March 25, 2019

One of the most impoverished places in the Southeast lies less than a mile-and-a-half from Atlanta's historic Grant Park, a prosperous neighborhood of 120-year-old Victorians, tidy bungalows, and the city's zoo.

That small distance, however, represents a socioeconomic gulf. In Thomasville Heights, weedy lots scattered with trash sit alongside low-slung apartment buildings surrounded by iron fences. In 2013, the neighborhood's median household income was under $8,000, and only one in 10 homes was owner-occupied, according to U.S. Census Bureau data. Up the street, Grant Park's median household income that year was $91,250, and owners live in two-thirds of homes.

"Most people don't experience the same economy."
President Raphael Bostic

Comprehensive data such as employment and gross domestic product (GDP) growth describe a strong U.S. economy. In fact, 2018 was the nation's best year for economic expansion since the Great Recession. By many measures, the Southeast economy has been equally robust. (The Southeast in this report refers to the six states that make up the Sixth Federal Reserve District.) In fact, led by Florida and Georgia, the six states combined surpassed the national pace of job growth in 2018.

Yet many people, like those in Thomasville Heights, do not live the national or regional norms, points out Federal Reserve Bank of Atlanta president Raphael Bostic. Bostic traveled the region in 2018, his first full year as Atlanta Fed chief executive. He visited more than a dozen places, from bustling metros to smaller cities fighting for footing in a changing economy, such as "the Shoals" area of Florence-Muscle Shoals, Alabama, and Albany, Georgia. He also visited the Thomasville neighborhood.

"There are many economies, not just one," Bostic said. "Depending on where you are, people are having very different experiences in terms of prosperity, in terms of hope, and in terms of access to opportunity."

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View data for: 1997 2007 2017

Visiting places across the Southeast offered Bostic a multifaceted view that numbers alone simply can't match. "When I talk to people, look in their eyes, and get a feel for their hopes and concerns, it creates a different and in many ways a more lasting impression than I get from the data," Bostic said. "I've found the experience incredibly rich."

The Atlanta Fed's annual report and three subsequent quarterly special reports will explore in text, video, and images the Sixth District's varied economies, in part by visiting some of the cities on Bostic's 2018 travels. Through statistics and interviews with people struggling to overcome economic challenges and people working to help others improve their economic mobility and resilience, the report will examine socioeconomic gaps, including differences in economic mobility and resilience.

"There are some places...that are booming and you see a lot of growth. But there are other places where the economy is not nearly as robust."
— Bostic

Economic mobility is a challenge

People are moving in droves to cities like Nashville and Orlando for high-paying jobs. However, the children growing up there in modest means are not necessarily reaping much benefitOff-site link from the economic boom, Harvard University economist Raj Chetty pointed out during an October 2018 visit to the Atlanta Fed. Among 381 U.S. metro areas, the Southeast's major metropolitan statistical areas, or MSAs, consistently ranked near the bottom of the list in terms of children's ability to move up from the bottom of the socioeconomic ladder:

Ranking of Major Southeast MSAs
Rank MSA
236 Miami
272 Orlando
275 Tampa
306 Nashville
307 New Orleans
326 Birmingham
330 Jacksonville
360 Atlanta
Note: To see a map with the household income for adult children of low-income parents for all U.S. cities, go to The Opportunity Atlas.Off-site link
Source: The Opportunity Atlas

One of Chetty and his colleagues' more intriguing findings is that proximity to large numbers of jobs is not highly correlated with robust economic mobility. What appears to matter more for children is living among large numbers of employed adults in their own neighborhood, Chetty said. Access to role models, strong family structures, and other elements of "social capital" are critical.

Two primary factors are to blame for diminished economic mobility: slowing economic growth over the past 30 years, and most income gains accruing to people at the top of the income scale, according to Chetty.

Also importantly, his research shows that much of the stagnation in mobility results from how we provide opportunities for kids from disadvantaged families. In particular, Chetty cites factors including access to higher education, the uneven quality of elementary schools, and the rise of both income and racial segregation.

"When people are unstable in their housing...they do worse in the workplace."
— Bostic

Persistently poor counties are further evidence of constrained economic mobility. The South has long encompassed more persistent-poverty counties than any region in the country. A band across central Mississippi, Alabama, and Georgia includes many of the nation's counties where 20 percent or more of the population has lived in poverty as measured by each census since 1980. (See this map on the U.S. Department of Agriculture's website.)Off-site link

Hope and promise amid challenges

Bostic saw plenty of challenges during his visits across the region. Albany and the Shoals, for example, both lost population between 2010 and 2017. In the Albany metro area, two counties sitting side by side tell a tale of differing economies. In the city of Albany's Dougherty County, vital signs such as labor force participation, the proportion of the population on food stamps, and the share earning income below poverty level all worsened between 2010 and 2017, according to American Community Survey data from the Census Bureau.

