Understanding and Assessing Strategies and Policy Levers for Poverty Alleviation

This research program examines the conceptualization of poverty and its impact on public policy in the United States, and assesses the determinants of community well-being that are more and less amenable to policy interventions. We suggest that a new outlook on poverty that incorporates place as a key concern can re-invigorate policy discussions and reveal effective levers for poverty reduction.

Prompting Poverty Reduction: Societal Values, Social Exclusion, and the Future of American Democracy

JANE COVER and RACHEL GARSHICK KLEIT

Abstract: Deeply ingrained American values have shaped U.S. social policy, particularly in the post-welfare reform era, and reflect a casual framework that envisions poverty as a problem of individual failings. Though there is ample evidence that social, economic, and political systems create disadvantage, poverty policy is only rarely oriented toward changing these structures to ensure equal access to opportunities and resources. In order to re-invigorate public and policymaker concern about poverty, we need to re-conceptualize poverty in terms of social exclusion, which shifts the balance away from a single-minded attention to individual failure, situates places and the problem of uneven development, and accommodates the multi-dimensional character of poverty.

Posted to web November 25, 2008

Policy Levers and Opportunities for Poverty Alleviation

JANE COVER and RACHEL GARSHICK KLEIT

Abstract: The purpose of this paper is four-fold: first, we want to understand how rural counties in the region vary by classifying them into similar places (clusters) on the basis of their characteristics that are less amenable to policy intervention (population size and density, natural resource endowments, economic structure, employment share in different industries, corporate ownership of agriculture, amenity-based economy, and geographic remoteness). Second, we want to understand the consequences of these demographic, economic, and geographic qualities for community well-being. That is, how do clusters compare on basic measures of well-being (household income, poverty rate, relative poverty, and inequality)? Third, we want to identify, within each cluster, the extent of the variation in community well-being, with the goal of identifying places that have been more and less successful (with respect to community well-being) relative to the other members of their cluster. A sample of these places would potentially serve as case studies for future research on successful policy interventions to reduce poverty. Fourth, we want to identify the mediating factors (e.g., social capital, strength of the education system, level of entrepreneurship) that are relatively amenable to policy and influence community well-being. Methodologically, creating the typology (the first item above) will involve cluster analysis based on similarities and differences in economic structure and geography. Analysis will focus on counties in the eight states of the Northwest Area Foundation region.

Poverty and the Concentration of Economic Activity

This research program identifies clusters of economic activity and evaluates the relationship among economic clusters, employment opportunities, and poverty. We also examine the influence social capital has on the growth and decline of economic clusters and the potential relationship between social capital and poverty reduction.

Identification of Labor Pools for Economic Cluster Development

COLLEEN CHRISINGER, CHRIS FOWLER, and RACHEL GARSHICK KLEIT

Abstract: Many states, regions, and cities pursue economic development by supporting promising clusters of industries. Researchers and economic development planners use a variety of methods to identify industry clusters, including the shared occupational traits of the labor pools from which they draw. Identification of labor pools is a first step in the process of establishing an economic development policy that matches the needs and skills of local workers with business demand in the same location, rather than emphasizing relocation of workers and businesses from other areas. A labor-based approach to economic development also is well suited to assisting workers making transitions to jobs utilizing similar skills in other industrial clusters, or moving from low quality to high quality jobs. This paper uses recent data from the Occupational Information Network (O*NET) database to identify labor pools that share similar occupational characteristics. The unique contributions of this paper relative to previous literature stem from the use of the most recently available and expanded data and a focus on occupations filled by less-skilled workers. Defining clusters in terms of where suitable labor pools exist is a key step in focusing local economic development resources to enhance both workforce development and poverty alleviation.

Posted to web September 24, 2009

Is There a Link Between Economic Development and Poverty Alleviation?  An Analysis of the Collocation of Economic Clusters and Impoverished Populations

CHRIS FOWLER, COLLEEN CHRISINGER, and RACHEL GARSHICK KLEIT

Abstract: Economic clusters are widely understood as a worthwhile target for local economic development resources. Nevertheless, most of the work on cluster development has asserted benefits that accrue to a regional economy as a whole with little to no focus on the specific links between clusters and poverty alleviation. This focus on growth alone overlooks the potential for cluster developments to improve regional economies by employing previously unemployed, local, individuals. Although these objectives are implied to some degree within the rubric of growth, the lack of specific attention has limited the degree to which cluster policies can affect these areas of social welfare. This paper seeks to understand the degree to which the presence of economic clusters is correlated with lower levels of poverty while controlling for other socioeconomic factors. In particular we attempt to discern patterns that might link the presence of rapidly growing or declining clusters with these populations in an effort to identify areas where policy intervention might be appropriate.

Fringe Banking in the U.S.

This research program examines the distribution of the alternative financial sector (payday lenders, check cashers, money transmitters, and pawn brokers) across the nation and in specific communities.  We assess the characteristics of geographic areas where these fringe services are concentrated, paying special attention to differences in racial and ethnic concentration.

