Inequality as a Demographic Shift and Local Government Adaptation

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization

By Agustin Leon-Moreta
November 20, 2017

American communities are shifting rapidly in terms of demographic structure. In this article, I discuss how income inequality is affecting the ability of local government to provide services. And, toward the end, I discuss what local governments can do to adapt themselves to changing demographics, and income inequality in particular, to deal with those shifts. I will emphasize the impact of those demographic shifts, in particular, on local governments’ ability to provide services.

Wide income inequality is a demographic shift of increasing concern. It is widely recognized that income inequality has increased in the US over the last four decades. The causes of widening inequality remain to be understood, although educational gaps seem to be one factor. However, it is apparent income inequality is a source of demographic change that affects local governments in many ways. In general, unequal municipalities have to spend more resources to provide services. This is first due to the fact that, in unequal municipalities, there are greater rates of poverty. Poor populations then are associated with a greater demand for services. As a consequence, unequal municipalities have to spend more resources in order to serve low-income populations. Thus, there is a direct effect of income inequality on resources allocated to services by municipalities.

The unequal distribution of wealth means, generally, that local governments have to adapt themselves to diverse socioeconomic needs. Income inequality places a fiscal burden on local governments. Because inequality means concentrated poverty, in many cases, local governments will have to deal with the consequences of serving more in-need populations. For example, local governments will have to adapt themselves to provide greater social services. This may also require local governments to raise greater tax revenue from taxpayers to support those social service needs. In effect, research suggests that unequal municipalities are more likely to have greater revenues and expenditure levels, that is, larger budgetary needs.

One example of the impacts of demographic shifts is that on public safety programs. Widening inequality appears to increase policing activity, for example. In unequal cities, there appears to be greater rates of crime victimization. In those cities, affluent residents are likely to support increase police efforts. This seems to be one of the reasons for the greater policing levels in highly unequal cities. By contrast, cities which seem to be more egalitarian in terms of income distribution tend to spend fewer resources in policing. Thus, widening income inequality is shaping policing and public safety, as well as other local government services.

A larger consequence of inequality is the prevalence of wide municipal disparities in metropolitan areas. This means that, whereas some municipalities have a high economic capacity, other municipalities have a low economic capacity. Those differential economic capacities are of concern because they mean different municipalities will have different fiscal capacities to support the delivery of services. Consequently, differential fiscal capacities will result in some municipalities with high levels of services and other municipalities with low levels of services. Fiscal disparities therefore could be a larger consequence of income inequality. It means that, at a regional level, quality of life would be lower for some communities than others.

What is the role of local governments in these challenges? On one hand, local governments do not have unlimited ability to deal with those challenges, as their governmental authority is circumscribed to their jurisdictional boundaries. However, on the other hand, local governments should be proactive in seeking to resolve or meet those challenges as much as possible. What can they do? First, they can be proactive in collaborating with each other to take advantage of economies of scale and savings in service delivery. Local governments can extend social service for needy people via interlocal collaboration. In effect, there are currently, in some states, county governments or region-wide governmental units that provide social services for low-income residents. Thus, local governments can rely on region-wide governance mechanisms to resolve those inequality challenges. Those mechanisms, of course, would require policy leadership and willingness to cooperate between local governments.

What additional practical steps can local governments take to address the consequence of income inequality? Local governments could also attempt to use inclusionary land use programs to include low-income resident in their communities. It is important that inclusionary housing efforts be made at the county or regional level. Because municipalities may not have the incentives for inclusionary zoning, higher level governments may be better positioned to undertake those responsibilities.

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Author: Agustin Leon-Moreta, PhD, Assistant Professor, School of Public Administration, University of New Mexico https://spa.unm.edu

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