A stark prosperity gap is crippling the economy -- and deepening social divisions

  • More than 52 million Americans live in deeply-disadvantaged, “distressed” neighbourhoods, report finds.
  • Distressed areas saw declines in both jobs and business establishments despite economic recovery.
  • Wealthy neighbourhoods have dominated the recovery, generating 52% of the country’s new jobs.

There’s a new interactive tool online that helps Americans visualise just how deeply economically divided the nation has become — and it’s not a pretty picture.

The country’s deep income and wealth inequalities, which match levels not seen since before the Great Depression, have been widely reported.

But the Distressed Communities Index, published by a Washington-based non-profit called Economic Innovation Group (EIG), adds some startling new detail and localised specificity to the widening and persistent gap between the country’s rich and poor, the worst of any “advanced” economy.

The US economy has, on paper, been recovering from the Great Recession since the summer of 2009. Recently, growth has hovered around 2% per year, and the unemployment rate has fallen to just 4.4%.

Still, much of the population has not felt the gains of this rebound, which is among the longest in modern history but also the weakest.

“It is fair to wonder whether a recovery that excludes tens of millions of Americans and thousands of communities deserves to be called a recovery at all,” the EIG says in its Distressed Communities Index report.

“The consequences extend far beyond the individual communities being left behind. The further we go down the path of geographically exclusive growth, the more we limit our nation’s economic potential as a whole — and the more fractured our society risks becoming in the process.”

This finding is in line with a recent shift in thinking at major institutions like the International Monetary Fund, which now argues that too much inequality is actively harmful to the long-run growth potential of economies.

Here are some depressing findings from the EIG report, which finds more than 52 million Americans are living in distressed zip codes:

• Job growth in the average distressed zip code was negative from 2011 to 2015, trailing the average prosperous zip code by more than 30 percentage points.

• Distressed zip codes were the only group in which the number of both jobs and business establishments declined during the national recovery.

• Most distressed zip codes contain fewer jobs and places of business today than they did in 2000.

• Distressed zip codes contain 35% of the country’s “brownfield” sites marked by “the presence or potential presence of a hazardous substance, pollutant, or contaminant.

• 58% of adults in distressed zip codes have no education beyond high school.

Meanwhile, on the right side of the tracks:

• 88% of prosperous zip codes experienced job growth from 2011 to 2015, and 85% saw rising numbers of business establishments.

• Prosperous zip codes have dominated the recovery, generating 52% of the country’s new jobs and 57% of its net new business establishments from 2011 to 2015.

• Adults with any level of postsecondary education are more likely to live in a prosperous zip code than any other type of community.

• 45% of the country’s advanced degree holders live in prosperous zip codes, more than in the bottom three quintiles of zip codes combined

The richest one-fifth of US zip codes were the “unambiguous drivers” of the recovery, the report found; 88% of them saw job growth and 85% had rising numbers of business establishments from 2011 to 2015.

“Outside of the upper echelon, however, growth rapidly becomes less pervasive,” EIG adds. “Only three out of every four comfortable zip codes saw job growth over the period, and the number of business establishments rose in only two out of every three zip codes in this second best-performing tier.”

For the poorest Americans, “stagnation and decline were the rule, not the exception.”

Just two of five distressed zip codes saw any job growth over the five years of recovery, and only about one in five saw the number of business establishments rise.

More than half (55%) of distressed zip codes experienced net declines in both jobs and business establishments over the 2011-2015 recovery period, compared to fewer than one quarter of mid-tier zip codes and a mere 3% of prosperous zip codes.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.