The District's Income Gap

The gap between the District's richest and poorest families has continued to widen since 2000, as incomes at the top soared and those at the bottom barely budged, according to a report based on census data.

Read More: Separation Between Rich, Poor Widening in D.C., Study Finds (Post, Jan. 27)

Ed Lazere, executive director of the D.C. Fiscal Policy Institute (DCFPI), was online Friday, Jan. 27, at 11:45 a.m. ET to examine the income gap between the city's richest and poorest families.

Lazere became the executive director of DCFPI in November 2001. He had served as the project's policy director since January 2001. Prior to that, he had been a policy analyst for 12 years at the Center on Budget and Policy Priorities and had worked on issues at both the state and federal level. Most recently, Lazere was a member of the Center's State Low Income Initiatives Project where he focused on state spending choices under the TANF block grant and on other issues related to welfare reform implementation. Lazere also worked for several years with the Center's State Fiscal Project, which focuses on the impact of state-level tax and budget policies on low- and moderate-income families and individuals, and he also has worked on issues related to affordable housing. Lazere holds a Master of Public Policy degree from the University of Maryland.

The transcript follows.

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Ed Lazere: Thanks for joining the discussion of this important issue -- something I consider to be one of the most, and perhaps THE most pressing issue our city faces. Revitalization is everywhere in DC, and there is a lot of good in that. The new data confirm, however, that a rising tide does not lift all boats, but they also suggest poor families are probably falling behind. Although incomes are not rising, housing costs are, putting families at risk of displacement. This pushes poor families into the few neighborhoods where housing is still somewhat affordable. Lots of research confirms that high-poverty neighborhoods have the worst schools, highest crime, and least access to employment.

On that cheery note, I hope we can talk about some solutions.

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Arlington, Va.: What are the reasons for the widening gap in D.C., and why is this also a national trend? Thank you.

Ed Lazere: The biggest cause of rising income inequality over the past two decades has been the erosion of wages for the 70 percent of workers with less than a college education. That stems from globalization, the shift from manufacturing jobs to low-wage service jobs, immigration, the weakening of unions and the decline in the minimum wage. On the other end of the income scale, there has been tremendous growth in investment income which benefits those at the high end of the income scale and the increase in the number of single parent families.

For DC, it doesn't probably reflect a manufacturing decline, but instead the increasing shift toward jobs that require advanced skills. In 1990, about 43% of working DC residents had a high school degree or less. By 2003,that was 30%. The share of DC workers with a college degree is now 53%.

Unemployment data confirm that finding a job in DC is increasingly hard for African Americans and those with the least education.

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Alexandria, Va.: It seems as though gentrification is inevitable, which means that those of the lowest income will be forced to relocate. Sure, I enjoy a Starbucks frappucino from time to time, but I would like to think that it's not going to come at the cost of people being forced from their homes. What can be done to help those that face this daunting future, to find a way to empower themselves not to be pushed out?

Ed Lazere: There are things that can be done to help low-wage workers do better. DC's minimum wage is $7/hour, and that is whet you make as a starting union cashier at Giant or Safeway. That in turn stems from fear of competition with Wal-Mart. So taking steps to prevent employers from having to push wages down are important. DC could raise its minimum wage further, to $7.50 or even $8/hour.

But 1/4 of workers in the DC region earn less than about $10.50 an hour, so we cannot solve our problem entirely on the wage side. We need to make sure that low-wage workers have a good transportation system, affordable child care options, and health insurance. And we can boost incomes through the earned income tax credit and other tax policies. DC already has a large EITC, which is a good thing.

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Washington, D.C.: Ed,

Thanks for all the great work DCFPI does. Did this study take a look at how the rising costs of things like health insurance and rent in the area are taking up a larger share of the family budget? And be 'King for a Day' - how do you think the District's Council and Mayor need to fix the low TANF payments to our poorest families?

Ed Lazere: There is no doubt that the combination of rising housing costs and stagnant incomes is leaving more families further behind. Unfortunately, we do not have data to demonstrate that. But the fact that the number of families seeking emergency shelter is way up is a clear sign of this.

