Boston's 2 Sides: How The City Can Have A Booming Innovation Economy And Widening Inequality

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The gap between the rich and the poor is a theme that increasingly defines the city of Boston, with its booming innovation economy -- and its growing number of people struggling at the bottom of the economic ladder. Here's construction in the heart of South Boston’s Innovation District in March. (Jesse Costa/WBUR)
The gap between the rich and the poor is a theme that increasingly defines the city of Boston, with its booming innovation economy -- and its growing number of people struggling at the bottom of the economic ladder. Here's construction in the heart of South Boston’s Innovation District in March. (Jesse Costa/WBUR)

Among the big themes of this year's presidential campaign is the growing gap between America's rich and its poor. The issue has provided fuel to Democrat Bernie Sanders' presidential campaign.

And it's a theme that increasingly defines the city of Boston, with its booming innovation economy -- and its growing number of people struggling at the bottom of the economic ladder.

A visit to Fan Pier on the waterfront in the heart of South Boston’s Innovation District provides a view of the city’s economic boom.

This is the world headquarters of Gillette and Vertex, and it is where GE will soon be based. It’s a world of construction cranes and gleaming steel and glass buildings rising out of the ground, giving way to luxury condominiums and new restaurants. It is a part of the city that is changing by the month -- faster than just about anyone had predicted, including Jim Rooney, president of the Greater Boston Chamber of Commerce.

“There was a plan done by the [Boston Redevelopment Authority] back in the '90s that projected 30 million square feet of development that would occur here by 2013,” Rooney said. “The pace of development is 10 years faster than that BRA plan. This has become a place to go — particularly if you’re involved in some sort of knowledge-based industry.”

Rooney called the cluster of corporations -- which include financial services firms, biotech and pharmaceutical companies — “remarkable.” It is also richly rewarding for many who work in the city's robust innovation economy. Just this spring, the U.S. Chamber of Commerce ranked Boston as the city best positioned to lead the "shift to a digital economy," thanks to this innovation boom and the region's high quality of life.

“I think it’s a significant moment that says to anyone who's thinking about where to do their startup, or where to locate their company, that Boston is now the place to be," Rooney said.

J'Neen Skinner-Seney works as a receptionist for a nonprofit in downtown Boston. She and her husband are trying hard to make the transition from unemployed to working parents. (Jesse Costa/WBUR)
J'Neen Skinner-Seney works as a receptionist for a nonprofit in downtown Boston. She and her husband are trying hard to make the transition from unemployed to working parents. (Jesse Costa/WBUR)

But there's another side of this economy.

That becomes clear if you ask J'Neen Skinner-Seney where she wants to be in five years. Her goals are modest: to have a place that her kids can call home, and to be “happy, healthy and on a path of financial success.”

She grew up in Mattapan and Dorchester, and now lives in Dedham with her husband and two kids. They're trying hard to make the transition from unemployed to working parents. But it's not easy. When they were both jobless, they counted on food stamps, cash assistance, daycare vouchers and public housing. Now her husband drives for Uber, and Skinner-Seney works as a receptionist for a nonprofit in downtown Boston.

So the good news is they're both working. But the bad news is all that public assistance stopped.

"My rent went up to $700. Daycare was added on,” Skinner-Seney said. "Now that I'm working, I have to pay for transportation to and from work, plus parking. So, it was very hard. I even considered leaving my job because that honestly wasn't making enough to sustain the bills. “

But she is still working. And she says there's something else she wants: enough money to buy a kitchen table so her family can sit down and eat dinner together every night. “People don’t realize that people in my situation don’t have that,” she said, choking back tears, then apologizing for becoming emotional. “I go to work with people who make great money and have beautiful homes, and I go home and we sit on the floor.”

Wading Into The Economic Debate

So there are two snapshots of Boston's economic reality: Skinner-Seney, struggling to afford a kitchen table; and the city's so-called Innovation District, building the country's digital future and enormous wealth for many who work there. According to the Brookings Institution, Boston has the highest rate of income inequality among the country's 100 largest cities. It found that the richest 5 percent of households make at least $266,000 a year -- nearly 18 times more than the bottom 20 percent, which make about $15,000 a year. So what explains this widening wealth gap in a state and city historically dominated by liberal Democrats?

According to journalist Thomas Frank, it is “because they don't care about it." Frank is an author, most recently of the book "Listen Liberal: Or, What Ever Happened to the Party of the People?" It includes a chapter with a tough critique of Massachusetts' innovation economy, which Frank calls a "liberalism of the rich." “It’s the economic plan that you find so many different leaders in the Democratic Party endorsing as the way forward in this country," Frank told me in an interview.

The way Frank sees it, Democrats have forged a kind of unholy alliance with those who benefit from the innovation economy, including biotech, big medicine and academia. And he says this alliance leads to policies that promote economic disparity.

“Once you decide that the only people that really matter are members of the white collar professional class, but at the same time switching off your concern about working people, [economic disparity] is naturally going to happen," Frank said. “By the way, this is not unique to Massachusetts. It's happening everywhere you have this boom-town economy.”

A recent example of public policy that promotes the innovation economy is the courtship of GE to relocate to the South Boston waterfront. GE is getting $150 million in state and city tax incentives. In return, the company has pledged $50 million worth of philanthropy to Boston Public Schools.

