could rise from 18 percent in 2007 to 27 percent in 2010. For African American children, the rate could rise from 34 percent to a staggering 52 percent.⁴

In earlier generations of public housing policy, high-rise estates contributed to the concentration of poverty.

There is wide agreement as to why poverty has become more concentrated in the past decades: deindustrialization, particularly in the rust belt states of the Midwest and Northeast; the steady flight of the middle class out of central cities into the suburbs; other demographic shifts, like burgeoning numbers of poor immigrants entering the low-wage labor market; and dissolution of the two-parent family structure, particularly in African American communities. Areas that start with high levels of poverty may be stuck, with few assets to attract investment,⁵ and never experience any economic growth.

Whether poor people are pushed by outside factors into areas where poverty is more concentrated, or they gravitate toward these areas on their own, the trend towards concentrated poverty makes it clear that we need anti-poverty efforts at the community level that are every bit as strong as those at the individual and family levels. As we saw this decade, when the economy slumps the gains are quickly erased. The past is also there to learn from. Public housing policy in the 1960s and 1970s, for example, was at best a mixed blessing, providing affordable housing to poor families while reinforcing social and economic exclusion. Cabrini Green in Chicago, a notorious example from this era in public housing, established a profoundly poor community of more than 15,000 people.

Public housing policy has evolved since its early experiments. In the 1990s, the Clinton administration boosted funding for mixed-income housing. The Obama Administration has proposed another evolution in housing policy by linking it to other components of community revitalization. The Choice Neighborhoods Initiative will be operated by the Department of Housing and Urban Development but creates partnerships with the Departments of Education, Transportation, Health and Human Services, and the Environmental Protection Agency. This is one of the most holistic approaches yet to community development. “For too long, government has funded housing, schools, and economic development in these communities as though they were islands unto themselves,” says Alan Berube of the Brookings Institution.⁶ Evidence from the Harlem Children’s Zone in New York City suggests that a holistic approach can achieve impressive results in interrupting cycles of poverty in families.

The problems in places where poverty is widespread cannot be solved by jobs alone. But there are many ways that policymakers can help high-poverty communities so that they are no longer marginalized when the economy rebounds from recession. The following sections look at how policies can help communities get on a path to sustainable development.

Issues