New Study Analyzes How Growth Impacts Income, Unemployment, Poverty

Published on January 11th, 2011

Fodor & Associates, a Eugene, Oregon-based consulting firm that specializes in community planning and land use, released a report last month of a study that looked at the connection between growth and economic prosperity in the 100 largest U.S. metro areas. Fodor wanted to learn if data actually supported the commonly held belief that many benefits come from growth. Fodor’s study found that areas with faster growth rates also had higher unemployment, lower incomes, greater income declines and more poverty, while the 25 slowest-growing metro areas beat out the 25 fastest growing areas in every category analyzed and averaged nearly $8,500 more in per capita personal income (2009). Thus Fodor’s findings challenge the soundness of city planning and economic development schemes that focus on growth as a means of achieving economic benefits for the citizenry. This growth most often is pursued through investments, public policies, subsidies and tax incentives, with resultant trade-offs that may negatively impact quality of life, traffic and the environment, as well as result in loss of farm and forest lands, among other possible impacts. The study also showed that chasing growth is very expensive. In just infrastructure, taxpayers foot the bill for more than $100 billion annually. Among the findings were:

  • Incomes tend to be higher in metro areas with lower growth rates.
  • Faster-growing metro areas tended to have a bigger drop in income in 2009.
  • Metro areas that grew faster from 2000 to 2009 tended to have greater declines in personal income during the 2007-09 Recession.
  • Metro areas with slower growth had bigger income gains during the 2000-09 period.
  • Per capita personal income in faster-growing metro areas was more severely impacted by the recession.
  • Higher growth rates occurring 10 or more years in the past had a stronger correlation to lower incomes in 2009 than did more recent periods. This indicates there may be long-term adverse consequences to local residents from faster growth.
  • Metro areas with faster growth rates do not tend to have lower unemployment rates, nor do they see their employment conditions improve more than slower growing areas.

Fodor suggests that the growth model isn’t a sustainable model and that a new model could redirect some of the resources that had been going towards growth to other investments, such as localizing economies and restoring production and manufacturing. The research is a good starting point to challenge the mantra of growth and should be required reading for city planners to help them begin rethinking their push for continuous growth.

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