Mayor Marty Walsh, a rock solid pro-union Democrat, says this is a case in which giving tax breaks to corporations will reap handsome returns for his city. “There's an opportunity here to bring in one of the largest companies in the world to invest in our city,” Walsh said. “The spin-off in our taxes, which will be reinvested back in the economy — into our schools, our police, our fire department — you can't put a figure on that."

But Frank sees this as the latest iteration of trickle-down economics.

"Republicans have their version of this -- you cut taxes to lure a company to your city," he said. "Either way, you are abasing yourself before a certain class of people. It’s not something you want to see in a democracy."

Frank argues that policymakers are promoting the innovation economy at the expense of the poor and working families — turning their backs on the kind of New Deal progressivism that once helped build the middle class.

But not everyone agrees with that, including Deval Patrick, the state’s former Democratic governor.

"That’s like saying, we shouldn’t have had policies that encouraged an industrial revolution because it was displacing agricultural workers," he said during an interview in his new office at Bain Capital, on the 38th floor of the Hancock Tower in Back Bay. "The economy is the economy."

Part of Patrick’s legacy was a $1 billion package of tax incentives, capital spending and business-friendly low-interest loans to promote the biotech and life sciences industry. Critics called it unfair because it singled out one part of the economy for generous subsidies. But Patrick says the benefit goes well beyond just one industry.

"We need an expanding economy to give people a way forward — to lift themselves,” the former governor said. “I think for those of us who believe that markets don't solve every problem in everyone's life right on time, and that government doesn't solve every problem right on time — that there’s a role for government to help those help themselves."

The idea that an expanding economy lifts everybody sounds intuitively correct, but sometimes economic effects are counterintuitive. So when it comes to Boston's booming innovation economy, can we assume that a rising tide will lift all boats?

According to Barry Bluestone, an economist at Northeastern University, the answer is no. “A rising tide may actually sink some boats," he said.

Bluestone says a chief reason for the dramatic wage disparity in Boston is a jobs miracle: the huge growth in financial services, tech and biotech, which are industries that pay very high salaries. But there are many more people still working in the old economy earning relatively low wages.

"As a result, once you control for the cost of living, many people have seen their wages go down — particularly because of soaring rents,” he said. “Since we are growing at the top end of the job distribution faster than most other cities … the income distribution has gotten much worse here than elsewhere."

The Gap For The Working Poor

Which brings us back to J'Neen Skinner-Seney, and how government can help her. As we said, when she was unemployed, she received lots of help. “But once I made the transition back into the workforce, I felt like everything was just taken away," she said. "There was no transition period."

Many working people in this city face this challenge, according to Chrismaldi Vasquez, who heads the Family Independence Initiative of Boston, a nonprofit that helps working families like Skinner-Seney's.

According to Vasquez, there’s an incorrect popular idea that families in poverty are stuck there. “In fact, what we know is that in three years, 96 percent of families move out of poverty, but in time, they move back in,” she said. According to Vasquez, what contributes to this cycle of poverty is a lack of critical support for the working poor. She points out that there is a safety net for the very poor (food stamps, cash assistance, child care vouchers, etc.), and there are policies that help the middle class (the mortgage interest deduction, access to credit, etc.), but for large numbers of the working poor — like Skinner-Seney -- there is relatively little.

At a time when the city and state are luring GE to Boston with generous tax breaks, Vasquez says she would favor policies that would invest more in the working poor -- to help people like Skinner-Seney stay above the poverty line -- and even climb well above it and into the middle class.

Economist Bluestone agrees with that. He says there are lots of global forces responsible for the growing wage disparity in Boston — including expansion of global trade and capital mobility. He also favors policies that support the roaring innovation economy.  “I support bringing GE here,” he said. “They’re here because this is where the talent is. And that is good.”

But Bluestone says along with the corporate tax credits for corporations, the city and state need to do more to help the majority of workers who are not part of the innovation boom.

“At the same time we are supporting GE and the innovation economy, there are ways of raising revenue that will allow us to support the rest of the economy, where most of us work,” Bluestone said.

Among the measures he favors: raising the minimum wage, a tax on millionaires, putting more money into education, including early childhood. “Those are the kinds of things we should be doing," he said.

Such measures could help close the income gap — and make it easier for working Bostonians to move up the economic ladder.

And in fact, when it comes to upward mobility, Boston actually does better than most American cities.

According to a Harvard study, Boston ranks seventh out of 50 major cities in opportunities to climb that ladder -- but that doesn’t mean it is easy. That same study found that in Boston, your chances of moving from the bottom fifth of income to the top fifth are only about one in 10.

And, of course, economic inequality in cities is nothing new.

“Cities have been unequal for something like 2,500 years,” said Ed Glaeser, a Harvard economist and author of "Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier." “Plato wrote about cities getting split into two cities -- one rich and one poor -- and in some sense, there’s an aspect of inequality that cities should even be proud of,” he said.

Glaeser is not being hardhearted about this. He points out that more than a quarter of Boston’s children are growing up in poverty, which he says is terrible. “But one of the reasons Boston has poverty is that it is a place that you can get around in without a car; there is affordable housing and decent social services," Glaeser said. "So give me the inequality of the city that manages to attract the rich and the poor alike, rather than the false equity of the suburbs.”

This segment aired on June 9, 2016.


Anthony Brooks Senior Political Reporter
Anthony Brooks is WBUR's senior political reporter.



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