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Dionissi Aliprantis |

Research Economist

Dionissi Aliprantis

Dionissi Aliprantis is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in applied econometrics, labor and urban economics, and education. His current work investigates neighborhood effects on education and labor market outcomes.

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Mary Zenker |

Research Analyst

Mary Zenker

Mary Zenker is a former research analyst in the Research Department at the Federal Reserve Bank of Cleveland.

05.20.11

Neighborhood Poverty Rates between 1970 and 2000

Dionissi Aliprantis and Mary Zenker

Official poverty statistics in the United States measure the percent of individuals whose income is below a threshold. The Census Bureau defines a set of income thresholds that depend on family size and composition, and family members are considered to be in poverty if their family’s total income is less than the specified threshold. Over the last 40 years, poverty rates have varied between 11 percent and 15 percent of the population, with a clear cyclical pattern. The latest figures available are from 2009, and they show a sharp rise in the poverty rate during the last recession.

The official poverty statistics measure poverty as experienced at the level of the family; however, an alternative approach to understanding the effects of poverty is to look at how many people live in high-poverty neighborhoods. It is widely believed that an increased poverty rate at the neighborhood level negatively impacts many other important outcomes, such as crime rates, employment opportunities, and educational attainment. Finding empirical evidence of negative consequences of concentrated poverty has been a focus of much research in the social sciences during recent decades.

In order to measure trends in the concentration of poverty, we compare poverty rates in different U.S. census tracts, which we will consider to be neighborhoods, over time. We look at how these rates vary across the U.S. and how this variation has changed between 1970 and 2000. (These data are from the decennial census and are obtained from the National Historical Geographic Information System [NHGIS]. Data for 2010 are yet unavailable.) We present the data in histograms of the U.S. and Fourth District populations by the poverty rate of their census tract of residence. Superimposed onto the histograms are lines representing the 10th, 50th, and 90th percentiles of the distributions. These lines indicate the poverty rates to the left of which 10 percent, 50 percent, and 90 percent of the population lived, respectively.

In 1970 the median individual in the U.S. lived in a neighborhood with a poverty rate of 5.1 percent, so that half of Americans lived in neighborhoods with a poverty rate less than or equal to 5.1 percent. In the Fourth District the rate for the median individual was similar, but slightly lower.

These figures also show that the distribution of poverty rates tends to have a long right tail. The 40 percent of the U.S. population that fell in the left tail (between the 10th and 50th percentiles) in 1970, for example, lived in neighborhoods with poverty rates between a narrow range of 1.7 percent and 5.1 percent. However, the 40 percent of the population that fell in the right tail (between the 50th and 90th percentiles) lived in neighborhoods with poverty rates spanning a much broader range, 5.1 percent to 19.6 percent. It is impressive to consider how much variation there is in poverty rates across neighborhoods, and what this may mean for individuals’ experiences.

In 1980 many more individuals were living in high-poverty neighborhoods than in 1970. The median individual in the U.S. lived in a neighborhood with a poverty rate of 8.3 percent, and the 90th percentile individual lived in a neighborhood with a poverty rate of 25.4 percent. In 1980 the median individual in the Fourth District lived in a lower-poverty neighborhood than did the median individual in the U.S. The same was true of the 90th percentile individual in the Fourth District, who lived in a census tract with a 21.7 percent poverty rate.

Between 1980 and 1990 there was again an increase in the number of people living in high-poverty neighborhoods. The median individual in the U.S. now lived in a neighborhood in which 9.3 percent of the residents were in poverty, and the poverty rate in the neighborhood of an individual in the 90th percentile had increased to a rate of 27.9 percent, an increase of 8.3 percent since 1970. We can also see that at some point between 1980 and 1990 the right tail of the distribution became worse for the Fourth District than for the nation as a whole. Although the 90th percentile was lower in the Fourth District than the nation in 1970, the increase in high-poverty neighborhoods between 1970 and 1990 was even greater in the Fourth District than the nation as a whole, causing these 90th percentile bars to switch order by 1990. By 1990, the 90th percentile of the Fourth District had moved all the way to 29.7 percent.

Things improved between 1990 and 2000, but this improvement did not return the right tails of these distributions back to where they were in 1970. At 9.1 percent, the median neighborhood poverty rate in the U.S. was still higher in 2000 than it was in 1980, but the 90th percentile became comparable to its 1980 rate. In contrast, although the right tail of the distribution improved between 1990 and 2000 in the Fourth District, this improvement was still not enough to return it even to 1980 levels. The median individual in the Fourth District lived in a neighborhood with a poverty rate of 8.1 percent in 2000, and the 90th percentile was still as high as 25.5 percent.

When we consider all of this evidence together, we see that since the 1970s there has been an increase in the number of Americans living in neighborhoods with high levels of poverty. A particular concern for policymakers is the emergence of many neighborhoods with highly concentrated poverty. Almost nobody lived in a neighborhood in which the poverty rate was 30 percent or more in 1970, but by 1990 a non-negligible number of Americans lived in such neighborhoods, as the distribution of neighborhood poverty rates had shifted substantially. Given the negative impacts of the recent recession, one would expect that the right tails of these distributions would resume their growth between 2000 and 2010. The continued evolution of neighborhood poverty rates will be an issue of great interest for researchers and policymakers when the relevant 2010 census data becomes available this summer.

Reference

Minnesota Population Center. National Historical Geographic Information System: Pre-release Version 0.1. Minneapolis, MN: University of Minnesota 2004.NHGIS website: http://www.nhgis.org.