Health & Human Services

Income Inequality Climbing in Many Large Cities

Larger metro areas experience some of the highest income inequality, and since the Great Recession, it’s only gotten worse. On Thursday, fast-food workers in 100 cities protested for higher wages.
by | September 2014
Rallies and sit-ins erupted outside fast-food restaurants in more than 100 cities across the country Thursday to push for higher wages.
Rallies and sit-ins erupted outside fast-food restaurants in more than 100 cities across the country Thursday to push for higher wages. AP/John Locher

Big metro areas such as Boston and New York are home to some of the nation’s highest-paying jobs and most affluent neighborhoods. At the same time, these places have high rates of poverty. So it’s perhaps not surprising that the nation’s larger metro areas have the highest rates of income inequality.

Multiple studies have noted this phenomenon. But more recent data suggests that, in the aftermath of the Great Recession, many of these regions saw the income gap widen even further.

One measure the Census Bureau uses to compute the level of income inequality among households is known as the Gini coefficient. Comparing 2007 and 2012 data shows that the Gini coefficient climbed slightly in most of the country’s 52 metro areas with more than a million residents. In fact, it rose faster in the largest metro areas than it did in the nation as a whole. In 29 metro areas, the increase was large enough to be considered statistically significant, while only Buffalo saw a statistically significant decline in income inequality.

Large metros have higher rates of income inequality mostly because they tend to attract more residents at the extreme opposite ends of the economic spectrum. Big cities often draw wealthy residents to high-paying industries; at the same time, these metro areas may offer the poor their only shot at affordable housing within a region. That sets up a wide income disparity that’s less prevalent in smaller cities, says Alan Berube of the Brookings Institution’s Metropolitan Policy Program. “You have this enormous distance between people at the top and people at the bottom that is less characteristic of smaller cities,” he says.

As inequality has worsened, some big-city mayors are rallying support for initiatives aimed at helping the poor. Seattle Mayor Ed Murray created an income inequality advisory committee that crafted the city’s minimum wage legislation. New York Mayor Bill de Blasio and Boston Mayor Martin Walsh, who both campaigned on the issue, are leading a new inequality task force convened by the U.S. Conference of Mayors.

In the past, much of the dialogue around inequality remained confined to the federal level ­-- where many believed it could be broadly addressed. Now, Democrats are pushing the issue in the lead-up to the midterm elections later this year. Republicans, meanwhile, often counter that wage inequality is not a problem that requires governments to intervene; many contend that it’s a matter of boosting individual skill sets so people can move up to higher-paying jobs.

Regardless, Washington remains gridlocked for now. At the local level, Berube says officials simply don’t have the tools to reduce income inequality in any significant way on their own. Local governments can, though, work to expand access to affordable housing and provide workforce training. “The antidote to inequality is building a stronger middle class and having pathways to the middle class,” Berube says. Localities should focus on attracting jobs that pay well and investing in education early, he says.

For the most part, those on the lower rungs of the economic ladder were hit hardest by the recession. Since 2007, the Census’ current population survey data indicates that the inflation-adjusted mean household income fell 10 percent for the lowest fifth of the income distribution. For the top fifth, the decline was only 2 percent, while incomes for the top 5 percent remained about the same.

Several metro areas with the highest income inequality are found in Florida, a state that suffered severe job losses during the recession. Much of the state’s economy is tied to either low-wage jobs, such as agriculture or tourism, or to jobs in real estate and construction, two areas that incurred deep cutbacks when the housing bubble burst.

In Tampa, Mayor Bob Buckhorn wants to incentivize the growth of other sectors where the state enjoys an advantage, such as defense contracting and biotech. “I think we have changed our economic DNA,” he says. “Moving from the low-wage jobs will allow us to eventually narrow the gap.”

Buckhorn views President Obama’s public statements on inequality as a “call to action.” While Tampa can’t tackle wage inequality in the way that Washington can, it has taken other steps to prop up lower-income residents. The Tampa Housing Authority recently opened its second new mixed-use affordable housing development, with a third complex set to open next year. Tampa has also worked to boost women- and minority-owned businesses, revamping the permitting process and making it easier for those businesses to win city contracts.

But bridging the divide, Buckhorn says, will take more than putting a roof over people’s heads. “If you aren’t providing job training, a GED or higher education,” Buckhorn says, “then you really aren’t solving the problem.”

 A high-profile study published last year by economists at Harvard University and the University of California, Berkeley, assessed the extent to which children in lower-income families move up the income distribution ladder later in life, finding substantial differences across regions. Salt Lake City and Pittsburgh, for example, had the highest intergenerational upward mobility of all larger metro areas.

In the Southeastern U.S., though, it’s a much steeper climb. Areas with high mobility were correlated with areas experiencing less income inequality and residential segregation. These areas also had better schools, social capital and family stability.

Income Inequality Data

Source: Governing calculations of 2012 and 2007 American Community Survey Estimates

Income Inequality Map

Metro areas with larger markers below had greater income inequality in 2012, as measured by the Census Bureau's Gini Coefficient. (Click to open interative map.)

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