It seems like such a stark, bland little statistic. This number presently represents Detroit’s poverty rate, but the significance of it really doesn’t sink in until you visit Detroit. Or, if you’re not that adventurous, to at least hunt down some Detroit blogs so you can get a bit closer from the safety of your computer screen to what that reality is like.
GoobingDetroit is an amazing find that shows how rapidly things change on the ground by comparing Google and Bing images of Detroit’s streets to show how they change. Here’s one small example:
I bring up Detroit straight away because it’s the first U.S. city, a formerly-major city anyway, to throw in the towel and file for bankruptcy. Detroit failed.
Refreshed statistics on where Philadelphia sits in the poverty rankings has come out and made headlines lately. Basically the story has not changed and Philadelphia continues to hold the No. 1 position of the top 10 cities of the United States as being the poorest.
Our poverty rate?
More interesting though out of the top ten cities is the one that had the biggest decrease in poverty: Houston. Jobs are bountiful all around the Houston metro and it has finally overcome the largest in-migration of Hurricane Katrina refugees who have permanently relocated to Southeastern Texas. Houston is the 4th largest city to Philadelphia’s spot at No. 5 with a population of 2.1 million people and is the energy capital of the United States.
Houston’s poverty rate?
That’s right, there’s only a four percentage point difference between Houston’s poverty rate and ours. Does that mean that Philadelphia’s poverty problem is not that bad?
Minneapolis, a city that’s often seen as successful has a 22.6% poverty rate, higher than Houston.
Poverty and income inequality are subjects which draw heavily on relative comparisons. Philadelphia is without-a-doubt the worst in the poverty category, and while we have an official poverty rate that is really not that different from other big cities in the U.S. that we like to think of as successful we still have one very strong comparison that makes us look way too much like Detroit:
The total number of jobs in Philadelphia.
In fact… our job growth rate based on the number of actual positions filled by active workers follows closely to Detroit and resembles nothing like cities experiencing gentrification-fueled skyrocketing rents:
So wait. How can we have Detroit’s jobs rate but at the same time we have people buying new houses in Philly and Fishtown becoming a hipster mecca?
Surrounding Philadelphia is a Life Saver®-shaped donut of reverse-commutable suburbs where most job-expansion in the Philly metro region has gone. We are also an unusual city for having a huge amount of suburbia. Adding the suburban population brings our metro population to over 6 million people. This includes another significantly-sized city, Wilmington, DE, one of the country’s largest consumer-credit back-office hubs.
Estimates are all over the place, but given how many white-collar jobs actually exist in the city it is estimated that nearly half of all Philadelphians who are at work today and reading this Philadelinquency article right now are doing it from a suburban office somewhere.
In just Montgomery County alone, Pew Charitable Trusts calculated that 68,986 Philadelphians leave the city to work in Montgomery County each day.
Reverse commuters bring in a huge haul. The City of Philadelphia heavily relies on the Wage Tax to pay its bills. Over 1/3 of the City’s revenue comes from the Wage Tax alone.
Without the suburban jobs providing a helping hand, Philadelphia would actually be exactly like Detroit in almost every single way. Since our suburban economy has a vast wealth of various jobs in varied industries, enough to satiate local residents in the collar counties but also expand to sizes beyond what small local populations can support with the aid of reverse-commuting city-dwellers, this symbiotic relationship between Philly and its constellation of suburbs has kept Philadelphia economically afloat.
Even with all those suburban jobs we still maintain a higher average poverty level and that reason rests on the back of our failing public school system that can’t educate most of the City’s indigenous residents to a degree that they can make it into the regional job market; never-mind the jobs available in the city. Non-skilled work in Philadelphia is very hard to come by because city employment has been stagnant since 1980. Prior to 1970 it was quite easy to finish high school and find unskilled work in a factory that paid decent wages. By 1980 this became impossible.
Neighborhoods like Kensington which were filled with unskilled and semi-skilled working homeowners rapidly depleted of workers whose incomes evaporated. By the late 1970s under Mayor Rizzo Philadelphia’s budget was starting to feel the economic pain. City Council with Rizzo’s blessing proposed jacking the Wage Tax to a shockingly-high 5% and this prompted the largest mass-exodus of residents at the fastest rate in Philadelphia’s decline.
