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Report finds city-suburb income gap means low growth for metro areas.

A new study of economic growth in metropolitan regions finds that overall growth rates appear to be influenced by the gap in city-suburban incomes. The greater the disparity, the more likely it is to find low or negative overall economic performance, as measured by employment growth.

"The economic destinies of a central city and its suburbs are tied together," says the report by the National League of Cities. "During the period 1988-91, metropolitan areas with greater internal disparities tended to perform less well economically than metropolitan areas with lesser disparities."

The findings are based on an analysis of differences in employment growth rates and disparities in per capita incomes in 56 large metropolitan areas. When the income data and growth in employment were compared, it was generally found that places with the largest income gaps between city and suburb showed sluggish growth. In contrast, stronger economic growth tended to occur in places with a closer parity of city and suburban incomes.

When the urban areas were separated into five equal groups according to per capita income disparities, the employment growth index moved steadily from a minus 3.2 percent in the quintile with greatest degree of income disparities to a plus 5.9 percent in the quintile with the closest parity of incomes.

"This is a powerful message about what happens when people, neighborhoods and communities become divided, polarized and isolated," said NLC President Glenda E. Hood, city commissioner of Orlando, Fla.

"The effort to escape or ignore the factors that create disparities ends up weakening the whole region, and that can easily lead to further deterioration. What this report also suggests is that places that have retained a stronger sense of shared prosperity, in terms of city and suburban incomes, are doing better overall and are likely to continue to," Hood said.

The report, prepared by Dr. Larry Ledebur of Wayne State University and NLC's Research Director, Dr. William Barnes, notes that there is considerable diversity of performance in different metropolitan areas and regions.

That fact "strongly suggests that what we call the national economy is an inter-defendant system of regional economies and, therefore, that the economic performance of each region has important implications for the performance of the national economy."

The report concludes that national economic growth "requires support for 'local growth packages' that address the hidden deficits in human capital, technology and infrastructure."

"A single uniform national policy that ignores significant differences in the circumstances of regional economies may not be an effective response to national economic problems," the report says.

Economic polarization in metropolitan areas "may create 'incentives' for some individual winners, but it does not create the basis for overall strong economic performance," it says.

As an effect of such polarization, the authors contend that something like an economic "Catch 22" arises, impeding the ability of communities to remedy the situation on their own.

"Cities, attempting to respond to their fiscal crises, are increasingly unable to invest in the economic foundations of their economies," the report says. "They are being forced to reduce expenditures and investments in services and infrastructure that are essential for future economic growth."

The report recommends that national priorities be directed toward "investments in the 'engines of growth' of the national economy, the urban centered regional economies of the United States."
COPYRIGHT 1992 National League of Cities
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Arndt, Randy
Publication:Nation's Cities Weekly
Date:Mar 9, 1992
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