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Just across the border, most of those measures trended upward in Lee County. That area north of Albany has seen clear growth: 65 percent of housing units have been built since 1990, census data show. The population climbed 4 percent from 2010 to 2017. In Dougherty, by contrast, only a quarter of the existing housing units have been constructed since 1990, and the population shrank by 3 percent from 2010 to 2017.

Despite witnessing widespread challenges, Bostic came away from his travels with hope. A big reason: people care and are working together to try to overcome the challenges. Among many southerners who see their hometowns at risk, he sensed a deep commitment to do something about it.

"People are trying really hard," he said. "The passion they have for their communities is clear. That says the fight hasn't been lost, and that's very inspiring."

In Birmingham, Alabama, for example, Antiqua Cleggett, director of the workforce development agency Central Six AlabamaWorks!, helps prepare people facing hurdles to employment to fill openings at local construction firms. (The special report scheduled for release in June 2019 will include a video featuring Cleggett and AlabamaWorks.) AlabamaWorks is meant to unify the state's training, education, job placement, and business support services into a cohesive network. The organization offers services targeted to various types of employers and potential employees, including veterans, older workers, students, and the unemployed.

Why does the Fed care?

Generally speaking, monetary policy, which is the Federal Reserve's core work, is not a tool that is targeted at aiding specific groups. Rather, it is a blunt instrument designed to create a general environment conducive to prosperity.

But variations in economic circumstances and opportunity matter greatly to the Fed because achieving its mandate of maximizing employment—alongside fostering stable prices—depends on broad access to economic opportunity.

"It all fits together. And so if you have things that break down in any of those dimensions, it can all break down."
— Bostic

Labor market success will vary depending on individuals' actions and abilities. Yet these outcomes should not be predetermined by a person's ZIP code at birth, socioeconomic background, gender, or race. Without equal access to opportunity, Bostic emphasized, the country squanders economic potential and limits the possibilities of its people.

In states like Alabama, for example, effective workforce development and improved public health could bring thousands more into the productive workforce and help alleviate what figure to be serious labor shortages in the coming years.

"When I talk to employers, they tell me there are a lot of challenges they have in trying to find workers to fill positions."
— Bostic

In addition, no discussion about employment and economic mobility should take place without also addressing the need for stable, affordable housing. At the most basic level, for someone without stable housing, finding and keeping employment presents an enormous challenge.

Atlanta Fed explores numerous aspects of mobility, resilience

Several Atlanta Fed economists and researchers are exploring topics that influence economic mobility and resilience. Senior adviser Ann Carpenter of the Atlanta Fed's Community and Economic Development (CED) team studies affordable housing. Carpenter most recently published a paper on rental housing affordability in the Southeast. Adobe PDF file format She found that more than two-thirds of low-income renter households in the region pay more than 30 percent of their income for housing, making them "cost burdened" and often forcing them to make difficult choices about their other needs, including food, health care, and education.

2/3: Share of low-income renter households in the region who pay more than 30% of their income for housing

Atlanta Fed experts are also deeply involved in researching workforce development and advising practitioners in the field. Stuart Andreason directs the Reserve Bank's Center for Workforce and Economic Opportunity, which focuses on employment policies and labor market issues that affect low- and moderate-income individuals. The center has convened thought leaders on many topics and collaborated on a three-volume compendiumOff-site link of resources aimed at helping policymakers and practitioners prepare as many people for the workforce as possible, in particular those who face big hurdles to employment. In this way, the book conveys the message that workforce development is not a cost, but an investment in long-term economic growth and productivity.

"When we have as many people gainfully employed as possible, that means our economy is performing at a very high...productive level."
— Bostic

Still, finding a job is not the end of the struggle for low earners. Atlanta Fed research director Dave Altig is examining disincentives to work that are built into aspects of the U.S. tax code and some public benefits programs. The essential issue centers on so-called benefit cliffs—meaning that means-tested public support can disappear quickly as recipients earn more income by working more hours, acquiring skills, or getting promotions. Basically, Altig and Boston University's Lawrence Kotikoff have found that these benefit cliffs result in relatively high penalties for working. They are, in effect, high "tax" rates for the least wealthy. As a consequence, when low earners' pay inches up, they may wind up worse off. (See Altig’s March 2019 macroblog post on marginal tax rates and benefits cliffs.)

In addition, CED's Mels de Zeeuw collaborated with Federal Reserve colleagues to examine the credit experiences Adobe PDF file format of minority small-business owners. They found that black-owned firms are less likely to obtain financing compared with similar white-owned small businesses.

Those are but a few examples of the Atlanta Fed's work to understand the forces that shape economic mobility and resilience and to help explain why the region and nation are a collection of many economies.

In the coming quarterly special reports, we will explore this work in more detail. First, we will delve into the region's formidable challenges in workforce development, especially in assisting those with serious barriers to employment, including veterans, formerly incarcerated people, and those with disabilities. Then we will examine the Southeast's affordable housing crisis and efforts to address it.

Finally, we'll take a look at the challenges facing small businesses and the critical role they can play in advancing mobility and resilience in southeastern communities.

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