As for TANF grants, it is never popular to raise welfare benefits. But there always will be some families that are between jobs or don't have the skills to get a decent job. TANF provides assistance while families are supposed to get training and look for work. Those families need stability to move up the economic ladder. A $379 monthly TANF benefit for a parent with two kids clearly is not enough. Other high-cost states, such as California, Massachusetts, and NY have benefits of $600 per month or more. We should too.

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Columbia, Md.: It seems to me that one of the best long term solutions to the income gap is the inheritance tax. I'm conservative on most issues, but a reasonable inheritance tax seems like a great equalizer. Also painless, since you don't miss what you never had. What are your thoughts on this?

Ed Lazere: Maintaining the estate and inheritance taxes, which only affect about 1-2% of estates, is an important source of revenues to support policies that can help low- and moderate-income families. I agree!

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Greenbelt, Md.: After reading Mary Patillo's "Black Picket Fences : Privilege and Peril among the Black Middle Class" for one of my classes, I became very interested in education and housing policy. What are some entry level (not requiring a master's degree) jobs that one should pursue to work in these fields?

Ed Lazere: A lot of public policy and advocacy groups have research assistant positions for people just out of college. Contact me later for more specific recommendations. I hope you will be able to join the field.

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Washington, D.C.: Hi Ed -

Thanks for taking time to chat with us!

It seems to me that cities are starting to fill more and more with young folks, rich folks and poor folks? What happened to the middle class in D.C.? Is a lot of it to do with poor quality of public schools? Or crime?

Thanks

Ed Lazere: The data in the report released yesterday suggest DC does still have a middle class, and that their incomes are growing somewhat. But as you note, it may be more singles than families with children.

From my experience, trouble finding a good public school is the main factor behind families leaving the city.

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Laurel, Md.: Last I remember, Washington had the highest or at least very close to the highest population density of any big city in America, implying there's very little land on which to put the kind of housing that attracts people in the middle of the income scale -- single family detached homes with yards.

Without a middle, everyone's either rich, poor or childless. Since income disparity in the country as a whole is growing, is this really a community issue, in the sense we could or should try to do something about it?

Ed Lazere: There actually is a lot of housing going up in DC. Clearly there is not as much space as in the suburbs, but there is space.

While income inequality is a national issue, it is particularly bad here. I think there is a lot more that can be done if the political will is there.

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Washington, D.C.: Why doesn't D.C. have a law to require city workers to live in D.C.? I am from Chicago where we have such a rule and I always thought it worked well. City employees are the type of high paying middle class jobs that D.C. residents need!

Ed Lazere: I don't know for sure, but given that a lot of DC workers are not paid well, and that access to affordable housing is more prevalent outside the city, I don't think this is a practical solution. Other jurisdictions, like Montgomery County, are also finding that a lot of government workers live outside the county because they cannot afford it.

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Increase minimum wage = Loss of business: I am all for a living wage, but if an increase in minimum wage causes a business to fail due to increased costs without ability to increase prices or a reduction in labor hours for a worker ... how does that help???

Ed Lazere: The research has been pretty clear that "moderate" minimum wage increases do not lead to job losses. Note that DC's minimum wage in 1997, when measured in today's dollars, equaled $7.55/hour. That suggests to me that there is room to raise our wage floor.

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Bowie, Md.: I've read, and I'd like to know if it's true, that the District's MUNICIPAL government workforce is the largest per capita of any major American city. And that it functions as a kind of social safety net for the marginally employable.

Is that an accurate perception?

Ed Lazere: I don't think it is accurate anymore. It may have been in the 1990s, but I think the DC work force has shrunk a lot over the past decade. Don't forget that we act as a city, county, and state, so we need workers to cover all of those functions. To compare us with other places, you would need to factor in workers at all these levels.

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Outside of D.C.: Please classify in earnings; lowerclass, middle class and upper class.

Thanks

Ed Lazere: That could take forever to answer. In DC, about 20% of workers earn $11 or less per hour. The top 20% make $33 or more.

