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Monday, August 18, 2008

Did the Housing Bubble Hide the (Already Increased) Level of Poverty?

The Brookings Institute takes a look at concentrated working poverty:

The study defines the concentrated working poverty rate as the share of low-income tax filers (those receiving the Earned Income Tax Credit, or EITC) living in communities where at least 40% of all filers receive the EITC.

The report shows that of the 58 large metropolitan areas studied, 34 experienced increased rates of concentrated working poverty between 1999 and 2005. Many of those metro areas, including Rochester, Detroit and Cleveland, are located in older industrial regions in the Midwest and Northeast. Western metropolitan areas, on the other hand, saw a steep drop of 42% in the number of EITC recipients living in high-working-poverty communities.
Please note that the data is somewhat (in fact more than somewhat) stale. However, there are a few things I would like to point out.
  • Many of those cities showing a decrease in poverty were in the heart of the subprime fueled housing bubble (think Southern California, Arizona, and Florida)
  • Even with that bubble that benefited many poverty stricken cities (enabled housing opportunities / created jobs) ~60% of cities experienced an increase in poverty from 1999-2005
  • Most gains directly related to this housing bubble have already reversed
Source: Brookings Institute