Not Everybody ‘Wins’

by Roderick J. Harrison, Ph.D.
originally published in the New York Times’ Opinion Pages

One of the most powerful concepts for understanding urban growth (and decline) is agglomerative economies – the efficiencies and reductions in cost that can be realized by reducing the transaction costs of producers and consumers exchanging the goods and services needed for their own production processes or final consumption. Although some transactions can now be accomplished digitally at any distance with no loss of efficiency, it is usually advantageous to have reasonable proximity to those with whom one seeks to exchange goods and services.

While the affluence has sustained support jobs in retail, hospitality and entertainment that have suffered large losses elsewhere, the city is highly polarized economically.

Washington D.C. is home to the federal government, the single largest producer of goods and services in the United States. In the past several decades, highly diverse industries needed to provide inputs to the government – defense contractors, IT and telecommunications firms, builders of offices and facilities, nonprofit organizations and lobbyists – have all grown rapidly.

For Washington D.C., the most important feature of the jobs provided by federal agencies and the industries is that they attract is that many of them require highly educated workers, including scientists and engineers capable of state-of-the art research, development and implementation.

In 2009, nearly half (48 percent) of the District’s residents were college graduates, and 28 percent had advanced degrees. The percentages in the greater Washington metropolitan area were similar. In contrast, about 28 percent of the U.S. population in 2009 held a B.A., and 10 percent held advanced degrees.

These educational and employment opportunities support some of the highest concentrations of affluent households in the United States: 4 of the 5 counties with the highest median household income, each with a median income over $100,000, are in the Washington metropolitan area. The metropolitan area includes 10 of the 16 counties with the highest household income in the nation.

This large affluent population, and the much lower vulnerability of federal government and private sector positions requiring high and often scientific or technical education to job losses in the recent recession, go far to explaining why Washington D.C. was one of the few metropolitan areas to experience a rise, rather than a decline, in housing values.

The stimulus funds that the federal government spent to revive the economy helped create jobs in the region, and – this is critical – the affluence of the D.C. metropolitan area has sustained the support jobs in the retail, hospitality, food and entertainment industries that have suffered much larger losses elsewhere. The region has provided attractive career opportunities to recent college graduates and those with advanced degrees, and made the District one of the few central cities in the nation to gain population since the 2000 census.

Firms seeking highly educated workers in turn find concentrations of the size D.C. offers highly attractive, and create even more employment opportunities when they locate or expand their offices or facilities in the region.

Population growth, especially when it is composed of high income workers – and even more so if they are young, as yet childless, and hence with more disposable income – has increased demands for housing in the District. This influx has also increased demands for the cultural amenities that these populations consume, leading to the revitalization – or gentrification – of many neighborhoods and the growth of shops, restaurants and coffee places that in turn provide employment.

The influx of college educated workers fueling the growth in population and housing values is predominantly white; the population lost is predominantly black.

The dynamics underlying these trends are perhaps an urban planner’s dream: job and population growth spur economic growth that in turn attracts jobs and population, transforms neighborhoods, and eventually should increase tax revenues that can be invested in public goods and services.

Everybody “wins” – with the very important exceptions of those who do not have the educational attainments or job skills to compete in so demanding a regional economy, and those for whom rising housing values might push home-ownership or rental costs out of reach. The exceptionally high percentage of high income, college educated households in D.C. has also made the District one of the most highly polarized cities in the nation socioeconomically, and since the population with high school degrees or less is predominantly black and Hispanic, the polarization is racial and ethnic as well.

The influx of college educated workers fueling the growth in population and housing values is predominantly white (an increase of 50,000); the population lost is predominantly black (39,000). Most of the black population loss was from Wards 7 and 8, and likely represents, as it has in past decades, movement from the District’s poorest wards to the inner suburbs of Prince Georges County, Md.

It seems likely that many see their move as a step up to a better neighborhood and an improvement in their lives. However, it does mean that the city that “wins” will not be the city that was majority black and where improvements might represent a long awaited victory for a black population struggling over decades to improve itself. Past transitions of inner city neighborhoods often fueled prejudices that in-migrants “ruined” the neighborhoods; one must hope that too many of us will not unconsciously infer that gentrification is the only way to improve them.

Roderick J. Harrison is senior fellow at the Joint Center for Political and Economic Studies and senior research scientist at the Office of Research Regulatory Compliance at Howard University.