This tax hike was so unpopular in-fact that Philadelphians were furious enough to launch a recall petition to get rid of Frank Rizzo.
While the recall election would have likely resulted in Rizzo’s downfall and over 250,000 Philadelphians indicated that they would vote to have him ejected from the mayor’s office, the Pennsylvania Supreme Court in a 1-vote majority sided with Rizzo, saying that a recall election was not possible under the Pennsylvania Constitution.
But as we can see right now with the new fancy restaurants and all the New Philadelphians moving into town we avoided Detroit’s fate. The suburban donut that surrounds Philly has certainly helped in a big way that most locals do not appreciate. The suburban jobs market has prevented a full-on Detroit happening to Philadelphia, so long as there are city residents sticking it out in Philadelphia and making that long commute.
In Michigan, nobody moves to Detroit to reverse-commute to Dearborn.
But any city, even Philadelphia, has a breaking point. If Detroit’s 38% poverty rate signifies a failed city where there is just so much poverty that the city could never hope to collect enough revenue to keep itself going, much less pay the bills, Philadelphia’s 26% poverty rate shows we get a C- or even a D, and we’re truly standing too close to the abyss. There is a number between 26% and 38% where things become so far gone that a city’s population could never hope to work together economically to make it function.
That number, and my guess that it’s a poverty rate approaching 29-30%, the local population could never be taxed enough to make good on the city’s bills. It would never matter how high you raise taxes or how many more taxes you invent, you will press out more taxpayers and leave behind a poor audience that’s exempt or unable to take on that burden. You could tax wealth until the cows come home. Once the wealth has decamped to a safe refuge, you are left with nothing else to tax. As Detroit faced auto factory closings it reacted immediately with tax hikes, prompting more of its population to flee. It could never augment its punitive tax policy with a carrot to replace the economic activity that left, much less convince workers who were able to flee to stay.
At that moment the Law of Diminishing Returns took hold and there was nothing left to stop the exodus.
A Pragmatic Approach to Poverty
As the middle class move out of a city the poverty statistic will immediately jump as there are less middle class people around to dilute the statistic.
Conversely, gentrification causes poverty numbers to dilute if the in-migration of wage earners moving in outstrips the in-migration of poor people and new poverty created by job-loss.
Like it or not, you need middle class and upper-income earners in your city if you want to be able to pay for municipal-funded assistance programs for the poor and also pay for the basic necessities a municipal government must provide its population. Grant money from higher rungs of government is fickle, as Detroit knew and we know. Big cities must always rely on local funding first and outside grants as a bonus.
You can only hold a middle class audience with a vibrant jobs market, which we sort-of have if you love podcasts and driving on the Schuylkill. To truly grow it you need boundless commercial growth, which Philadelphia certainly does not have. At all.
Moreover, our attitude towards middle-income earners needs to shift. Instead of looking at these people as the most horrible things ever out to rape society, we should instead be looking at creative-classers who have been moving into Philadelphia as little fracking wells… resources that produce and spend money here, but they also act as a Band-Aid for taxpayers that Philly has lost and they certainly should be taxed in ways that are constructive.
Shifting Philadelphia’s tax burden back to real estate and relying a lot less on a local income tax would do a lot to shift suburban attitudes about living and working in Philly. After all, the Wage Tax is one of the biggest gripes suburbanites have about Philly in the first place. Suburbanites who never venture into Philadelphia at all immediately point to the 75-year old income tax, the first local income tax in the country, as a reason to stay away.
The indigenous poor sitting in the poverty line and below will definitely benefit with a City that is far more flush with cash provided local pols make smarter decisions on aid programs. With the rampant municipal corruption we currently have, I don’t think we can really count on a City that has plenty of money to spend on social aid to spend most of it effectively; but that’s the case we have now with a City budget that is stretched thin.
But even if the poor aren’t being helped by the City at all when fortunes get better, the local economic picture with more open job positions is a far more effective tool to dampen indigenous poverty, provided that our arcane school system is also reformed along with that shift.
To date, tax reforms and school reforms has had little positive progress in Philadelphia, and this is the root of our poverty.
We only need to move the poverty needle down 4% to match New York City, our most economically vibrant nearby neighbor.
Four percent. Why do our local leaders think this is impossible?