Episode 1: A House Divided Episode 1: A House Divided

Runtime: 15:16 — Does where you are born and live matter when it comes to educational opportunity? To how much money you’ll make? To how long you’ll live? The answer to all those questions is yes, and these regional disparities are only getting worse. Why is this happening, what can be done, and how do policymakers need to think differently?

Overview Overview

A pillar of the American story is that our possibilities here are limited only by our aspirations. Where we were born, what we were born into, all that can be overcome by a good idea, or a refusal to quit. But what if where you are born and live matters more than ever when it comes to financial, physical, and emotional well-being?

It’s a question that researchers are asking here at the Federal Reserve Bank of Boston. The Boston Fed’s 2019 Economic Conference focused on “geographic disparities” – differences in economic and social well-being between areas of the country. These disparities seem to be getting deeper and more fixed.

In this episode of Six Hundred Atlantic, Boston Fed President Eric Rosengren and Senior Economist Christopher Foote help us make sense of this changing landscape and understand why closing geographic disparities matters for our future.

Six Hundred Atlantic

Sign up for the latest from Six Hundred Atlantic, the Boston Fed podcast that tells the stories behind the people and trends that impact our region and nation.

See our privacy policy

Transcript Transcript

A pillar of the American story is that our possibilities here are limited only by our aspirations.

Where we were born, what we were born into, all that can be overcome by hard work, or desire, or a good idea, or a refusal to quit.

There’s a poem by Emma Lazarus at the base of the Statue of Liberty. It basically invites the world’s downtrodden to give America a shot. The words are well-known:

"Give me your tired, your poor, your huddled masses yearning to breathe free. The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door!”

Lady Liberty says, “Come on in.” You can make it here in America.

And it’s not just a poem. The idea that there’s something different about America is seen in the long lists of people hoping to immigrate here. Bono, the lead singer of the Irish rock band U2, offered this take on the sense of optimism and possibility he found in America.

He said, “In the United States, you look at the guy that lives in the mansion on the hill, and you think, ‘You know, one day, if I work really hard, I could live in that mansion.’ In Ireland, people look up at the guy in the mansion on the hill and go, ‘One day, I'm going to get that bastard.’”

But what if that mansion on a hill is getting further out of reach here in America—at least if you weren’t born into it?

What if—when it comes to your financial, your physical, your emotional well-being… What if where you are born and live matters more than ever?

It’s a question researchers are asking here at the Federal Reserve Bank of Boston.

Last fall, it was the focus of our annual Economic Conference, which was called “A House Divided: Geographic Disparities in 21st Century America.”

These “geographic disparities” simply refer to differences in economic and social well-being between areas of the country. For example, it would be when we see positive health and wealth measures in certain urban centers, but negative results on the same measures in rural counties.

Chris Foote is the economist here at the Boston Fed who put the conference together.

It seems like these geographic disparities are taking on a sharper character than most economists would have predicted even 10, 15 years ago.
And I think that disparities like that can impact the United States in a lot of different ways that could be hard to quantify, but which really aren't great for sort of the future of the country going forward.

I don't think it's crazy to think that to the extent that people believe that there are some areas of the country that are more favored than other parts of the country, that's going to make a lot of things worse in the country, that's going to make politics harder.

This is Six Hundred Atlantic, a podcast produced by the Federal Reserve Bank of Boston. I’m Jay Lindsay, I work at the Boston Fed, and I’m your host. This season, we’re going to talk to some of the country’s leading economists about this story, this change that’s happening right now.

We’re also going to ask if it’s time to start thinking differently about how to close these divides, because they’re getting wider, and that matters for our future.

Here’s Eric Rosengren, president of the Boston Fed.

I think it's important for the United States as a whole, not to continue to have more income inequality and more inequality of outcomes than we already have. And so I think there's a danger that this actually persists and gets worse rather than actually just getting better.

If we’re going to explore what we’re calling a “House Divided,” we need to define a term in economics called “convergence,” and we need to talk about the fact it’s not happening between regions like it used to anymore.

Convergence is the narrowing of a gap between two groups, like two separate lines gradually “converging” at the same point. So, for instance, convergence in real income levels between blue-collar rural and blue-collar urban populations would just mean that any inequality in their incomes was gradually disappearing.

Convergence used to be a feature the economic relationship between richer and poorer areas in this country, but it’s not anymore. Chris Foote explains, using state data as an example:

If you look at the state level data, we have good state level data on per capita incomes going back into—I think that began in 1929. And it was an amazing fact that if you looked at which states were getting richer between 1929 and the early to mid-1980s, it was the poorer states, many of which were located in the South that were getting richer. And so there was a narrowing of the income differentials at the state level for a long period of the 20th century. Then in the early 1980s, a gun goes off, and that narrowing just stops.

But it not just richer and poorer states. Convergence has also slowed between different regions of the country, between urban and rural areas. The nation’s geographic disparities seem to be becoming more fixed.

We see this gap show up in different ways and places. One phenomenon is the rise of the so-called “superstar cites.” Think San Francisco, New York, or Los Angeles—places with lot of amenities, places in high demand, places with a high cost of living.

Christopher Mayer from Columbia University is one of the scholars who introduced the “superstar city” concept.

He says these cities all share two characteristics: First, some kind of constraint on building –for example, a lack of land. Second, various amenities that make them attractive places to live.

Here’s Mayer:

So that combination of increasing demand and secure supply means that prices, the cost of living in a superstar city goes up. And that drives the increase in price that actually brings more—The only people who can afford to move there tend to be more highly educated, higher income people.

Meanwhile, rural areas of the U.S. are having the opposite experience. In some places, people are leaving for good, and that’s feeding a cycle of deterioration that’s widening the geographic disparities between rural regions and the rest of America.

