Economic inclusion may be the key to lasting growth and prosperity

The latest edition of the Brookings Metro Monitor paints a sobering picture of metropolitan economic progress. Few large metro areas achieved consistent progress across the Monitor’s three broad categories of economic growth (the size of the economy), prosperity (the quality of growth), and inclusion (the distribution of growth), in any of the three time periods the Monitor tracks (2015 to 2016, 2011 to 2016, and 2006 to 2016).

This piqued our interest. If growth, prosperity, and inclusion are hallmarks of economic progress, why does progress within metro areas appear so uneven? Are these measures in fact related, or are they largely independent of one another? We set out to explore these dynamics using a ruthlessly wonkish toolkit: scatterplots and regressions.

Wait! Don’t stop reading! Despite our tedious methods, we come to some interesting and useful findings, which we explore here using a new interactive feature.

Progress on growth, prosperity, and inclusion is uneven

First, a short explanation of what, exactly, we examined. The Metro Monitor measures metro areas’ progress on growth, prosperity, and inclusion using a series of sub-indicators for each of these three categories. (You can read about them here on page 6 of the report.) A composite score measures how a metro area’s overall performance in a category compares to that of its peers. Positive scores indicate a metro area performed above average; negative, below.

The chart in the data interactive below is split into quadrants that correspond to whether a metro area performed above or below the large-metro area average in each combination of two categories, as indicated by its composite scores on either. Metro areas in the upper right quadrant performed above average on each of the categories displayed on the horizontal and vertical axes. Metro areas in the bottom left performed below average on both categories. Metro areas in the other two quadrants achieved uneven performance. The dot color corresponds to metro areas’ performance on the third category not shown on the chart axes.

These interactive charts show that metropolitan progress on economic growth, prosperity, and inclusion is highly uneven. In the one-year period from 2015 to 2016, 20 large U.S. metro areas performed above average in all three categories of growth, prosperity, and inclusion. Another 19 performed below average in all three categories. The remaining 61 metro areas achieved uneven progress. Over time, metro performance grows marginally more consistent. Fifty-two (52) metro areas achieved uneven progress in the five-year period from 2011 to 2016, and 48 achieved uneven progress over the 10-year period from 2006 to 2016.

The data interactive also shows that metro areas’ economic progress varied regionally. Metro areas in Pacific Coast and Mountain West states tended to achieve above-average progress more consistently compared to peers in other regions. Metro areas in the Northeast and around the Great Lakes saw below-average or uneven progress more consistently.

Growth, prosperity, and inclusion are positively related

Although uneven progress within metro areas paints a discouraging picture, the relationships between growth, prosperity, and inclusion among metro areas are instructive. The dotted lines on the interactive scatterplot charts indicate the nature of the relationship between the measures on the horizontal and vertical axes among all 100 large metro areas. (Statistics on these relationships are reported in Table 1, below.)

All of the lines in the charts, no matter the combination of measures, move from the bottom left to the top right. This indicates that better performance on one measure is associated with better performance on the other two measures in all three time periods. Gains in one category, like growth, are typically accompanied by gains in others, like prosperity and inclusion, and vice versa. For example, Table 1 shows that over the one year from 2015 to 2016, each one-unit increase in metro areas’ composite growth score was associated with a nearly half-unit increase in composite prosperity scores, on average. This relationship is moderately strong: growth scores explain about one-quarter of the variance in prosperity scores. The magnitude and strength of this relationship is relatively consistent over each of the time periods.

Growth and prosperity’s relationship to inclusion, however, grows larger and stronger with time. Table 1 shows that over the one-year period, each one-unit increase in metro areas’ composite growth score was associated with less than a quarter-unit increase in their composite inclusion scores. This relationship is tenuous: composite growth scores explain just 8.9 percent of the variance in their inclusion scores over a year. But the magnitude and strength of this relationship are greater over the five-year period and even greater over 10 years. Prosperity and inclusion, similarly, show little relationship over a one-year period, but exhibit an even stronger relationship over 10 years than prosperity and growth.

These dynamics suggest that a metro area that achieves better performance in one category will likely achieve better performance in another, since growth, prosperity, and inclusion appear to be mutually reinforcing, especially over longer periods of time.

Inclusion delivers in the long run

The varying magnitude of the relationships between measures within and across time periods may help explain metro areas’ uneven progress. From one year to the next, growth and prosperity share the largest and surest association with one another. But inclusion is more variable, exhibiting a weak relationship to the other measures over the short term. Meaningful progress on inclusion seems to take longer to manifest.

Over the 10 years from 2006 to 2016, however, changes in inclusion track more closely with changes in growth and prosperity than changes in growth or prosperity track with each other, as the charts in Figure 1 depict.

Over this longer term, progress on inclusion seems to stand out even despite the unevenness noted above. Of the 38 metro areas that achieved above-average performance on growth from 2006 to 2016, 28 also achieved above-average performance on inclusion. Twenty-five (25) of the 38 also performed above average on prosperity. Of the 45 metro areas that achieved above-average performance on prosperity during that period, 32 also achieved above-average performance on inclusion. Twenty-five (25) of the 45 also performed above average on growth.

This admittedly wonkish analysis thus points to a simple insight that should guide regional economic development efforts: although it may be elusive from year to year, in the long run, inclusion may provide the key to true economic success.