News that Cleveland’s poverty rate is the worst in the nation--and rising--has elevated the community’s concern about conditions in the city. But a closer look at the way poverty rates are calculated suggests that all the possible causes of Cleveland’s ranking have not been fully understood.Poverty - Cleveland (Ohio) ; Economic conditions - Cleveland (Ohio)

Brian Rudick

Mark Schweitzer

English

Research Papers in Economics

A Closer Look at Cleveland’s Latest 
Poverty Ranking
by Mark Schweitzer and Brian Rudick
February 15, 2007
ISSN 0428-1276
Cleveland is the poorest big city in 
the United States, according to the 
Census Bureau’s American Commu-
nity Survey, with nearly a third of the 
city’s residents living in poverty. This 
news has received a lot of attention 
since it was ﬁ  rst released, but unfor-
tunately, the numbers on which it is 
based are easily misinterpreted.
A closer look at those numbers reveals 
that the clearest picture they paint is 
one of a region whose poor are con-
centrated in the central city, while the 
wealthier live in the suburbs. Many 
other cities follow the same pattern, 
but Cleveland’s concentration of poor 
residents is extreme. Only Detroit has 
as much poverty concentrated in the 
central city. Comparing cities’ poverty 
rates doesn’t give us much informa-
tion about what Cleveland could do 
to improve because such comparisons 
are not apples to apples, as we explain 
below.
Another hard-to-interpret ﬁ  nding in 
the latest data is the upward trend in 
Cleveland’s poverty rate. Does a ris-
ing poverty rate indicate that the local 
labor market has deteriorated? While 
that could be the case for the city’s 
residents, other data suggest that the 
situation in the general metropoli-
tan area has actually been improving. 
An equally plausible explanation for 
Cleveland’s rising poverty rate is that 
people are moving out of the city, and 
those that leave are disproportionately 
better-off than those that stay behind. 
   Poverty Rates in the 
City of Cleveland versus 
the Metro Area
To understand the causes of Cleve-
land’s rising poverty rate, it is impor-
tant to consider the entire labor market, 
not just city boundaries. City bound-
aries are largely historical, and using 
them to investigate new economic 
trends could be misleading, especially 
when it comes to labor markets. Fami-
lies can typically choose a place to 
live from a number of different cities 
without having to change employers, 
and conversely, city boundaries do not 
limit their job options. For instance, 
many people live in Cleveland but 
work in its suburbs—44 percent, 
according to the 2000 Census—and 
News that Cleveland’s poverty 
rate is the worst in the nation—
and rising—has elevated the 
community’s concern about con-
ditions in the city. But a closer 
look at the way poverty rates are 
calculated suggests that all the 
possible causes of Cleveland’s 
ranking have not been fully 
understood. 
Federal Reserve Bank of Cleveland
FIGURE 1  POVERTY RATES IN THE 
CLEVELAND-ELYRIA-MENTOR, OH MSA
SOURCE: U.S. Bureau of the Census, American Community Survey, 2005. 
Lorain
Ashland
Medina Summit
Trumbull
Cuyahoga
Stark
Portage
Mahoning
Wayne
Cleveland Ashtabula
Geauga
Lake
Cleveland (city)
MSA minus city
MSA (old) minus city
2005 poverty rate (percent)
32.4
9.6
9.9
Areamany people live in the suburbs but 
work in the city—twice as many, in 
fact, as live and work in the city. 
A more useful concept for studying 
labor markets is the metropolitan sta-
tistical area (MSA). It uses the com-
muting patterns of workers to deter-
mine the approximate boundary of 
the market. The deﬁ  nition of the MSA 
that contains Cleveland (ofﬁ  cially 
the Cleveland-Elyria-Mentor, OH 
MSA) has recently changed to exclude 
Ashtabula County, but under the older 
deﬁ  nition or the newer one, poverty is 
far lower outside the city than inside it 
(ﬁ  gure 1). 
Looking at the poverty rate of the 
larger metropolitan area reveals that 
Cleveland is not too different from 
other U.S. cities. The poverty rate 
of the Cleveland MSA is just a little 
above the average for all metropoli-
tan areas in the United States. And like 
other cities in the country, Cleveland’s 
suburbs have far lower poverty than 
the city itself.1 
   The Role of City 
Boundaries in the 
Poverty Rankings
Cleveland is far from the only city 
central to an MSA where suburban 
residents have higher incomes than 
residents of the city. That pattern is 