I think most people agree that a family needs at least twice the poverty line -- or about $40,000 for a family of four -- just to scrape by. Wider Opportunities for Women has found that the "self-sufficiency" income in DC is actually $60,000 or so for a 4-person family.

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Washington, D.C.: A lot of the causes you listed are national or international in scope? What can the city do against all these seemingly unstoppable forces?

Ed Lazere: The mayor and his folks can do more, I think, to make sure that big local employers hire DC residents. The fact that most workers at our $800 million convention center are not DC residents is an outrage.

I think the city also could do more to help DC residents who have not had a lot of job experience -- hand-holding kind of stuff.

Social science research suggests that even a little intervention can go a long way. Effective pre-school programs, for example, lead to better high school completion rates down the road.

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Dupont Circle, Washington, D.C.: Where do you see D.C. Fiscal Policy Institute going in 5 and 10 years?

Ed Lazere: I am not sure. Let me know if you have some good suggestions!

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Columbia, Md.: Is the income gap more or less profound in D.C. than nationally? Also, I noticed the analysis begins with 2000. Is this an analysis beginning with Bush (and a commentary on his economic policies) or with the start of a new decade or something else? Why start with 2000 and are there other era's to compare the finding too?

Ed Lazere: A 2004 study we did (at www.dcfpi.org) found the gap in DC was as wide or wider than in any major city.

The focus on 2000 is in part because that was a good year. Really low unemployment rates led to a big increase in wages at the bottom. But a lot of those gains have been lost since then. But it also is an important reminder that a national labor market policy that leads to very low unemployment could do a lot to address wage inequality.

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Alexandria, Va.: What is your solution for increasing incomes at the low end of the income scale. My solution is education, but D.C. already spends a very high amount per pupil.

Ed Lazere: Improving DC schools is key. It actually is not true that DC spends more per pupil. A study by parents united (see full report at http://www.dcpswatch.com/parents/pu0503.htm) shows that DCPS spends less per pupil than Montgomery County when special ed is not included.

Also, research shows, not surprisingly, that poor school districts need to spend MORE per pupil than other districts to get good outcomes.

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Washington, D.C.: You wrote, "We need to make sure that low-wage workers have a good transportation system, affordable child care options, and health insurance." Does this mean my taxes will have to go up to do all this? Isn't D.C.'s tax rate already one of the highest in the country?

Ed Lazere: I don't think it necessarily means an increase in taxes. DC has a strong economy and revenue base. It would be great of course, if the feds gave us $800 million or more to address the fact that they do not let us tax income earned in DC by non-residents.

Our research shows that DC's high taxes is something of a myth. When you look at income and property taxes, the biggest taxes paid by families, DC middle income families pay about the same as in Montgomery county. See http://www.dcfpi.org/?p=109

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Friendship Heights: The District's Office of Planning loves to wave the flag of inclusionary zoning when they want to push for higher-density housing around metro stops. They let the builder double the density of a site if the builder puts in a few low-cost housing units.

I fail to see how adding 300 luxury units and 3 low-cost units improves balance.

Thoughts?

Ed Lazere: An inclusionary zoning policy now before the zoning commission would require builders to set aside as much as 15% of their units as affordable to moderate-income families. It is not the complete solution to affordable housing problems, but it helps.

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Washington, D.C.: 1. Raising the minimum wage decreases the amount of jobs available

2. All people should graduate high school at a minimum

3. Washington, D.C. has spent hundreds of millions of dollars since the 1980s to help the poor and the poor are still poor.

Ed Lazere: I'll answer # 3. The others I think I have answered.

We have spent a lot on poverty. While we haven't eliminated it, we have helped a lot of people meet their basic needs. Lifting people out of poverty permanently is very hard, and we shouldn't disparage programs that help poor and working poor families make ends meet. As I noted, there always will be low-wage work, so eliminating poverty is not easy.

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Re: Minimum Wage: Are you aware that city council is reviewing a proposal to increase minimum wage to over $11? I think it's $11.75.

Ed Lazere: Not the minimum wage -- it's a "living wage." Unlike the minimum wage that applies to most workers, the living wage applies only to workers in businesses under contract with the city and those getting economic development subsidies. It is an important policy to help address low wages.

