New York Times
By: Annie Lowrey
February 20, 2014
If you want to live in a more equal community, it might mean living in a more moribund economy.
That is one of the implications of a new study of local income trends by the Brookings Institution, the Washington research group. It found that inequality is sharply higher in economically vibrant cities like New York and San Francisco than in less dynamic ones like Columbus, Ohio, and Wichita, Kan.
The study, released on Thursday, comes as a number of cities across the country are trying to tackle income inequality and expand opportunity through measures like increasing the minimum wage, which President Obama has promised to do at the federal level. In no city is the effort more prominent than in New York, where the new mayor, Bill de Blasio, has promised higher taxes for rich families and better services for poor ones, including expanded early-childhood education and affordable-housing developments.
"The truth is, the state of our city, as we find it today, is a tale of two cities, with an inequality gap that fundamentally threatens our future," Mr. de Blasio said this month, echoing his campaign speeches. "It must not, and will not, be ignored by your city government."
Local officials here in Washington and in Boston, New Haven, San Francisco and Seattle have also seized on the issue.
But in some cases, higher income inequality might go hand in hand with economic vibrancy, the study found. "These more equal cities -- they're not home to the sectors driving economic growth, like technology and finance," said its author, Alan Berube. "These are places that are home to sectors like transportation, logistics, warehousing."
He added, "In terms of actual per capita income growth, these are not places that would be high up the list."
That does not mean that measures intended to mitigate inequality will necessarily reduce the vibrancy of a local community. But the study confirms what many others have shown: The country's big cities tend to have higher income inequality than the country as a whole. For instance, in the 50 biggest American cities in 2012, a high-income household -- which the study measured at the 95th earnings percentile, putting it just into the top 5 percent -- earned about 11 times as much as a low-income household, at the 20th percentile. Nationally, that ratio was 9 to 1.
Income Gaps in U.S. Cities
The incomes of the richest earners tend to be markedly higher in cities with the highest rates of inequality, although some cities, like Miami, have inequality gaps driven more by lower incomes for the poor.
Some places tend to have much more intense income inequality than others. A high-income family might earn 15 or 16 times what a low-income family earns in San Francisco or Boston, compared with earnings multiples of six or eight in places like Virginia Beach or Wichita.
Low-inequality cities, the study found, tend to be located in the South and the Midwest. They also tend to be geographically large, encompassing neighborhoods that in many other cities would be considered suburbs. Generally, the average for the top income group in such cities tends to be lower than it is in high-inequality cities -- $150,000 to $200,000 a year, compared with $354,000 in San Francisco and $280,000 in Atlanta.
The driving force behind spiraling inequality at a national level is the rich getting richer. But in many cases, the Brookings numbers indicated, poverty is as important a factor at the local level. In Miami, for instance, a household in the bottom 20th income percentile earned just $10,000 a year in 2012.
Inequality in the 50 biggest cities grew modestly from 2007 to 2012, the study found. The effect was not primarily because of rapid income growth among the richest families -- generally, earnings for the top 1 percent of the income distribution have not yet surpassed their prerecession peak. Rather, it was because poor families, saddled with debt and high unemployment rates, have suffered through the recession and the recovery.
The single biggest increase in inequality over that period occurred in San Francisco, where earnings for the typical low-income household dropped $4,000 and soared $28,000 in inflation-adjusted dollars for a high-income household. But in most other places, inequality intensified because the poor got poorer, including in Cleveland, Sacramento, Tucson and Fresno, Calif.
"High-income households did not lose much ground during the recession," Mr. Berube of Brookings said. "Low-income households lost ground and haven't gained it back. And the pressures around cost of living are higher at the low end than they are at the high end."
Researchers say local inequality trends are related to national inequality trends, but are not the same. Any individual city's earnings ratios might be more defined by who can afford to and wants to live there -- whether a family of relatively low-skilled new immigrants, or a computer programmer in high demand or a financier from abroad -- than by tidal economic trends like unionization and technological change.
But New York and many other cities have promised to tackle inequality, in part by shifting the tax burden, but also through initiatives aimed at attracting middle-class families with cheaper housing and better schools.