Updates

Expanding Opportunity

July 16, 2015

The twin challenges of rising inequality and stagnating mobility threaten the long-term health of the US economy and the promise of the American Dream. It’s all too easy to forget, as we’re debating the merits of various development and growth strategies, that, ultimately, our economy is made up of people – individuals and families working to make a better life for themselves and for the next generation. Which is why, if we care about the future of Greater Philadelphia, we must be sure to care about all of its citizens, ensuring that, when we move ahead, we move ahead together.

In recent years, our region has enjoyed a resurgence driven by growth in city population and development, the emergence of a dynamic innovation economy, and a new kind of energy and momentum. Despite these gains, however, uneven access to economic opportunity across Greater Philadelphia’s communities poses a threat to our prosperity and competitiveness as a region. The challenges associated with growing disparities are especially pronounced in the Philadelphia area, where our central city and other core communities vastly underperform many suburban communities on measures of educational attainment, employment, and earnings.

These disparities translate directly into disadvantage for many individuals and families and compromise the economic potential of the region as a whole. Beyond the moral imperative to reduce inequality, emerging research shows that too much of it can also slow or stall long-term economic growth. A recent study examining the economic performance of select US metro areas found that those that fared better on measures of equity were more likely to withstand recessionary shocks and sustain growth for longer periods of time.

So if we’re committed to ensuring a world class future for Greater Philadelphia, it’s critical that we prioritize regional improvement strategies that not only drive growth but also expand opportunity for individuals and families in underserved communities. The issue is a critical one for Greater Philadelphia and its residents, as a region that doesn’t provide for its own can never truly be considered world class. And while people like to say that a rising tide lifts all boats, we know that far too many individuals and families in our region are being left behind – and it’s our responsibility to find a better way.

There are many positive stories to tell about our regional economy…

When it comes to our regional economy, there are a number of reasons to be bullish about Greater Philadelphia’s future. With a population of more than 6 million, Greater Philadelphia ranks 6th in size among all US metros. Economically, we pack a big punch. In 2013, Greater Philadelphia’s economic output was $375 billion, ranking 8th nationally. If the Philadelphia metro area were a country, we would rank 38th in the world in terms of gross product, putting us in line with places like Thailand, Colombia, and South Africa.

The region’s strategic location – between the US seat of government, Washington DC, and the global financial capital, New York City – offers a unique competitive advantage. In fact, the Philadelphia-New York City metro trade corridor boasts the largest value in North America, with $56 billion worth of goods movement in 2010.

The regional economy is dynamic and highly diverse, with a concentration of financial firms, professional and business employers, and education and healthcare institutions. And despite the widely reported decline in the region’s manufacturing sector, Greater Philadelphia has maintained a competitive advantage in several specialized goods-producing industries, including precision instruments, aircraft products, and communications and electrical equipment. In addition, the region has the potential to expand upon recent growth in the professional services and technology sectors.

On top of these strengths, momentum has seemingly been on our side in recent years. High profile events like the World Meeting of Families and the Democratic National Convention, world class food and cultural scenes, and growing recognition as a tourist destination of choice have thrust our city and region into the international spotlight.

…but they don’t capture the full picture.

Greater Philadelphia’s many assets – its size, scale, location, diversity and profile – are undoubtedly reasons to be optimistic about its future. But, unfortunately, they don’t tell the full story. Despite these and other strengths, some hard truths lurk beneath top-line indicators of growth.

Regional job growth is anemic.

For one, Greater Philadelphia’s post-Recession job growth has lagged far behind that of peer metros. In fact, with the number of jobs in the region growing just 4.9 percent between 2010 and 2015, Greater Philadelphia’s employment growth ranks last among the ten largest metro areas in the US.

EMPLOYMENT GROWTH, BY METRO AREA (FEB. 2010 - FEB. 2015)

Labor force participation is lagging.

As a byproduct of sluggish job growth, regional labor force participation – the percent of noninstitutionalized civilians ages 18-64 who are employed or seeking employment – is also lagging. While a larger share of working age adults in Greater Philadelphia participate in the labor force than do nationally, our rate of 77.7 percent lags behind other top metros including Washington, Boston, Chicago, Dallas, Miami and Atlanta.

While every metro grapples with disparity, the challenge is especially pronounced in Greater Philadelphia.

Why do we lag other metros? A closer look at the data reveals significant disparities between communities in our region. While every metro grapples with disparity, the challenge is especially pronounced in Greater Philadelphia.

In Montgomery County, 82.8 percent of working age adults participate in the labor force, which is on par with the best-performing US metro, Washington DC. In the cities of Philadelphia and Chester, on the other hand, only 68.4 percent participate. And in Camden, the rate drops to 66.2 percent. Additionally, what these figures do not tell us is the quality of jobs held by those in the labor force – are these jobs in opportunity-rich sectors? Do they offer family-sustaining wages and the possibility of advancement?

People who do work are making less.

To compound matters, a decline in real income has made things even tougher for those who are participating in the labor force. In fact, median household income in Greater Philadelphia has declined by $4,700 since 2009. The average household in Greater Philadelphia earns around $61,000 annually, which ranks us 4th among our peers. But again, we see disparities within the region. Chester County’s median household income of $83,000 is more than two times that of Norristown, which has a median income of $41,000.

Poverty rates in our core communities are staggering.

As is often the trend, the volume of individuals living in poverty in the city of Philadelphia far exceeds the number in the region’s suburban counties. More than one in four Philadelphians is living in poverty, compared to one in eleven in the rest of the region.