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Washington, D.C.: I had a question cornerning working class families in D.C. and particularly those who are classified as "working poor." Besides instituting a living wage, what other policy decision do you believe would provide the most relief for these struggling families?

Ed Lazere: Better training, and helping workers get into jobs with upward mobility. I don't think the city is doing a great job on either. Beyond that, the supports I mentioned before, such as child care, are important to help working poor families make ends meet.

Investing in affordable housing so that low-income families are not relegated to the most challenging neighborhoods also is important.

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Columbia Heights, Washington, D.C.: How does the immense number of illegal immigrants who are working for lower wages factor into the income gap in D.C.?

Ed Lazere: I don't know enough about this to answer intelligently. Sorry.

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Washington, D.C.: It seems that the income gap results from choices made by individuals -- to obtain (or not obtain) more education. Why is this perceived to be a problem that society must remedy?

Ed Lazere: If you live in a poor neighborhood, you are bound to have a pretty poorly performing school. It is a bit simplistic to assert that everyone who does poorly in school or fails to graduate is personally at fault.

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Washington, D.C.: It seems there's no question that education is the difference between those stuck at the bottom of the wage scale and those who's income continues to rise. That said, D.C. spends more per student on public education than any state in the union. Can you comment?

Ed Lazere: See one of my earlier responses. DC does not spend more per pupil than everyone else

I am not an education expert, but common sense says DCPS could be doing better. Good leadership is a key. I hope Dr. Janey can do it.

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Herndon, Va.: Mr. Lazere: I have a long-term solution which is practically impossible to implement - improve the D.C. schools so a vast majority of its graduates are actually prepared to either go on to college to get a decent job.

Ed Lazere: maybe a policy to tutor children and promise them a college education if they graduate -- The "I Have a Dream" model -- would help.

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Washington, D.C.: Has there ever been a period in which the gap between rich and poor narrowed? It seems impossible, though we could certainly do a lot to make economics more equitable.

But one party is on a moving boat, and the other group is watching from the dock: those two will continue to move apart over time.

Ed Lazere: The rich-poor gap definitely has grown more slowly at different times than it is growing now. And there probably were stretches when it was pretty stable (I don't have the needed data in front of me.) In the late 1990s, wages at the bottom rose sharply when unemployment got to be very low.

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Washington, D.C.: You said something important that made me break out my calculator - - What if we raised the minimum wage in D.C. to $8 an hour? A dollar more means over $170 more (pre-tax) per month for a poor worker. That really could make a difference and it wouldn't crush businesses to do that.

Ed Lazere: Thanks. The research seems to agree with you. A $2,000 annual wage increase ($1/hour) is a huge deal to a low-wage worker.

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Sioux City: Do you guys have any report cards to rate sitting politicians or political candidates on their positions on these issues? Thanks.

Ed Lazere: We do not, but I would be happy offline to give you a sense of how various elected officials stand on these issues.

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Cheverly, Md.: Isn't this just the effects of capitalism? There will always be an underclass, the people who serve the middle and upperclass? Or is this capitalism gone bad where we will soon have the types of societies seen in other parts of the world where they have caste systems?

Ed Lazere: I think this is capitalism going in a bad direction, which is why we need public policy interventions to soften the rough edges of capitalism.

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Washington, D.C.: Hi, Thanks for taking my question.

I remember a while back, there was talk (perhaps not serious, but it was talked about) about eliminating all income tax from D.C. (or property tax, or both). Sales taxes and other taxes would obviously still be in place. What do you think of such a proposal. DC could become a panacea of sorts, like a Monaco of the U.S., where wealth is abound, and many of the issues involving poor people could much more easily be solved using the immense amounts of money that would be entering the city.

Is this at all a possibility? Or am I just dreaming.

Ed Lazere: I am not sure how this would help income inequality. We need a progressive income tax to raise revenues from our better off residents to support public services, including those that benefit us all and targeted benefits for less well off residents.

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Ed Lazere: Thanks for this opportunity. Feel free to contact me at lazere@dcfpi.org if you have a question I did not answer or a question you think of later

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