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Economic report highlights.

There is a strong economic justification for addressing the needs of central cities and for cooperation among cities and suburbs to meet the mutual economic needs of their local economic region. It can be found in the strong and consistent relationship between changes in central city incomes and changes in suburban incomes. For every one dollar increases in central city household incomes, suburban household incomes increase by $1.12.

In each of the 25 metropolitan areas with the most rapidly growing suburbs, measured by changes in median household income, central city incomes also increased over the 1979-1989 period. No suburbs in this high growth set experienced income growth without corresponding growth in their central city. This evidence indicates that cities and suburbs are interdependent. Their fates and fortunes are intertwined. Further, the evidence suggests that this interdependence of city and suburbs is becoming stronger, rather than diminishing.

This documentation of the significant relationship between cities and their suburbs is critical to the debate about whether suburbs can prosper and succeed, regardless of the fortunes of their central cities. This finding, however, should not be surprising. Cities and their suburbs are not two distinct economies. They are a single economy, highly interdependent with their fortunes inextricably intertwined.

These local economic regions are key to federal efforts to "grow the national economy." Federal efforts to "jump start" the economy through a short-run stimulus package, as well as long term efforts to increase national productivity and investment must target these local concentrations of economic activities and sources of productivity growth.

The debate over the shape of the national economic program should also recognize the diversity of circumstances and performance of these local economic regions. The breadth and depth of variations in performance of these economies, make it less likely that uniform national economic policies, administered as if there was a single national economy, will suffice as a "national program for economic growth." There is a wide range of variation on most measures; this study presents the variation in median household income, employment change, and unemployment. This range of diversity strongly suggests that federal policies should be sensitive to these differences.

The findings of this study suggest looking at the U.S. economy as a common market of local economic regions rather than as a huge but undifferentiated "national economy." In turn, this view indicates several directions in which federal policy should develop.

* Federal economic policy should aim at improving the condition and performance of the local economic regions.

* Federal economic policy should address the variety among these local economic regions as to their circumstances and needs.

Interdependence of Suburbs and Cities

The 1990 Census provides a new focus on the critical issue of the relationship between central cities and suburbs in the United States.

The debate is most severely formulated in terms of whether suburbs can prosper and succeed, regardless of the fate and fortunes of their central city; or whether the prosperity of cities and suburbs are intertwined and interdependent.

This issue is critical.

In the State of the Union speech President Clinton declared, "We are all in it together." If cities and suburbs are "in it together," a strong economic justification can be made for addressing the needs of central cities and cooperation among cities and suburbs to meet the mutual economic needs of their metropolitan area.

If, on the other hand, the fate of cities and suburbs are not economically intertwined, the case for addressing the problems of central cities must be made in terms of social equity and avoidance of the longer term costs of failure to address these problems. In the current politics of the nation, the economic argument appears to be more compelling than the call for social equity.

The recently available 1990 median household income data provide new opportunities to test the hypothesis that the economic futures of cities and suburbs are interdependent.

* If cities and suburbs are economically independent, rather than interdependent, then changes in suburban incomes and central city incomes should not be related or move together. A plot of these relationships will appear randomly scattered.

* If there is some degree of interdependence, changes in suburban incomes would be related to changes in central incomes and vice versa. A plot of these relationships, the scattergram, will cluster in a clear and discernable pattern.

In the scattergram in figure 1, each point represents a metropolitan area positioned to present the relationship between the city and suburb on the income measure. The pattern is sharp and distinct (see figure 1). The relationship is very strong. The percent of the variation explained (statistically, the R2) is 82 percent.

This is clear evidence of a strong and consistent relationship between changes in central city incomes and changes in suburban incomes. The interpretation of this relationship is as follows. For every one dollar increase in central city income, suburban incomes increase by $1.12. Conversely, for every increase of $1.12 in suburban income, central city income increases by one dollar. The relationship does not imply causation, i.e., that change in one causes the change in the other. Rather, the relationship is mutual, interactive, and interdependent. This evidence strongly suggests that the economic fate and fortunes of cities and suburbs are inextricably intertwined.

Figure 1 suggests that where suburban incomes are increasing, central city incomes are increasing. Conversely, where central city incomes are decreasing, suburban incomes are decreasing. Tables 1 and 2 present detailed data on these patterns of change. Table 1 focuses on the 25 largest metropolitan areas in which suburban incomes increased most rapidly between 1980 and 1990. Table 2 deals with the 18 largest metropolitan areas in which suburban incomes declined over this period. [TABULAR DATA 1 and 2 OMITTED]

In high growth areas, suburbs and central cities grew together. Table 1 shows that in each of the 25 metropolitan areas with the most rapidly growing suburbs, measured by absolute and percentage gains in median household income, central city incomes also increased over the 1979-1989 period.

In other words, in the high growth set of metropolitan areas, no suburbs experienced income growth without corresponding growth in their central city. This also means that no central city in this high growth sample experienced income growth in the absence of suburban growth. In all but one (San Diego) of the 25 metropolitan areas, the absolute gains in suburbs exceed those in their central cities.

In 10 of these metropolitan areas, however, the rate of central city income growth exceeded that of their suburbs.

The interdependence between suburbs and their cities is also apparent for suburban areas experiencing income decline. Over the 10 year period, suburbs in 18 of the 78 largest metropolitan areas experienced declines in real median household incomes (see table 2). In all but four of these, central city incomes also declined. In only one of these four did the decline in suburban income exceed one percent (Salt Lake City: -4.7 percent). The corresponding increases in central city incomes were also relatively small, ranging between one and four percent.

Of the remaining 35 metropolitan areas (not presented in the two tables above), all experienced suburban income growth. Central city median household income grew in 25 and declined in 10. In the overall sample of 78 metropolitan areas, therefore, suburban incomes grew in 60 and declined in 18. Central city incomes grew in 54 and declined in 24 (31 percent). The direction of change in suburban and central city household incomes was the same in all but 14 of these metropolitan areas (18 percent). Furthermore, the strength of the relationship between cities and their suburbs appears to be increasing rather than declining.

In 1979, the relationship between central city and suburban median household incomes was quite weak. Ten years later, in 1989, this relationship had become stronger and more apparent. In other words, the degree of economic interdependence, as measured by income levels, increased over the decade.

Some Implications For Federal Policy

The findings of this study suggest looking at the U.S. economy as a common market of local economic regions rather than as a huge but undifferentiated "national economy." In turn, this view indicates several directions in which federal policy should develop.

* Federal economic policy should aim at improving the condition and performance of the local economic regions.

For example, the importance of infrastructure and of education and training for workers must be related to each local economic region. Also, a stimulus for job creation will work best if it is targeted and delivered locally where it is needed.

* Federal economic policy should address the variety among these local economic regions as to their circumstances and needs.

For example, an investment tax credit can be structured with an incentive for investment in local economies that need it and can use it best. Analysis of the presence and absence of this and other prerequisites for economic growth should be focussed on the local economic regions.

* Federal economic policy should seek to diminish city/suburb disparities within the local economic regions.

For example, redlining by providers of mortgages or insurance undercuts the ability of some areas to contribute to the development of the local economic region. Also, efforts to overcome the spatial mismatch of job openings and people seeking jobs will strengthen overall performance of the local economy.
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Title Annotation:Special Report: All in It Together: Cities, Suburbs, Regions
Author:Ledebur, Larry; Barnes, William
Publication:Nation's Cities Weekly
Date:Mar 8, 1993
Words:1553
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