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Community Affairs departments in the Federal Reserve System across the country, including the Reserve Bank in Philadelphia, recently undertook a joint research project with the Brookings Institution’s Metropolitan Policy Program that examined 16 American communities characterized by extreme poverty. An “extreme poverty” community is typically defined as one whose poverty rate is 40 percent or higher. Research suggests that communities where poverty is so highly concentrated are associated with disadvantages for households living there over and above those disadvantages that might be expected because of the households’ limited resources.1 Negative effects might be transmitted via a number of avenues. For example, children who grow up in high poverty neighborhoods may have few positive role models, or the quality of public services that a jurisdiction provides may be lower in high poverty neighborhoods than in more affluent areas.
Most previous research on concentrated poverty has focused on neighborhoods in large central cities. By design, this project studied concentrated poverty in a broader range of settings, encompassing not only this type of city but also smaller cities, rural areas, and Native American reservations. Statistical data from sources such as the U.S. census and interview data collected from residents, service providers, and other stakeholders were used in drawing a picture of the 16 communities and the issues they face.
The Community Affairs research team at the Philadelphia Fed studied an area within Atlantic City, New Jersey. This city provides a particularly interesting context for examining concentrated poverty. Economic activity in Atlantic City is today dominated by the casino industry. In 2005, for example, the casinos provided almost 44,000 jobs in a city whose total population was only about 40,000; these jobs represented about 78 percent of the city’s private-sector jobs.2 A high proportion of casino jobs are open to low-skill workers, and on any given day, many go unfilled. Yet in 1999 the city’s poverty rate was 23.6 percent, while the national rate was 11.3 percent; unemployment stood at 12.9 percent in 2000, compared to 5.8 percent in the nation.3 The city’s poverty rate is actually a bit higher than before the beginning of legalized gambling in 1978, when the city was in sharp economic decline, following its loss in popularity as a beach resort in the mid-twentieth century.4 The research conducted by the Philadelphia team sheds light on the workforce paradox of plentiful jobs co-existing with high rates of poverty and unemployment. It also identified concerns that residents have about their neighborhoods and about their future status in Atlantic City.
Atlantic City, N.J., looking west from the Absecon Lighthouse. The Borgata Casino is in the background.
The geographic area on which the research team focused was made up of three contiguous census tracts in the central to northeastern section of the city, each with a poverty rate above 40 percent in 1999. The tracts, located in an area that has historically been African American, are home to a series of distinct neighborhoods, such as Bungalow Park, a neighborhood of single-family dwellings with many elderly homeowners, and Back Maryland, characterized by a number of HUD-subsidized privately owned housing projects. In 2000, the area contained 7,771 residents, 19 percent of Atlantic City’s population.
Socioeconomic data on the study area’s residents for 2000 show that unemployment levels were higher than in the city as a whole, particularly for males (male and female rates were 25.3 percent and 12.8 percent respectively). About 45 percent of family households were headed by females with one or more children under 18, compared to about 26 percent for Atlantic City as a whole. About 44 percent of residents over age 25 lacked a high school diploma, and only 7 percent of this group had completed college.5
Eighty-four percent of occupied housing units in the study area were renteroccupied, compared with 71 percent for the city as a whole.6 About 53 percent of all occupied units in the area were in public housing projects or in HUD-subsidized privately owned housing.7 The study area’s concentration of poverty would be expected simply based on the concentration of subsidized housing, since it is provided by design for low-income households. The blocks in and around some of this housing have a reputation for criminal and gang activity; residents stressed the need for more free youth activities and schoolrelated programs, particularly within their neighborhoods, to provide alternatives to gang membership and drug use. More generally, they noted the lack of physical and social investment in their neighborhoods.
Residents and service providers cited a number of factors that contributed to Atlantic City’s workforce paradox. A lack of critical skills necessary for employment a problem linked to limited educational achievement was cited in a number of interviews.8 New Jersey laws barring individuals with criminal records from many casino jobs limit work opportunities for some residents. The round-theclock nature of casino work, coupled with a lack of enough safe, affordable child care, affects the ability of employees with children, particularly single parents, to maintain their jobs. Finally, the low-skill service jobs available in casinos or other industries may not provide enough income to escape poverty. Residents often noted that they or someone they knew held two or three casino jobs in order to make ends meet.
The full report on the Federal Reserve’s concentrated poverty project, The Enduring Challenge of Concentrated Poverty in America: Case Studies from Communities Across the U.S., is available from the Federal Reserve Board of Governors or at www.frbsf.org/cpreport.
In addition to concerns about the current quality of life in their neighborhoods, area residents frequently expressed deep concern about their ability to continue to live in Atlantic City in the face of casinorelated development. Their fears stemmed from a number of different sources. In one part of the study area dominated by HUD-subsidized but privately owned housing developments, there is some concern that owners will find it profitable to sell their properties once HUD obligations to maintain low-income occupancy expire in the near future. Rapid house-price appreciation in Atlantic City in recent years has also contributed to residents’ fears that affordable housing will become increasingly scarce. Homeowners, particularly elderly residents on fixed incomes, expressed concern that an upcoming property tax revaluation mandated by the state would raise taxes to the point that they would no longer be able to live in the city.9
Despite plans for new upscale casinos and retail districts as part of a strategy to counter competition from new gambling venues in nearby states, Atlantic City’s actual development path cannot yet be known with certainty. But in a city where the casino industry is so dominant, that path can be expected to have an impact on the well-being of a large part of Atlantic City’s resident population.
The full report on the Federal Reserve’s concentrated poverty project, The Enduring Challenge of Concentrated Poverty in America: Case Studies from Communities Across the U.S., can be seen at www.frbsf.org/cpreport . Single copies are available from: Publications, Mail Stop 127, Federal Reserve Board of Governors, 20th and C Streets, N.W., Washington, DC 20551; (202) 452-3245.