repeated in almost every major met-
ropolitan area in the United States, 
as suburban areas offer newer, larger 
housing while most central cities are at 
best stable. 
Some central cities house the majority 
of their metro area’s overall popula-
tion while others, like Cleveland, con-
tain only a small fraction. Speciﬁ  cally, 
Cleveland holds just 19 percent of the 
MSA’s population, while the aver-
age central city over 250,000 includes 
about 30 percent. Cities with a small 
percentage of the MSA’s population 
tend to be those that were already large 
(more than 250,000 residents) in the 
1940s, such as Boston, Detroit, and 
Washington, D.C. 
On the other end of the scale, some cit-
ies contain half or more of their MSA’s 
residents. Central city poverty rates 
for these cities tend to be lower (ﬁ  g-
ure 2). Many have grown substantially 
in the last couple of decades, going 
from small to big city in the process, 
like San Antonio, Texas. Other central 
cities have absorbed much of the sur-
rounding suburbs to form a uniﬁ  ed city 
and county government. An interesting 
case is Jacksonville, Florida, which has 
expansive borders and includes over 63 
percent of the metro area’s population. 
It makes little sense to compare pov-
erty rates within the borders of cities 
like Cleveland and Jacksonville, where 
the area bounded by Cleveland’s city 
limits comprises little of its MSA, 
while that of Jacksonville’s comprises 
most of its MSA.
To determine whether the city of 
Cleveland’s rising poverty rate is the 
result of deteriorating labor opportu-
nities in the area, we need to look at 
the labor market of the entire MSA of 
which it is a part and see if it is declin-
ing. And if this broader market is 
declining, we should see much of the 
rise in poverty occurring in the sub-
urbs, because more than half of the 
metro area’s poor live outside the city 
of Cleveland. Yet the poverty rate of 
the metro area was relatively ﬂ  at for 
most of the ﬁ  ve-year period studied in 
the Census Bureau’s survey. In fact, 
the 2005 rise in metro-area poverty 
numbers seen in the ﬁ  gure is almost 
entirely accounted for by the increase 
in the number of poor people in the 
city of Cleveland, rather than in the 
suburbs. In the 2004–2005 shift that 
boosted the poverty rate for the MSA, 
for example, the number of poor peo-
ple in the MSA grew by 43,522, but 
most of that increase occurred in the 
city (36,991). 
Other data also suggest that the 
region’s labor market has gradually 
stabilized since the 2001 recession. 
The unemployment rate for the region 
has dropped: the city’s unemployment 
rate is now 7.3 percent, down from 7.9 
percent three years ago. Similarly, the 
MSA’s unemployment rate fell from 
5.9 percent to 5.6 percent over the last 
three years. Employment levels dipped 
in both the MSA and the city after the 
start of 2000, but have been essentially 
ﬂ  at since 2003.
  What Else Could Push Up 
the Poverty Rate?
If individuals who are above or below 
the poverty line move to new resi-
dences, it can have profound effects 
on poverty rates, if the shifts in resi-
dence alter the population of the city. 
That is what may have happened in 
Cleveland.
According to the American Com-
munity Survey’s ﬁ  gures, Cleveland’s 
population has declined 11.5 percent, 
while the total number of poor resi-
FIGURE 2  THE ROLE OF CITY LIMITS IN 
POVERTY RATES
SOURCE: U.S. Bureau of the Census, American Community Survey, 2005. 
-5
0
5
10
15
20
10 20 30 40 50 60 70
Percent of MSA residents in central city
Poverty differential (central city – MSA)
Riverside
Virginia Beach-Norfolk
Cleveland Detroit
Atlanta
Minneapolis-St. Paul
Pittsburgh
Cincinnati
Seattle
Tampa
Louisville Jacksonvilledents has increased by about 20,000 
since 2000 (ﬁ  gure 3). Meanwhile, the 
number of nonpoor people fell 21 per-
cent (74,000) in the city and rose just 
slightly in the rest of the MSA (1 per-
cent). The result of this combination is 
a poverty rate that rises quite a bit in 
the city and much less so in the rest of 
the MSA. 
There is no way, short of following 
individuals with different income lev-
els, that we could be sure that changes 
in residence were behind Cleveland’s 
increased poverty rate. But this expla-
nation seems very consistent with the 
changes in poverty and residence cap-
tured in the American Community 
Survey and worth consideration as the 
community discusses its options. 
An important dimension of the trend 
