The District of Columbia is, by almost any measure, among the most unequal in the country. In both 2012 and 2013, DC ranked fifth in terms of income inequality among the 50 largest cities in the country, surpassed only by Atlanta, San Francisco, Boston, and Miami. DC is also highly unequal in terms of its racial and ethnic geographic distribution.

But one measure of inequality that is less often discussed is the geographic distribution of businesses throughout DC. This distribution is important not only because residents of underserved areas lack places to shop, eat, and receive services, but also because they have less access to the jobs available at these businesses.

Many economists even argue that spatial mismatch—that is, the mismatch between where good jobs are located and where low-income workers live—is a root cause of inequality in the labor market. In many cities, there are fewer jobs per worker in or near neighborhoods that are heavily minority than in or near neighborhoods that are predominantly white.

Business inequality in the District

In DC, the distribution of businesses is highly unequal. Ward 2 is an outlier because it includes the downtown core, and therefore has the greatest number of establishments by far. But among the more residential wards, Ward 6 (the Capital Hill area) and Ward 3 (the northwestern portion of DC) often have the greatest number of establishments, while Wards 7 and 8 (east of the Anacostia River) trail far behind, even though these wards are all close in terms of population.

Retail and food establishments, in particular, highlight this disparity. As the following figure shows, new retail and food establishments in DC between 2000 and 2011 were concentrated in Wards 2, with 6, 5, and 1 close behind.

This distribution of businesses has not changed much over time. Looking at the more residential wards, Ward 6 has consistently outranked any other ward, with Wards 1, 3, 4, and 5 in the middle and Wards 7 and 8 always at the bottom.

In terms of employment, this gap is even more substantial. As of 2011, more than nine times the number of retail and food employees worked at businesses in Ward 6 than in Ward 8. This does not necessarily mean that those employees lived in Ward 6, but spatial mismatch suggests that proximity is an important factor in where people work.

What is the solution?

Many people will argue that businesses won’t enter these underserved areas until residents have adequate disposable income to spend. But it is difficult for residents to improve their incomes until jobs are available and accessible. It seems, then, that these residents need to be better linked to jobs and opportunity, whether by encouraging business growth in these underserved areas or by connecting residents in underserved areas with jobs in other areas.

As we mentioned in our recent recommendations to Mayor Bowser about how to build a vibrant DC economy, some potential solutions include

• Using transit to create equal access to jobs and services.
• Requiring developers to ensure that existing residents gain from development deals, such as requiring that a certain number of employees live in the neighborhood being developed.
• Altering land use policies throughout the city to bring in entry and mid-level jobs with career pathways.
• Encouraging and retaining new businesses in underserved areas through programs such as the Great Streets initiative and training on the 504, SBA, and 7A loan programs.
• Systematically analyzing the distributional effects of current policies to ensure that they are not hindering increased equality in where businesses are located.

In our next blog post, we’ll look more closely at specific neighborhoods and types of businesses, and talk about the challenges to understanding these dynamics in more detail.