State policies to promote shared prosperity in cities

The United States continues to be a country of tremendous economic opportunity, but this opportunity is not shared equally among the nation’s residents. As highlighted by the Shared Prosperity Partnership, success in the 21st century depends on generating growth that benefits individuals of all incomes, races and ethnicities (Berube et al. 2018). Yet even in the nation’s most successful cities, the failure to distribute the economic opportunities and benefits more evenly across underserved communities has resulted in stark racial and economic disparities.

Across the United States, courageous leaders at the local level are responding with creativity and resolve to promote more inclusive growth, but they face a challenging combination of disruptive forces (Poethig et al. 2018). For example, the adoption of digital technologies and automation in the workplace is reshaping established industries, and workers hoping to access quality jobs require very different skillsets than in the past (Muro et al. 2017). There are also profound demographic changes underlying these economic trends, yet there remain biases in many public policies that make it difficult for young and diverse populations to find economic success (Frey 2018).

In addition, the environment in which these leaders operate can be hostile. Many states are limiting the ability of local governments to address their most pressing economic and inclusion challenges (Davidson et al. 2017), and the federal government is adopting policies in areas such as trade, immigration, public safety and income support that make it harder for cities to grow inclusively. And if this were not enough, the urgent need for policy innovation comes precisely as the aging of the population and retirement of the baby boomer generation squeezes state budgets through pensions, healthcare and human services (Felix and Watkins 2013). Meanwhile, the federal government is cutting its investments in communities and the social safety net (Kogan and Bryant 2019).

In this environment, the leaders who are most committed to building shared prosperity in their cities and states understand they need to do things differently. Not only do they need to learn from one another and elevate the work of their colleagues, but they also need to think creatively and build new partnerships with others in their regions.

States are natural partners for city and regional leaders. State policy is critical to the health and well-being of cities and metropolitan areas. State investments in both people (healthcare, education and the safety net) and places (transportation, infrastructure, housing and parks) can dramatically affect the economy and quality of life in its communities. And the economic and fiscal health of a state fundamentally affects its ability to make these investments.

City and regional leaders are also natural partners for states. Cities increasingly drive innovation and economic growth, and state leaders should support and harness this growth to promote statewide prosperity.

Cities are also on the front lines of the demographic changes that are slowly transforming state populations: By the end of the next decade, a majority of the country’s under-30 population will be people of color. How these growing populations fare in the coming years will determine whether current economic disparities persist, grow or narrow over time, not only within states but also in smaller communities now beginning to experience similar demographic shifts.

Finally, because the economic challenges facing states and cities are dynamic and evolving rapidly, local and state leaders must continuously adapt and refine policies to promote shared prosperity. Both states and cities can benefit from working together to support policy innovation and experimentation.

There are many areas of policy in which a closer and more collaborative partnership between states and cities would help Americans more easily navigate economic change and promote shared prosperity. Specifically, there are three key policy areas that both greatly influence people’s access to important economic opportunities and involve deeply shared responsibilities between state and local governments:

• Creating and preserving affordable rental housing.
• Attracting and growing quality jobs.
• Helping workers obtain the skills they need.

In this series of briefs, we suggest ways that states and cities can work together to encourage shared prosperity. We articulate why affordable housing, job growth and upskilling workers matter to statewide shared prosperity, explore how state and local governments can more effectively partner in these areas, and profile states that are leading the way. Across these areas, states bring a unique set of assets and capacities to new partnerships with cities, including three key roles they can play to advance shared prosperity:

• Financial support and incentives. States can and do draw on much broader and deeper sources of revenue than cities, including revenues raised from taxes and fees and those passed through the states from the federal government. State financial support is essential to the provision of basic services, but states should also deploy resources in ways that incentivize local public and/or private sector efforts that promote shared prosperity.
• Legal authority to act. State law, often within state constitutions themselves, defines the basic authorities of all units of government within the state. This sets limits on the scope of legally permissible actions by leaders in cities, counties, regions and other subunits of the state. In setting these basic rules, states should support policy innovation in cities that encourage shared prosperity while restricting local policies that impede it.
• Enabling cooperation and addressing exclusion. States are better positioned than cities to stimulate cooperation across jurisdictions and sectors to promote shared prosperity. In particular, states can share information and data, use state convening power, and provide financial or regulatory incentives that promote multi-jurisdictional approaches to ensure shared prosperity. States also play an important role in overcoming local tendencies to underserve or exclude families with low incomes by encouraging regional collaboration, pooling and redistributing resources, and stepping in to ensure local policies address statewide needs, especially for families living in poverty.

As local leaders continue to face a myriad of challenges across technological, demographic, political and fiscal fronts, it is imperative that states and cities work together to offer an alternative narrative and form strategic partnerships to ensure that economic opportunities are shared among families and communities statewide and, ultimately, across the nation.

State Policies to Promote Shared Prosperity in Cities

The Shared Prosperity Partnership—a collaboration of The Kresge Foundation, the Brookings Metropolitan Policy Program, the Urban Institute, and Living Cities— convenes local leaders in select communities across the United States to discuss challenges to inclusive growth and provide data, research, and access to national experts, networks, and financial resources. Nationally, the Partnership elevates promising models through publications and public forums to spark dialogue among practitioners and support evidence-based policy at the state and national levels. The Center for Urban Innovation at the Aspen Institute supports the partnership by connecting leaders from different cities to share common challenges and work together to identify specific actions to advance sustainable prosperity in their communities. Since the partnership’s formation in 2018, it has supported locally driven efforts in eight U.S. cities: Arlington, VA; Chicago, IL; Cleveland, OH; Fresno, CA; Kansas City, MO; Milwaukee, WI; Minneapolis-St. Paul, MN; and Memphis, TN.