How Elite Communities Are Pulling Away in the 21st Century Race for Jobs, Businesses, and Human Capital
Part of EIG’s Distressed Communities Index series
Underneath national headline statistics, local economies—and their residents—are on steeply divergent trajectories. Growth and opportunity surround dwellers of favored zip codes, while both seem to elude less advantaged communities. EIG’s Distressed Communities Index (DCI) documents these place-based disparities in U.S. economic well-being by scoring and ranking nearly every U.S. zip code on seven complementary metrics before grouping zip codes into quintiles.
This analysis takes zip codes as they rank on the DCI in 2015 and looks backwards to the turn of the 21st century to see how national growth in the number of jobs and business establishments has been distributed across all types of communities. It finds that today’s most well-off places have enjoyed 15 years of nearly uninterrupted growth and rapidly rising living standards. The bulk of American communities, by contrast, have seen only modest advances and still bear deep scars from the Great Recession.
The situation is far bleaker for the bottom tiers of U.S. communities, however: Hit badly by two recessions and bypassed by two recoveries, the country’s most distressed places have been nothing short of hollowed the century. An age of unrivaled prosperity for thousands of communities and tens of millions of Americans has taken root alongside what amounts to a deep and sustained modern depression in the communities that house many of the country’s least advantaged citizens.
National trends in jobs and businesses: Tracking 15 years of growth across U.S. communities
The 25,500 zip codes analyzed here added 6.8 million jobs between 2000 and 2015. Those new jobs overwhelmingly flowed to the country’s most prosperous communities—those that land into the top quintile, or 20 percent, of zip codes on the latest DCI. Employment rose in these privileged neighborhoods by 6.5 million over the period. Together these zip codes added three times as many jobs as in the second-best group (“comfortable” zip codes) and ten times as many as in “mid-tier” ones.
“Distressed” zip codes have shed jobs even faster than they have population since 2000, and remaining residents struggle to access opportunities generated elsewhere. The number of jobs in the bottom two-fifths of the nation’s zip codes fell by 2.3 million between 2000 and 2015. “At risk” communities accounted for 135,000 of those jobs lost, but most of the losses were racked up by distressed zip codes, which shed a total of 2.2 million jobs over the period—1 in 8 of what they started with. Altogether, these zip codes lost 1 million more jobs than they did residents. With prime-age adults more than twice as likely to be out of work in distressed zip codes as they are in prosperous ones, evidence suggests that residents of distressed communities struggle to access good job opportunities even outside of their home zip codes. The fact that half of distressed zip codes’ neighbors are also distressed may factor in significantly.
Though the country as a whole officially recouped its 2008 to 2010 job losses by 2014, only prosperous and comfortable zip codes had fully recovered all jobs lost during the Great Recession by 2015. Prosperous zip codes have proven especially resilient—experiencing shorter and shallower recessions before proceeding to dominate the national recovery. Were it not for them, the U.S. economy would still have been 1.5 million jobs short of a full employment recovery in 2015. Meanwhile, mid-tier, at risk, and distressed communities still contained fewer jobs in 2015 than they did prior to the downturn. The number of jobs in distressed communities fell in 11 of the 15 years examined here, including in 2015 itself.
Business establishment openings and closings serve as a good proxy for entrepreneurial activity and provide concrete, local gauges for the health of the broader economy. As it happens, the Great Recession’s aftermath saw a profound shift in the geography of new businesses openings in favor of well-off communities. Prosperous zip codes were the only ones to contain more business establishments in 2015 than they did in 2007, before the recession. The landscape of all other quintiles remains scarred by empty storefronts and vacant office spaces.
An individual zip code may have lost jobs or businesses (or both) while still retaining its prosperous status, just as a distressed zip code could nevertheless have experienced some growth over the period. However, the higher the tier of economic well-being of a zip code today, the higher both the likelihood and likely magnitude of growth it has experienced since 2000. Three-quarters of today’s prosperous zip codes added business establishments on net over the period, for example, and they added five times as many on average as did the typical (and far scarcer) expanding distressed zip code. Decline was more balanced in magnitude across tiers of communities, suggesting that the economy’s creative forces are far more unequal and discriminating than its destructive ones.
The view from the top: Comparing the highest-performing zip codes to the rest
The top 10 percent of zip codes on the DCI have truly dominated U.S. economic growth since 2000, emerging from a 15 year stretch during which the number of jobs increased by 35 percent, compared to only 9 percent nationally, and the number of business establishments by 34 percent, compared to 8 percent nationally. The gap between these communities and the rest widened nearly every year. Thus far in the 21st century, incomes have grown twice as quickly in top-decile communities as they have in bottom-decile ones. By 2015, the median household in the average top-decile zip code earned $90,200 annually, compared to $76,900 in the second-highest decile and $31,100 in a bottom-decile zip code.
The data presented here imply that there are effectively three tiers of American communities: 10 percent—home to 41 million people—are truly flourishing, with high levels of growth and high overall degrees of economic well-being measured across metrics: educational attainment, housing, incomes, and more. The next 70 percent are muddling along with varying degrees of success, and finally the bottom 20 percent—home to 52 million people—are struggling to escape a nexus of compounding forces: disappearing jobs and active disinvestment on top of high poverty rates, low levels of educational attainment, and weak labor force attachment.
The most prosperous zip codes are far more evenly spread across the country than popularly assumed. They can be found in every state and region, while the most distressed zip codes are more concentrated in Appalachia, the Southeast, and sparsely populated parts of the Southwest.
Educational attainment, industry structure, and demographic composition in 2000 all meaningfully predicted which communities would thrive (and which would not) in the years that followed. The top 10 percent of zip codes stood out for their exceptionally high levels of starting educational attainment, for their specialization in high-end professional services sectors, and, more troublingly, for their relative lack of diversity. However, the minority share of the population increased fastest in this group of zip codes thanks in part to a large influx of foreign-born residents.
A nationwide phenomenon: The economy’s new divides transcend state and regional boundaries
These broad national patterns are remarkably consistent across states. Every state has zip codes in the top decile nationally, and those zip codes universally added jobs between 2000 and 2015. In the reverse, zip codes in the bottom decile shed jobs in 42 states and business establishments in 47 of the 49 states which contained them. Yet underneath that general pattern of consistency, a few telling archetypes emerge. Select a state from the drop-down menus to explore its patterns of employment and establishment growth by quintile.
Cumulative Change in Employment Since 2000 (Interactive)
Cumulative Change in the Number of Business Establishments Since 2000 (Interactive)