László Kulcsár is an expert on rural America from Penn State:

So with population decline comes, the loss of businesses, the loss of consumers, the loss of tax revenues for those localities. If they don't have the revenues, they can't maintain the services, which then will make other people leave again. So that's the cycle.

But it’s not just falling populations that are hardening geographic disparities. It’s also stagnant populations.

Economists used to assume people in a depressed area would simply move to improve their financial situation.

Economists viewed this as a key mitigating factor when economic shocks hit different regions of the country. That mobility is one of the most romantic aspects of the American story. “Go west, young man,” is the famous exhortation. Your fortune awaits.

But since the 1980s, this interstate migration, this mobility, has declined significantly. The reasons why are unclear—some people may stay in a given area out personal preference or because of family ties, others may want to leave but they’re priced out of more prosperous regions.

Either way, economists see significant implications for the country’s ongoing geographic stratification.

Here’s Chris Foote again:

There may be some cultural factors going on, nobody's really quite sure what's happening. But the idea that migration has declined is certainly consistent with the idea that the country's getting farther apart in a sense that if you're in a declining area, it's just harder for you to get out and move to an area that's doing better.

There are clear negative implications for people who remain in areas that are in decline. For instance, educational opportunities can be limited or inferior, and that has a cascading and self-sustaining effect that can result in decreasing opportunity.

Carol Graham at the University of Maryland researches concepts such as “well-being” as an economist. She’s documented what she calls the “geography of despair” in the U.S.

These places are marked by a lack of economic opportunity, and their location seems to follow the migration of manufacturing as it moved over decades from urban to rural areas, then overseas.

So, people who can leave, leave, and people who are there, who remain, you've got a collection of lost hope, lost jobs, lack of sense of community, because when a population is hollowing out it's harder to keep a community up.

In geographies of despair, there’s been an increase in so-called deaths of despair—such as suicides and overdoses from substance abuse.

Economists have also tracked a disturbing trend that shows a widening gap in mortality rates between regions.

In other words, where you were born seems increasing relevant to how long you’ll live.

Here’s Dartmouth economist Jonathan Skinner:

One of the things that I've been most concerned about is the fact that it's not as if the entire country is sort of gradually getting a little bit worse or maybe a little bit better on other measures, but that the country seems to be splitting into different regions with regard to how well they're doing.

So, in some parts of the country, people seem to be doing pretty well. Their mortality rates continue to decline, the reported pain isn't going up quite as much, but in other parts of the country, things are not as bright.

So these geographic disparities—in health and wealth, in life and death—are real, across the nation. This season on Six Hundred Atlantic, we’re going to discuss these disparities, this divide, in greater detail.

We’re going to look at what’s happening, where it’s happening, and why it’s happening. We’re going to look at what’s been tried, what’s might work, and what does not.

We’ll also ask if it’s time for policymakers and economists to think differently.

Traditionally, economists have downplayed “place,” or geographic location, when they’re looking to reduce inequality and increase economic opportunity.

They’ve argued that because people can relocate, it makes more sense to try to improve an individual’s prospects by enhancing his or her skills, education, or buying power.

But some are wondering if that’s still the best approach—given the trends such as slowing convergence and interstate migration that indicate people in depressed areas are just staying put, even though life isn’t improving. They’re wondering if we should tailor more policies to help a particular region or place. Here’s Eric Rosengren:

I do think that it's slowly catching on among economists that they have to think more about place-based type of activities. I think the set of economists that we had, some of them have changed their views over time about how important it is to focus on place-based.

That’s later this season.

Our next episode focuses on what’s happened in rural America. We’ll also trace the rise of those “superstar cities.” And we’ll consider what it means when America’s wealth and despair increasing have a regional address.

To the extent that you have the wealthiest people living in segregated communities, it certainly creates a greater distance between people with different wealth and income. And I think that also perpetuates political problems and social problems. And we're starting to see, not starting, we are seeing some of those come out in U.S. politics.

So there are definitely challenges and risks associated with having a society where the wealthiest people more and more concentrate in a relatively small number of places.

That’s next time on Six Hundred Atlantic.

Thanks for listening to Six Hundred Atlantic, and please check out the rest of our debut season, which includes five episodes and a bonus episode. Learn more and subscribe to our mailing list at bostonfed.org/six-hundred-atlantic. Listen and subscribe to Six Hundred Atlantic on Apple Podcasts, Spotify, Stitcher, and TuneIn.

Most of the interviews and reporting for this season of Six Hundred Atlantic were done prior to the onset of the COVID-19 pandemic. But the trends discussed are decades in the making and are particularly relevant during a time of economic upheaval. The pandemic’s impact on these trends are the focus of a special bonus episode of Six Hundred Atlantic, which features a discussion with urbanist Richard Florida and Harvard economist Ed Glaeser. We invite you to listen.

The producers would like to thank our expert contributors for lending their time and insights. They are Christopher Foote, Carol Graham, László Kulcsár, Christopher Mayer, David Neumark, Jonathan Skinner, Eric Rosengren, Katheryn Russ, and Abby Wozniak.

Six Hundred Atlantic is a Federal Reserve Bank of Boston podcast hosted by Jay Lindsay. Produced by Jay Lindsay, Allison Chase, and Peter Davis. Executive producers are Lucy Warsh and Heidi Furse. Recording by Steve Osemwenkhae. Engineering by Steve Osemwenkhae and Alex Cronin. Project manager is Allison Chase. The chief consultant is Christopher Foote. The podcast is written by Jay Lindsay and edited by Christopher Foote, Allison Chase, and Nicolas Brancaleone. Graphics and website design by Meghan Smith and Stephen Greenstein. Production consultants are David West and Thomas Stranberg.