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US economy potentially threatened by regional divergence

By Zheng Qi (People's Daily)    09:02, May 31, 2019

The economic fortunes of rich and poor regions of the US have diverged dramatically over the last 40 years, said a recent study by Harvard social policy scholar Robert Manduca which triggered huge attention from US media.

According to the study, in 1980, around 12 percent of the US population lived in metropolitan areas whose mean family incomes were at least 20 percent larger or smaller than the national average, while the share had climbed above 30 percent by 2013.

As a matter of fact, regional divergence has become an issue of the US and drawn significant attention from the research community who releases relevant reports every now and then.

Another study by US public policy organization Economic Innovation Group (EIG) pointed out that most of the benefits of the US economic recovery in the post-recession era were gained by only a small percentage of regions.

The study, having a probe into the economic vitality, resident income, employment, housing and education of US zip codes from 2007 to 2016, found that the top 20 percent of zip codes have added 3.6 million jobs, more than those of the bottom 80 percent of zip codes combined.

Rural zip codes were by far the most likely to be downwardly mobile compared with their urban and suburban counterparts, according to the study, with 30 percent dropping into a lower prosperity.

Massive population of the US has moved to regions that are more economically energetic since the recession, said John Lettieri, President and CEO of EIG.

From 2010 to 2016, said an earlier research by Brookings Institution, 53 metropolitan areas in the US with a population of over 1 million accounted for 2/3 of the national economic output and 3/4 of employment growth, while 93 percent of the US population growth came from these areas in the same period.

It indicated a synergy between population mobility and economic opportunities which resulted in a situation of regional divergence in which a small part of regions experienced obvious economic improvement, while small towns and rural areas suffered.

Since the last year, plenty of small towns in inland states such as Ohio and Nebraska have launched subsidies for student loans and housing, and even offered free-land for housing to attract talents. It offers another perspective on the regional divergence of the US economy.

Analysts attributed the enlarging regional divergence to the ongoing changes of the US economic structure.

For instance, the rise of high-tech industry is considered an important reason. The sector has been the most dynamic part of US economy since the end of the recession, and created massive high-income jobs.

The industry is highly clustered in distribution. The household income median of San Francisco went up by 13.2 percent in the past decade, ranking the first among 100 US metropolitan areas, and that of San Jose, which is on the second place of the list, stood at 12.7 percent.

The two cities located at the Bay Area are both hubs of high-tech industry. They witnessed rapid population increase in the recent years, which is reflected in their surging property price and frequent traffic jam.

Economists believe regional divergence to be a potential risk of the US economy. The Associated Press noted in an article that as the regional divergence of the US kept expanding, the country’s macro economy, through showing a sign of picking up, failed to generate prosperity that could be widely shared. It created more diversified opinions on the US economy.

Indeed, regional divergence is not only happening in US economy, but politics. The rising of populism in the US political world in the recent years is widely considered to be relevant with the loss of vitality of inland towns. Obvious political differences are showing between east and west coasts and the inland areas, and between urban and rural areas.

Apart from regional divergence, the US economy is also threatened by many risks. According to a poll conducted by Monmouth University at the end of this April, only 34 percent of those earning less than $50,000 a year say they have benefited at least somewhat from the growing economy. This contrasts with those earning more the $100,000, where a majority of 58 percent say they have benefited.

A Washington Post-ABC News poll indicated that 62 percent of Americans believe the country’s economic system works mainly to benefit those in power.

However, the above-mentioned inequality is completely ignored by US policymakers, and what the US government is doing about macro economy is just showing off its “performances” on certain indicators with eyes on the election next year.

It’s really an excessive demand to ask the US administration to care more about the low-income group, as the country would not have ignited trade disputes everywhere that impacted the already uneasy life of the group if the US policymakers had a heart for them. 

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Hongyu, Liang Jun)

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