The Geography of Fringe Banking

JANE COVER, CHRIS FOWLER, RACHEL GARSHICK KLEIT, and ANTHONY RUSSO

Abstract: Over the past two decades, the U.S. financial service sector has become increasingly bifurcated into a two-tiered system: the traditional banking system serves primarily middle and upper income individuals, while a less-regulated and more expensive alternative financial sector serves many low- and moderate-income individuals. An estimated 56 million U.S. households now rely on the alternative financial sector – payday lenders, check cashers, pawn brokers, money wiring companies, auto title lenders, and rent-to-own retailers – for basic financial services and transactions. While proponents argue that this service sector fulfills a need in the financial services market, critics allege that these ‘fringe banking services’ charge high fees, create spiraling debt, and contribute nothing toward establishing credit worthiness, all of which impairs the ability of economically vulnerable households to improve their financial fortunes. Moreover, fringe providers are disproportionately present in some minority communities, relative to those that are more predominantly white. This study describes the distribution of fringe banking services across the nation, assessing whether traditional and fringe banks operate in different counties, and whether fringe providers are disproportionately represented in counties with greater racial and ethnic concentration. We find evidence of a greater number of fringe providers in urban and mixed rural counties that have more minorities, net of other factors.

Posted to web September 24, 2009

Banking Services in Relation to Hispanic Neighborhoods

JANE COVER, RACHEL GARSHICK KLEIT, and AMY FUHRMAN

Abstract: Since the mid-1990s, the U.S. financial service sector has become increasingly bifurcated into a two-tiered system: the traditional banking system serves primarily middle and upper income individuals, while a less regulated and more expensive alternative financial service sector caters to lower income individuals. An estimated 56 million individuals either do not use banks at all, or use them only sporadically, for essential financial transactions like writing and cashing checks, and obtaining credit. Instead, many low income individuals rely on payday lenders, check cashers, pawn brokers and money wiring companies for basic financial services and transactions. These fringe banking services charge high fees, contribute to spiraling debt, create disincentives to save and contribute little toward establishing credit worthiness, thus impairing their customers’ ability to improve their financial fortunes.

Racial and ethnic minorities are disproportionate users of fringe banks, thus exacerbating the inequity of a bifurcated financial system and regressive fee structure. Case studies in select cities have found that fringe services are more geographically accessible to predominantly minority neighborhoods while traditional banks are more accessible to white neighborhoods. However, many of these studies have focused on African Americans, or collapsed all racial and ethnic minorities into a single nonwhite category. Hispanics may be more likely (than either African Americans or immigrants from other regions) to be unbanked, in part because of their immigrant background, legal status, language limitations and culturally ingrained distrust of traditional banks. Indeed, the very limited research that focuses on Hispanics has found a strong relationship between the location of fringe providers and Hispanic neighborhoods.

Therefore, this study uses GIS mapping to explore the spatial relationship between Hispanic communities and traditional and fringe banking services in two metro areas. Specifically, we examine the prevalence and proximity of fringe and traditional banking to majority Hispanic, integrated, and non-Hispanic neighborhoods. We identify patterns of disproportionate access to fringe and traditional services for Hispanic and non-Hispanic residents across the metropolitan areas, assessing differences between central city, suburban and peripheral city areas. Existing research frequently compares the racial composition of neighborhoods with fringe providers against the average for the county. This is problematic if minorities tend to live in more commercial areas (the universe of possible locations for fringe providers). This study overcomes this methodological limitation by incorporating zoning data to determine the appropriate yardstick against which to measure whether fringe providers predominantly locate near Hispanic communities.

Rural Housing Needs and Poverty Alleviation

RACHEL GARSHICK KLEIT and AMY FUHRMAN

Abstract: This paper seeks to answer some basic questions about housing needs in rural areas and examine linkages between those housing needs and poverty alleviation. Housing is a basic human need, and the average American family pays between 24 and 30% of its income for housing. Yet, those who live in poverty often pay disproportionately for it - in 2006, among the 25% of households at the bottom of the income distribution, 42% of homeowners and 52% of renters paid more than 50% of their incomes for housing. While housing is relatively less expensive in the rural areas within the Northwest Area Foundation’s region, the question remains what the housing issues and needs are for the lower income residents of these areas. The paper will end with recommendations for further research looking at this connection.

