Time to Focus on Individual Economic-Well Being of/for All

In conventional thinking about the economy, standard assumptions include:

  • Economic growth creates jobs
  • Jobs create individual prosperity
  • A rising tide raises all boats

A new report from the Metropolitan Policy Program (MPP) of the Brookings Institution, discloses that it's time to forget those assumptions and to start looking at things in a different way - at least when it comes to examining the economic results achieved within metropolitan areas.

As Amy Liu, Vice President and director of the MPP, asserts in a recent Brookings blog post, "It's time to change how leaders benchmark progress and measure metro economic success."

Ms. Liu goes on to observe that the "relentless chase for jobs absent broader goals to improve people's economic well-being can be costly." (And, we would add an exercise in futility). She concludes that what state and regional leaders need are "regional economic development metrics and strategies" that produce "...not just more jobs, but better incomes and opportunities for all."

The MPP provides the metrics that can be used as reference points to craft comprehensive and coordinated strategies to achieve that end in its recently released Metro Monitor (Monitor) report. The Monitor provides new economic performance rankings for the 100 largest U.S. metropolitan areas in three categories:

  • Growth (changes in the size of the economy)
  • Prosperity (changes in the economic well being of the region's average workers and residents)
  • Inclusion (change in disparities within the region by income and race)

[For those policy wonks among our readership, there are three indicators in each category.

  • The Growth indicators are: Change in gross metropolitan product (GMP). Change in aggregate wages. Change in the number of jobs.
  • The Prosperity indicators are: Change in productivity. Change in the average annual wage. Change in the standard of living.
  • The Inclusion indicators are: Change in the median wage. Change in the relative income poverty rate. Change in the employment rate.

Those indicators were converted to a standard score and used to construct a composite ranking for each category.]

The report provides data for one year and the past 10 years but focuses primarily on the rankings of these 100 metropolitan areas in the three categories for the five-year period from 2009 to 2014. The findings are revelatory.

Highlights (Or, should we say low lights?) for the comparative rankings of these 100 metropolitan areas in the categories in that five-year period include:

  • Growth: 95 of the areas saw increases in gross metropolitan product, jobs, and aggregate wages.
  • Prosperity: 63 of the areas saw gains in productivity, the average annual wage and the standard of living.
  • Inclusion: Only 8 areas saw increases in their median wage, employment rate and relative income poverty rate.
  • Inclusion: The median wage declined in 80 areas.
  • Inclusion by race: The relative income poverty gap between whites and other races grew in 69 areas.

[For details on the rankings, access the full report by clicking on this link.]

The disparities in these results are striking and instructive.

Alan Berube, Senior Fellow and Deputy Director of the MPP and a co-author of the Monitor, reports in a Brookings blog post, his analysis showed that the "growth/inclusion relationship was relatively weak." Based upon this, Berube concludes, "...the pace of recent growth hasn't revealed much about whether we are resolving larger challenges around providing improved economic opportunities."

Therein, lies the rub. While improvement in each category matters, the real test of a vital and vibrant democracy rooted in capitalism is whether improvement in the categories of growth and prosperity translate into improved inclusion - or, as we would put it enhanced "individual economic well-being" for all.

Since the beginning of the Great Recession - and most likely for well before that - there has been a disconnect between the two. We first commented on this in Chapter One of our book, Renewing the American Dream: A Citizens Guide for Restoring Our Competitive Advantage (Renewing) published in 2010. We devoted a whole chapter titled "Individual Well Being: The 100%" to the concept in our book, Working the Pivot Points: To Make America Work Again published in 2013.

In Renewing, we wrote, "...we need to examine and project the impact of GDP growth on future Individual Economic Well-Being (IEW). This is because while there may be a strong correlation between GDP and the general economic conditions of a country at the macro-level, there can be very little at the micro- or individual."

We proceeded to state, "Economists need to continue to study and help us to make new inferences and develop insights on the interrelationships between growth in GDP and IEW. Economics does not create jobs or improve the human condition directly. However, data from economic studies can be used by government and business decision-makers for that purpose.'

We now say hallelujah for the "new and improved" Monitor which provides a treasure trove of data to be plumbed and a powerful analytical tool for policy makers and influencers to use for their decision-making in this regard. We further say hats off to Ms. Liu, Mr. Berube and their colleagues in the MPP, Richard Shearer, John NG, and Alec Friedhoff for their invaluable contribution to the pivot point area of individual economic well-being.

Having said that, as pragmatists, we extend the caution - access to better data does not necessarily mean better policies or better performance. (We'll have more to say on that topic in our next Huffington blog post titled "Poverty in the United States Today: Many Words, No War.")

Repeating Ms. Liu's advice, "we need regional economic development metrics and strategies" that produce "...not just jobs but better incomes and opportunities for all." We now have the metrics and they can be used as the basis for data-driven change within a region.

One of the primary obstacles to doing that, however, as we noted in a lengthy Huffington blog post titled "America's Cities: An 'Urban Crisis' Ignored" posted in March of 2015, is that a metropolitan area is a statistical concept and not an operational one.

The metropolitan area is comprised of a large population core (think inner city) and adjacent communities having a high degree of social and economic integration with that core (think suburbs). In many of the those areas, most of those in poverty tend to live in the city - except for the wealthiest who live in high rises downtown - and the suburbs are relatively affluent (although this has changed over the past decade as many suburbs in metro area have increased their poverty population).

There are multiple governments in metro areas - each with their own agendas and citizen's needs and demands to try to address and satisfy. There are usually overlapping jurisdictions (think city and county). Given these layers of complexity, cooperation and collaboration in problem-solving is not necessarily the order of the day.

These metropolitan areas share a common core but lack a common ground. In order to address the category of inclusion and the issue of IEW, that ground has to be established.

In our earlier blog, we advanced three "radical recommendations" for accomplishing this. They were:

  • Recommendation 1: Eliminate the middle man for federal government grants. (By-pass the state. Give grants directly to local governments and provide incentives for them to work together in solving regional problems.
  • Recommendation 2: Consolidate governments in metropolitan areas and/or create alternative operational configurations for decision-making and/or delivery of services in metropolitan areas.
  • Recommendation 3: Require metropolitan area gain sharing plans.

We did not expect those recommendations to be embraced when we presented them last year. We did so because we wanted to re-establish a debate on what to do about the decaying cities at the center of many of our metropolitan areas.

We repeat them now because the MPP's Monitor casts a bright light on the criticality of this need and substantial information for rekindling the debate - and moving forward toward inclusive solutions for IEW.

Moving forward is what is required. As the Monitor's findings demonstrate all to well, we have spent the last five years moving backward.

As the old saying goes, the journey of a thousand miles begins with a single step. This new data gives us the essential step to begin that journey.

It will be up to national and regional leaders and affected citizens to determine whether that journey can be completed by creating the condition of Individual Economic Well-Being of and for all.