A basic principle of finance could yield big wins for U.S. cities, according to a new policy agenda.
Proportionally speaking, Americans living in poverty pay more for basic necessities. On energy bills, the poorest 20 percent of Americans spend more than seven times the share of their income than do the wealthiest. Dividing American incomes into three, households in the bottom third spend twice the portion of their incomes on transportation than the top third. High housing costs are hurting everyone—but they’re hurting poor Americans the most.
The more you spend, the less you save, and the harder it is to climb up rungs on the economic ladder. Jobs and job-training programs are often heralded as the answer to poverty—but so long as the costs of living continue to rise faster than wages, better-paying work won’t break this vicious cycle alone. Poverty’s precipitous rise, it often seems, is intractable.
It might not need to be. Urban poverty could be cut—rather drastically— through a basic principle of finance, according to the Center for Neighborhood Technology, a Chicago-based urban policy think-tank. On Thursday, the CNT released the “Urban Opportunity Agenda,” with a central premise so simple that it’s sort of stunning it’s not talked about more: Reducing the cost of living for low-income citizens.
According to the agenda, major U.S. cities could cut their poverty levels by 25 percent in large part by reducing household transportation costs, energy and water bills, and food expenditures. Focused job-creation is also necessary, and called for. But as the report makes clear, jobs alone can’t get to that magic number without measures aimed at keeping more cash in the pockets of the poor.
A 25 percent reduction in poverty is a bold goal for any city, and requires a place-specific balance of strategies depending on local conditions of poverty. The CNT dives deep into eight different municipalities around the U.S. where poverty has increased (listed on the chart below) to see what a rough mix of policies might look like in each one.
To take one example, in Philadelphia, reducing poverty by 25 percent would mean 100,000 people stepping above the poverty line. To bridge that gap, Philadelphia would have to get a rough total of $476 million into the pockets of those citizens through expense reductions and income increases. The plan would have to respond to demographics, too: Philadelphians who live in female-headed households and who don’t work are most likely to live in poverty.
The CNT breaks their blueprint for Philly into a number of broad actions. Transportation costs are the third-biggest income-eater for low-income Americans, after housing and food. For Philadelphia, the biggest-ticket poverty-reduction item is expanding transportation access, with goals to reduce the need for workers at every income tier to drive alone, and to open up jobs previously too hard to get to. Relying on the CNT’s Housing and Transportation Affordability Index, the CNT estimates that if Philadelphia grew the number of jobs accessible by a 30-minute transit ride by 12 percent, that could translate into roughly 4,700 newly accessible jobs for people living in poverty. That could chip away at about a third of that $476 million target. According to the agenda, the city could accomplish this by increasing transit service, or with softer options such as rideshare and employer shuttles, like Buffalo Niagara Medical Campus’ GO BMNC program.
Philadelphians would also feel cost savings by leaving their cars at home. “A 20 percent decrease in auto travel could save a low-income household [an average] $490 per year in Philadelphia,” says Jen McGraw, a sustainability specialist with the CNT. “Multiplied across 40,000 households, that could be $20 million a year in expense reductions for low-income households.”
That number (and this is a little unclear in the agenda) shows up in the third-biggest-ticket item on the agenda: household-expense reduction. “A city cannot just give every resident more money”—universal basic income is still a long way away in the U.S.—“but it can help them cut down on bills and save,” the report reads. For Philadelphia, according to the CNT’s analysis, stronger efficiency education and rebate programs could save low-income residents 20 percent on energy and water bills, which could add up to $180 per month. In addition to transportation, telecom, and even food savings through increased self-sufficiency programs, that could bring down the poverty gap by another $85 million.
Most of the other strategies that CNT calls for fall under the category of good old-fashioned job creation, with a careful focus on sectors that could benefit the city in multiple ways, such as green infrastructure, resource efficiency, childcare entrepreneurship, and waste-recycling solutions. Notice that all of these areas of productivity focus on providing more cost-effective basic services, which could then indirectly cut down monthly bills for individuals. But it is striking that, largely as a result of direct cuts to expenses, nearly a quarter of Philadelphia’s $476 million target could be met.
And that’s without really touching the issue of housing, the top cost faced by most poor Americans, which is notably absent from the Urban Opportunity Agenda. Scott Bernstein, president and co-founder of the CNT, says he feels that housing has received far more attention as a major income-sink than transportation and energy, and that research has already examined the poverty-reduction potential of better housing subsidies.
Still, factoring in ways to save on housing costs would have been a valuable addition to this agenda. Bernstein says that a second iteration of the agenda might very well include that and other recognized poverty-reduction policies—for example, expanding access to education and healthcare, especially for women. He offers an analogy for how he views the agenda’s potential to grow and change: “When Chicago came out with its Climate Action Plan in 2005, hardly anybody had played with city-level climate action strategies. A year later, there must have been 100 times as many ideas.” In a way, the plan built demand for, and the supply of, new solutions, which Bernstein hopes to see with the Urban Opportunity Agenda.
“There hasn’t been this kind of conversation about poverty reduction,” Bernstein says. “Listening to the speeches at both political conventions over the last few weeks, both candidates were talking about more good-paying jobs. But no one talks about reducing the cost of living.”
Which is strange, because cutting basic expenses for the poor is not a novel idea. This is what food stamp programs, housing vouchers, and subsidized transportation passes are all supposed to do, too. By the same token, reducing energy consumption and expanding effective public transportation are key components of any “smart-growth” planning agenda. What makes the CNT’s approach unique is that it takes a whole suite of efficiency measures, frames them in terms of poverty reduction, and quantifies the big reductions in poverty that cities could see if they deployed them all in concert.
In practice, of course, that’s easier said that done. “No, this isn’t rocket science,” says Joel Rogers, a scholar of political science at the University of Wisconsin, Madison and the director of COWS, an urban policy think-tank which often partners with CNT. “In some ways it’s more difficult than rocket science, because you have people involved.”
For a city to act on poverty with a multi-pronged approach such as this, it would require determined, focused leadership, perhaps on the part of an anti-poverty czar, with real mayoral support. It would also require popular support, and a willingness among citizens to come together around the issue. The good news is that reducing poverty by cutting monthly expenses would be a big boost for people on the lower end of the economic spectrum, without hurting the middle or the top. That should be something cities can rally around.