A new report
by Boston Indicators finds that Greater Boston’s continued economic
boom has failed to crack persistent economic inequality among residents.
The new report, Boston’s Booming… But for Whom?: Building Shared Prosperity in a Time of Growth, was released Wednesday morning to a crowd of 300 people at the Edgerley Center for Civic Leadership.
The report finds that Boston actually ties for second nationally
among the nation’s largest cities when it comes to the ability of those
raised in lower-income households to improve their economic state as
working-age adults. Boston also ranks high when breaking out by race,
but the analysis finds that Blacks in the cohort still earn 22% less
than their white peers.
The challenges of the economic boom on the middle-class are evident
in the shrinking size of Boston’s middle class. A Boston Indicators
analysis finds that while the number of low- and high-income city
residents has risen sharply in the past three decades, the number of
middle-class residents has declined.
One possible culprit? The cost of housing. Despite the City of Boston
playing a leadership role in the region by creating thousands of units
of affordable housing, the Indicators team analysis found just 20 census
tracts of 150 in Boston where median rent would be considered
affordable for a median income household. That list included zero tracts
in Roxbury, Dorchester or Mattapan.
Affordable housing by median income
Redoubling efforts to produce affordable housing, close Boston’s racial
homeownership gap, improve transportation, and continue to reduce
incarceration in Massachusetts are highlighted among a dozen local
action areas for building greater shared prosperity in the region.
The report is available now for download, and easily can be read online at bostonindicators.org.
The Indicators team plans to take deeper dives into a number of the
issues raised by the report during the course of the coming year.
Source: Boston Foundation
From a new NBER working paper by Richard Hornbeck, Enrico Moretti, "Who Benefits From Productivity Growth? Direct and Indirect Effects of Local TFP Growth on Wages, Rents, and Inequality"
Abstract:
We estimate the local and aggregate effects of total factor productivity (TFP) growth on US workers' earnings, housing costs, and purchasing power. Drawing on four alternative instrumental variables, we consistently find that when a city experiences productivity gains in manufacturing, there are substantial local increases in employment and average earnings. For renters, increased earnings are largely offset by increased cost of living; for homeowners, the benefits are substantial.
Strikingly, local productivity growth reduces local inequality, as it raises earnings of local less-skilled workers more than the earnings of local more-skilled workers. This is due, in part, to lower geographic mobility of less-skilled workers.
However, local productivity growth also has important general equilibrium effects through worker mobility. We estimate that 38% of the overall increase in workers' purchasing power occurs outside cities directly affected by local TFP growth. The indirect effects on worker earnings are substantially greater for more-skilled workers, due to greater geographic mobility of more-skilled workers, which increases inequality in other cities. Neglecting these general equilibrium effects would both understate the overall magnitude of benefits from productivity growth and misstate their distributional consequences.
Overall, US workers benefit substantially from productivity growth. Summing direct and indirect effects, we find that TFP growth from 1980 to 1990 increased purchasing power for the average US worker by 0.5-0.6% per year from 1980 to 2000. These gains do not depend on a worker's education; rather, the benefits from productivity growth mainly depend on where workers live.
Gated version of paper is available here.