Spatial Variations in U.S. Poverty: Beyond Metropolitan and Non-Metropolitan

MAN WANG, RACHEL GARSHICK KLEIT, and JANE COVER

Abstract: Because poverty in rural and urban areas of the U.S. often has different causes, correlates and solutions, effective anti-poverty policies depend on a thorough understanding of the ruralness or urbanness of specific places. As a short-hand for this understanding, government agencies and researchers have created a number of different classification schemes for urban and rural areas that drive the application of policy. This paper reports on research comparing several widely used classification schemes and the varying magnitudes of poverty that they reveal in the U.S. The commonly used federal “metropolitan/non-metropolitan” distinction obscures important socioeconomic differences among metropolitan areas, making our understanding of the geography of poverty imprecise. Given the number and concentration of poor people, people of color in particular, living in mixed-rural and rural counties in metropolitan regions, researchers and policymakers need to pay more nuanced attention to the opportunities and constraints such individuals face. The Obama Administration’s new focus on urban areas and prosperity heightens the importance of accuracy and proper use of these definitions. In short, a cross-classification of the OMB’s metro system with a nuanced RUDC scheme is the most effective for revealing the geographic complexities of poverty within metropolitan areas.

Posted to web September 24, 2009

Spatial Variation in County Poverty Rates in the U.S.

MAN WANG and RACHEL GARSHICK KLEIT

Abstract: Geographers and regional scientist have long been aware of the effects of spatial autocorrelation when using aggregated data in regression analysis. However, the concept has not drawn enough attention in poverty studies. Using county-level data from the 2000 Census and employing exploratory spatial data analysis and spatial regression analysis, this paper examines spatial distribution of poverty (clusters/hot spots) in the Northwest Area Foundation region and identifies mechanisms that are at work, namely the joint effects of place-based factors and person-based factors on poverty.

Literature Review on the Role of Social Capital in Poverty Reduction

AMY FUHRMAN and RACHEL GARSHICK KLEIT

Abstract: This paper provides an extensive review of the theoretical development and research applications of social capital. The many definitions of social capital and the various ways it has been measured are discussed. This paper pays specific attention to empirical results from analyses that apply social capital to poverty alleviation, and community and economic development. Findings from the literature show that although the conceptualization, definition, and measurement of social capital is convoluted, empirical analyses indicate that social capital plays a role in poverty reduction by spurring community and economic development. The paper concludes by citing suggestions for building social capital so that it can be harnessed to achieve community goals.

Literature Review of Macroeconomic Conditions and Poverty Rates

COLLEEN CHRISINGER and RACHEL GARSHICK KLEIT

Abstract: Throughout most of the last 50 years, poverty rates have usually declined during times of economic growth. Economic theory predicts that growth causes wages to rise and unemployment rates to fall, resulting in greater overall prosperity. Yet high levels of inequality and stagnant wages, as observed during the 1970s and 1980s, can prevent growth from “trickling down” to those who most need it. This literature review examines in detail the types of places and people for whom economic growth appears to reduce poverty, in order to inform policymakers of the prospects for growth to reduce poverty within their own communities.

Literature Review of Poverty Measurement

COLLEEN CHRISINGER, JACQUELINE MEIJER-IRONS, and RACHEL GARSHICK KLEIT

This paper reviews the ideas and methods that have influenced the measurement of poverty in the United States and elsewhere, and summarizes the debate surrounding proposed changes to the official measure of poverty in the U.S. In sum, the concept of poverty may seem simple, but the practice of determining precisely which individuals are poor is complicated and controversial. Poverty is usually defined as having insufficient resources to achieve a particular standard of living, but no consensus has formed about the nature of that standard. Many authors suggest that people should be counted as poor not only if their physical survival is threatened, but also if they have inadequate levels of community participation, use of modern technology, and access to opportunities for economic advancement, self-expression and self-improvement. Although many measures of poverty are based on income, these definitions merely reflect the role of money as a means to achieve these ends, but may not fully capture the concepts of interest. Alternative measures of poverty attempt to address access and quality of life issues more directly. Such alternative measures encompass participation in social and democratic institutions, local perceptions of what it means to be poor, and specific human capabilities such as the ability to reason, to express oneself, and to be healthy. These alternative measures offer a more nuanced picture of poverty, and should be used in tandem with the current U.S. poverty measure.

Posted to web September 24, 2009

Evaluative Catalogue of Person and Place Based Policies in the U.S.

MAN WANG, AMY FUHRMAN, J CHRISTOPHER PIERSON, and RACHEL GARSHICK KLEIT

Abstract: This report serves as a broad review of the major “person-based” and “place-based” policies and initiatives being implemented on the federal, state, and local levels that address poverty, either directly or indirectly. Much federal, state, and local public policy in the United States directed towards poverty reduction emphasizes programs affecting individuals, be they tax credits (EITC), income protection (TANF), child care subsidies, job training, or asset building (IDA accounts, homeownership, etc.).  A wide variety of anti-poverty policies also exist that target places, including policies affecting economic development, workforce development, local entrepreneurship, and the built environment. We describe the goals and operation of the policies, and when available, present evidence on the policy’s effectiveness for reducing poverty.  A growing body of research suggests that both person-based and place-based policies have positive impacts on poverty reduction, and also reveals that person- and place-based policies are not as dichotomous as commonly described.