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Boston's Booming... But for Whom? New report digs into building shared prosperity

Boston Indicators analysis finds signs of both promise and problems in our growing economy

October 10, 2018

Boston Boston’s robust innovation economy has triggered economic growth, but has failed to reverse national trends in economic mobility and income inequality, according to a multi-layered analysis of economic, housing and other trends by Boston Indicators, the research arm of the Boston Foundation. The report, Boston’s Booming… But for Whom?, was released today at a forum at the Foundation’s Edgerley Center for Civic Leadership.

The report illustrates a long-term decline in the percentage of young adults that earn more than their parents did at the same age. In Massachusetts, just 55% of those born in 1980 were found to be earning more than their parents did at age 30 – down from 91% for those born in 1940. However, in that context, a Boston Indicators analysis of Boston data finds that Boston tied for second nationally in average income among those who grew up in lower-income households, and first in average income for Black men and women from lower-income households. (Despite the high ranking, however, Black men in the Boston cohort earned an average of 22 percent less than their white peers.)

Download the report or view an HTML version here.

The data also show continued income inequality and a “hollowing out” of Boston’s middle class, driven out of the city by a lack of affordable housing and the high cost of living. 

“The data in this report do highlight some relative successes for Greater Boston in creating opportunities for all citizens to succeed,” noted Paul S. Grogan, President and CEO of the Boston Foundation. “But the overall picture is continued proof that we must double down on policies and programs that open doors for better jobs, enhance educational outcomes and bring down the burden of housing and other costs that crush our lower-income families and drive out the middle class. Relative success does not solve inequity.”

In addition to the data findings, the report provides a list of proposed action items, many of which are ongoing, that are most likely to improve economic mobility, increase opportunity or relieve cost burdens on all Greater Boston citizens.

“With this report, we seek to bring new perspectives to the data that paint a broader picture of the factors that make some of these issues so difficult to address,” said Luc Schuster, Director of Boston Indicators. “The data suggest that civic, community and philanthropic programs have made a difference in some areas, but our analysis has illuminated some stark differences between the narrative of Massachusetts’ booming economy and the realities of day-to-day life and the realities entire segments of our residents experience each day.”   

 

Economic mobility: Boston ranks relatively well, but income figures highlight continued disparities 

The Indicators team analyzed data from the Equality of Opportunity Project (now Opportunity Insights) for those who grew up in the 25th percentile for household income to see how they fared as working-age adults. Boston topped all cities in average individual income for Black men and women, ranked 4th for whites and 10th for Hispanics in the data, suggesting greater opportunities for young people to increase their earnings over time. However, Black men in Boston still trail members of other ethnic groups in average incomes.

At the report release, however, Schuster shared additional data that showed despite Boston’s #1 ranking for Black men, their average annual income figure was lower than the figure for their white peers in 49 of the nation’s 50 largest cities, suggesting a significant and pervasive racial gap in mobility rates nationwide.

 

Income inequality: A familiar tune

Boston’s challenge with income inequality has been well-documented. The Indicators researchers again note a bit of relatively good news – Brookings Institute data show that Boston has improved from worst to 7th-worst in the nation for income inequality between the 20th and 95th percentiles of income. However, while our booming economy has brought rewards to many people in Massachusetts, those rewards are not distributed equally. A Boston Indicators analysis of inflation-adjusted wages finds that hourly wages have risen 7% for low-wage earners, 25% for median wage earners, and 52% for workers in the highest five percent of earners since 1979. 

Indicators research also found substantial racial differences in median income in greater Boston, and found that non-whites outside the city of Boston saw substantial increases in their median household income relative to their city peers – ranging from 15% for Blacks, to 37% for Hispanics, to 108% for Asians. 

 

Home prices hollowing out Boston’s middle class

While Boston’s middle class does well on many national measures of income, Boston Indicators analysis finds Boston’s high cost of living and high housing prices are forcing middle-class households to look elsewhere when seeking to own or rent new housing. Using median rent data from Zillow and median income data, researchers found median rent of $2613 per month would consume 51% of a median household’s income. The analysis found just 20 census tracts in the city where median rent would be considered affordable for a median income household – a list that included zero tracts in Roxbury, Dorchester or Mattapan.

Slow income growth and rising housing costs have combined to shrink the middle class in Boston. A Boston Indicators analysis finds that since 1990, the number of low-income households in Boston has grown by more than 30,000. The number of high-income households has jumped by over 43,000. But the number of middle-class households? It has dropped by more than 15,000. An analysis of state workforce projections suggests that trend will likely continue, as middle income jobs are expected to grow more slowly than low- and high-income jobs in the next decade.

 

Poverty persists

Massachusetts’ strong statewide economic performance this decade has not had the impact on state poverty rates one might hope, particularly using more sophisticated measures that take income into account. The state’s “official” poverty rate ranks among the nation’s best. But when using the Census Bureau’s newer supplemental poverty measure, which takes cost of living into account, Massachusetts sinks to the middle of the pack for poverty rates, between North and South Carolina. 

 

Greater Boston’s wealth and the Homeownership Gap

While decades of effort and current developer requirements mean Greater Boston does better than most large cities in providing affordable housing, a UMass Donahue/Boston Indicators analysis of racial differences in wealth found notable racial differences in homeownership rates for both middle-income and low-income earners. Middle-income working-age white households were one and one-half times as likely to own homes as Black or Latino households. Nearly 7-in-10 white households owned their homes, versus less than half of Black and Latino households, and 51% of Asian households. 

For low-income working-age households, the numbers were more stark. Whites were three times as likely as blacks, and 5 times as likely as Latinos to own their own homes. 

 

Local Action Ideas

What can be done in the face of the daunting challenge to buck the local and national trends of inequality and reduced mobility? The report authors suggest there are areas, many already in action, where continued investment can build greater shared prosperity. Boston students score relatively well compared to other large cities on standardized tests, but all cities score below the level of proficiency, and with a knowledge-based economy, improving K-12 results and access to affordable higher education and workforce training remain paramount. City, state and a number of philanthropic efforts are underway to strengthen the education-to-career pipeline from pre-K through to the workforce, and likely deserve some credit for the relative improvements in income across racial groups. 

The report authors also see evidence of a correlation between Massachusetts’ low incarceration rates and greater economic mobility among those who grew up in lower-income households. Boston’s Black and White imprisonment rates are among the nation’s lowest – although the Black incarceration rate is nearly eight times the white rate for the state. 

Continued efforts to reduce housing costs, provide affordable health care, expand labor force protections, and provide opportunities for new immigrants in school and the workforce are also seen as critical to reduce levels of poverty and inequality.

“Finding ways to better leverage our economic boom for the benefit of all residents and all neighborhoods has become the central challenge of our time. Fortunately, we’re operating from a position of tremendous strength,” the report concludes. “We have vast local resources to invest in better workforce training pipelines, and we know what it takes to provide better labor force protections, to increase multifamily housing production and to rebuild our transit infrastructure. Success on all of these fronts will require broad civic action and effective coalition building.”