But when we compare ourselves to core cities in peer metros, Philadelphia still has the dubious distinction of being near the head of the pack, with the second-highest share of people living in poverty and in deep poverty (defined as 50 percent of the federal poverty level). And poverty and deep poverty are not just problems for the city of Philadelphia. We see similarly troubling trends in other core communities in our region, including Norristown, Chester and Camden, where poverty rates are 20.9, 31.7, and 41.2 percent, respectively.

PERCENTAGE OF PEOPLE LIVING IN POVERTY AND DEEP POVERTY, BY CORE CITY IN 10 LARGEST METRO AREAS (2013)

Gaps in educational attainment across communities limit opportunities for many residents.

We know that educational advancement is central to both individual prosperity and regional economic success, particularly in an economy like ours with employment concentrations in the high-skilled services and advanced manufacturing sectors. Wide variation in educational attainment across Greater Philadelphia’s communities translates into limited opportunity for many residents of underperforming communities.

At the regional level, 40.6 percent of our region’s population holds an Associate’s degree or higher, which ranks 6th out of the 10 largest US metros. A closer look at educational attainment data reveals stark disparities within the region. For example: only 28.9 percent of Salem County residents have an Associate’s degree or higher while 54.2 percent of Chester County residents hold a postsecondary degree.

PERCENTAGE OF POPULATION WITH AN ASSOCIATE'S DEGREE OR HIGHER (25 AND OLDER), BY COUNTY (2013)

In the city of Philadelphia, nearly 190,000 people do not have a high school diploma or equivalency. There are 250,000 suburban residents without a high school degree, for a total of 440,000.

The number of disconnected youth in the region is large and growing.

Our youth disconnection numbers are particularly troubling. In Greater Philadelphia, more than 106,000 youth ages 16-24 are considered “disconnected,” meaning they are not enrolled in school and are not working. Greater Philadelphia was the only region out of the 10 largest to experience an increase in disconnected youth between 2010 and 2014.

NUMBER OF YOUTH NOT ENROLLED IN SCHOOL AND NOT WORKING, AGES 16-24, BY COUNTY (2014)

It all adds up to a markedly unequal regional economy.

As these indicators demonstrate, broadly accessible opportunity is clearly a challenge for our region. We know that growing inequality across the US can be attributed in part to a structural shift in the composition of US jobs over the last 30 years. With most job growth occurring at opposite ends of the pay/skill spectrum – in high-skilled jobs that pay well and require significant postsecondary training, and in low-skilled (mostly service sector) jobs with low wages and limited opportunity for advancement – the share of middle-skill jobs in our economy has shrunk significantly.

But while job polarization and rising income inequality have beset metros throughout the country, these challenges have been particularly acute in Greater Philadelphia. Experts and practitioners use an indicator called the Gini index to approximate income inequality for countries and large metros around the world. A higher Gini coefficient means a more unequal distribution of incomes. Greater Philadelphia currently ranks seventh worst among the top ten US metros in terms of income inequality. If you were to compare income inequality in our region (GINI Coefficient, 0.4781) to that of the 34 member countries of the Organization for Economic Co-Operation and Development, we would rank at the bottom of the group, surpassed only by Chile. Astonishingly, Greater Philadelphia also has a higher rate of inequality than such countries as Mexico, Turkey, India, China, Indonesia, and Russia.

INCOME INEQUALITY BY COUNTRY (2014)

Most troubling, however, is that the gap between the rich and poor in our region has been growing wider in recent years. According to the US Census, over the last five years, inequality has risen faster here than in all but two of the ten largest US metros.

CHANGE IN INCOME INEQUALITY, BY METRO AREA (2009-2013)

Increasing evidence suggests that inequality affects the extent to which economic growth can be maintained over time. This is because growing levels of inequality combined with decreasing levels of social and economic mobility inhibits economic efficiency. We know that if we don’t grow our economy in a way that reduces disparities, Greater Philadelphia will not be a nationally- or globally-competitive economy in the long term.

Reducing inequality would accelerate regional growth and expand individual prosperity.

A recent study of 184 US metro areas with a population of at least 250,000 found that a region’s ability to sustain growth over time is positively associated with measures of equity, including lower income inequality. According to calculations by the OECD, at the national level, a 1 Gini point reduction in inequality would raise cumulative growth by 0.8 percentage points in the following five years.

Most importantly, expanding broad access to opportunity in our region will help lift more people out of poverty. Currently, more than 800,000 Greater Philadelphians are living below the poverty line. We simply can’t afford to leave them behind.

We spend more public, philanthropic, and private dollars on education and social and human services in high poverty communities. Public safety and incarceration costs have been on a steady rise. Neighborhood businesses struggle to survive, and employers can’t find the employees they need to grow. And we lose the economic benefits that come from rising incomes – more money to spend locally, more stable housing markets, and more economic mobility.

We know, instinctively, why expanding opportunity is the right moral thing to do. But we also know that it’s critical to our economic future.

Making real progress on this front requires a shared understanding among business and civic leaders of where we stand, what’s being done today, and how we can make an impact moving forward. So we’ve set out to provide insight on three ways to expand opportunity within the World Class agenda. Read on to explore challenges, opportunities, and promising strategies surrounding moving workers from low wage jobs into family-sustaining careers; supporting underserved entrepreneurs; and ensuring broad access to transportation in Greater Philadelphia.