Cleveland Fed research: Facing a tradeoff, Black and Hispanic households often give up neighborhood quality for representation

Black and Hispanic households often live in neighborhoods with lower socio-economic status than white households with similar incomes, according to a new report from the Federal Reserve Bank of Cleveland.

In the report, “Neighborhood Sorting, Metros, and Tomorrow’s Labor Force,” researchers Daniel Carroll and Christopher J. Walker assign to neighborhoods a measure of socioeconomic status based on neighborhood characteristics that are strongly correlated with the future labor market outcomes of children.

They find that in many metro areas, Black and Hispanic households often must choose between a neighborhood’s Black or Hispanic population share and its socioeconomic status. Many end up sorting into lower status neighborhoods, according to the report, which builds off prior research conducted by the Cleveland Fed.

Because of the correlation between neighborhood socioeconomic status and labor market outcomes of children, “these sorting patterns could, over time, act to limit workforce productivity, and individual earnings, by restraining skills acquisition for youth residing in under-resourced areas,” Carroll and Walker write.

Read the Economic Commentary: Neighborhood Sorting, Metros, and Tomorrow’s Labor Force

Related research and insights: The Program on Economic Inclusion