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MIT Better World

By Kathryn M. O’Neill

She is widely known for developing the Living Wage Calculator, which analyzes the minimum income required to pay for basic living expenses. Launched in 2003, the calculator today is widely used by companies and regional governments to set wages that meet the needs of local populations. Glasmeier has also published several books, including An Atlas of Poverty in America: One Nation, Pulling Apart 1960–2003 (Routledge Press, 2005). Spectrum asked her to explain how her research is helping us better understand the sources of poverty, and of wealth.

What has your research in economic geography revealed about how where people live affects their chances for economic advancement?

AG: Economic geographers study how economic activities, processes, and outcomes vary by location. My area of expertise is the underlying economic causes of such variation in economic opportunity—for example, how a region rich in natural resources, like central Appalachia, remains among the nation’s poorest.

I spent 25 years advising the Appalachian Regional Commission, a governmental economic development agency, and can say the explanation comes down to four core factors: exploitative industries, geographic remoteness, failed institutions, and political corruption. The remoteness of Appalachia meant there was a lack of markets and population centers, which in turn meant few job-generating alternatives to coal.

While the single-industry economy produced low pay and poor working conditions, the absence of information about opportunities beyond the region’s rugged mountains discouraged people from moving. In addition, the coal industry was in cahoots with Appalachia’s political leadership, scaring away other industries that might have created alternative opportunities.

Stories like that of Appalachia still resonate today. Countries in Africa that are rich in resources, including Nigeria, Sierra Leone, and Tanzania, suffer a similar fate.

How have the data and analysis you’ve gathered from the Living Wage Calculator helped address economic inequality?

AG: The calculator was created when I was working on a Ford Foundation grant revisiting poverty policy. We noticed that from 1990–2000 a number of counties that had crawled out of poverty had fallen back in. It turned out many of these places had lost major sources of employment. We knew that recovery would not come easily, so we built the tool to demonstrate that cost of living adjustments can lag behind job decline. Now we can look at data from areas such as Appalachia and see that this is exactly what happens.

Interestingly, while we designed the tool for individuals to understand their personal cost of living, today’s users also include groups— ranging from unions to cities to religious organizations—interested in improving employee compensation. Employers like IKEA, for example, use the tool to set entry-level wages. Their motivation is fairness and reward for consistency in employee performance.

The City of Dallas uses the tool to set the wage rates contractors must pay their workers as part of its bid process. This has worked so well, improving both productivity and service, that the city has actually offered full-time jobs to former contract workers.

Can economic geography help us understand what drives wealth as well?

AG: Absolutely. The theories and tools we use are central to understanding the development process in booming areas. Consider what’s been happening within the environs of MIT and Kendall Square. Geographic concepts help explain why, given the rising cost of real estate in the area, firms continue to agglomerate here.

The simple answer is there are economic and noneconomic benefits to being close to companies in the same or similar industries. These include being able to access a diverse and highly skilled source of quality workers and something intangible but essential: access to the knowledge people learn on on the job.