MacroScope

America’s poverty trap tightens its grip

December 21, 2011

U.S. poverty is becoming increasingly concentrated both geographically and racially, according to a new study from the Federal Reserve Bank of Cleveland. The authors find that while the poverty rate has moved up and down in a relatively narrow range over the last 40 years, mostly mirroring the ups and downs of the economy, that a deeper look at the data reveals some disturbing trends.

The data we have examined indicate that the share of Americans living in high-poverty neighborhoods increased between 1970 and 2000. And we have found that an individual’s poverty status or race is highly predictive of the neighborhood poverty rate they will experience.

The findings also suggest blacks and Hispanics have been disproportionately affected. The concentration is likely to further limit opportunities for escaping poverty, the authors say:

Because it is likely that neighborhoods are one of the factors that shape individuals’ opportunities, we might be concerned with how neighborhood poverty impacts outcomes. For example, we might ask: If the next Bill Gates or Warren Buffett were to grow up in a neighborhood of concentrated poverty, would their talents be utilized?

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