in Cleveland’s poverty rates is the high 
concentration of high school dropouts 
within the city. More than a quarter 
of Cleveland’s adult residents do not 
have a high school diploma (26 percent 
of those 25 and older). The rate in the 
suburbs is much lower (11 percent). 
Cleveland’s dropout population is so 
high partly because the city’s gradua-
tion rates are so low (just 51.8 percent 
for the 2004–2005 school year), but 
the accumulation of past generations of 
dropouts and their lack of mobility also 
increases their concentration inside 
the city. While new dropouts contrib-
FIGURE 3  POVERTY STATUS
ute a relatively small percentage to the 
total stock of dropouts in any place 
(about 2 percent per year in the case of 
the Cleveland Municipal School Dis-
trict, assuming they do not move out 
of city), year after year of high dropout 
rates adds up.
Reducing the dropout rate might be 
an important step in the ﬁ  ght against 
poverty among younger citizens, but it 
is difﬁ  cult to sort out whether a poor 
education causes poverty or results 
from it, because poor kids are likely to 
face other disadvantages as well. For 
example, young people who are poor 
are more likely to have had out-of-
wedlock children. Still, after control-
ling for single parenthood and race, we 
estimate that high school dropouts are 
10 times as likely as high school grad-
uates to slip into poverty each year.2 
This is a compelling result, but it does 
not prove that education will neces-
sarily reduce poverty. In an interesting 
paper on the subject, Philip Oreopou-
los goes further and shows that com-
pulsory schooling laws (which require 
kids to be in school until they reach a 
speciﬁ  c age) help boost the incomes of 
those affected by the laws. This is the 
case even though many of the prob-
lems that these low-achieving students 
face are likely to remain and the laws 
are only partially effective at keeping 
kids in school. 
  What Can We Do?
If the goal is to improve the incomes 
of poor people, little could be more 
appropriate than focusing on improv-
ing their skills so that their earn-
ings can rise. Improving the educa-
tional outcomes of the Cleveland City 
Schools could boost the incomes of 
some of the youth who are most likely 
to be poor, regardless of where they 
live. Adding employers to the area or 
expanding existing ﬁ  rms also wouldn’t 
hurt, but is unlikely to quickly lower 
the city’s poverty rate, as these 
employers would tend to draw workers 
from the broader metropolitan area. 
If the goal is to alter the city’s rank-
ing as the poorest among the big cities, 
attracting and retaining moderate and 
middle-income households within the 
city limits is also critical. 
  Footnotes
1. For consistent comparison since 
2000, we add Ashtabula County to 
the metro area ﬁ  gures. So for our pur-
poses the MSA includes Ashtabula, 
Cuyahoga, Geauga, Lake, Lorain, and 
Medina counties. Ashtabula County 
was dropped from the ofﬁ  cial metro 
area deﬁ  nition in 2003 and the ACS 
changed to this deﬁ  nition beginning 
in 2005.
2. This estimate is based on linear 
probability model of individual pov-
erty status among those aged 24 to 35 
in CPS data from 1984 to 2004, after 
controlling for a broad range of fam-
ily structures and race of the individu-
als. Other controls and/or periods of 
time can lower these estimates; how-
ever, the general result that high school 
dropouts are far more likely to experi-
ence poverty remains in any version 
we tested. 
SOURCE: U.S. Bureau of the Census, American Community Survey, 2005. 
0
50
100
150
200
250
300
350
400
450
500
550
600
2000 2001 2002 2003 2004 2005
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Not in poverty
In poverty City of Cleveland
City of Cleveland
MSA minus city of Cleveland
Thousands Thousands
MSA minus city of ClevelandMark Schweitzer is an assistant vice 
president and economist at the Federal 
Reserve Bank of Cleveland, and 
Brian Rudick is a research assistant at 
the Bank.
The views expressed here are those of the 
authors and not necessarily those of the 
Federal Reserve Bank of Cleveland or 
the Board of Governors of the Federal 
Reserve System or its staff. 
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A closer look at Cleveland's latest poverty ranking

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A closer look at Cleveland's latest poverty ranking

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