|"Welcome To Fishtown"|
Here is an interesting question, does the neighborhood you live in affect your paycheck? Interesting question, that blogger had never considered until right this moment. This is a subject that Richard Florida recently considered in his City Lab article "How Your Neighborhood Affects Your Paycheck." Mr. Florida writes, "The part of town where you live-especially where you grew up-can profoundly affect lifetime earnings." It is not something that we readily think about [where we grew up] when planning a career but yours truly will venture a theory that the neighborhood you grew up in plays a strong part in the career choices available to you.
|Tree line neighborhood in Portland, Oregon|
|Rudd's Trailer Park just off Jefferson Davis Highway|
South Richmond, Virginia
Queens, New York
There have been previous studies that accounted for the different ways in which parents have had a profound effect on the economic future of their children. Nevertheless, Messrs. Massey and Rothwell speculate that "the characteristics of neighborhoods have an effect on future earnings independent of the well-established roles of factors like parents' income or education." Their results were startling. Messrs. Massey and Rothwell found the neighborhood effect accounted for "50 to 66 percent of the effect of parental income." They wrote, "growing up in a poor neighborhood would wipe out much of the advantage of growing up in a wealthy household." Startling indeed. They call this finding the "million dollar neighborhood effect," revealing that "lifetime earning are roughly $900,000 higher (or $730,000 net present value terms) for those who grow up in the richest 20 percent of neighborhoods than for those who grow up in the bottom 20 percent, even after corrected for parental income." This results in as big a difference in the wage gap between high school-only graduates and college graduates, estimated by the Census Bureau to be about "$1 million dollars in lifetime earnings."
|Predicted difference in lifetime earnings|
Richard Florida points out, "Of course, the neighborhood effect is also associated with a host of other variables, race chief among them." The authors used two Census tract-based to indicated data points that determine the neighborhood effect based on race. They found that both variables and specific neighborhood effect alone are significant predictors in future earnings. However, they also found that the neighborhood effect is the clearest explanation of the three. The authors note, "It thus appears that the lower intergenerational income mobility of African Americans can be explained by their disproportionate segregation in poor, disadvantaged areas."
|King Street-Meeting Street corridor|
Charleston, South Carolina
The big, somewhat obvious, takeaway: "Neighborhoods have a very different effect on the incomes of blue collar and service workers as compared to knowledge and creative workers." Residential neighborhoods have a bigger impact on blue collar and service worker incomes. The researchers suggested that "This...may be because these workers are more likely to 'network' with friends and neighbors to find good jobs." Meanwhile, residential neighborhood locations has less of an effect on knowledge and creative workers, whose incomes are more affected by their workplaces. Further, creatives and knowledge-based employee received an income boost from working in a creative cluster location, perhaps "because these clusters are also where 'they can change jobs frequently and where firms compete for some talent.
The two studies cited in this article sheds light on how the powerful role of neighborhoods affects income. Most of the findings seem obvious but what is groundbreaking is that the research is crucial to understanding why certain locations experience growth while others do not and how segregation and other divides can resonate in the future.