“While the economy is picking up steam, income inequality and wage gaps are an alarming trend that must be addressed,” U.S. Conference of Mayors President Sacramento Mayor Kevin Johnson. The Monday release of the study, conducted by IHS Global Insight, was timed to coincide with the launch of the nonpartisan conference’s new Cities of Opportunity Task Force, meant to address problems arising from growing income inequality and economic immobility.
The report confirms what state-level data have consistently shown: the income divide is growing. (Relatedly, economic insecurity has spread like a virus through the nation over teh past several decades.) Nationally, the top fifth of earners have steadily accounted for a larger and larger slice of the income pie, as expressed in the chart below using data from the report.
And the same was true among metro areas in recent years, the report finds. To characterize income inequality by metropolitan area, the report examines employs a common method by examining the relationship between average and midpoint household incomes. The growth rate of average incomes tracks economic growth over time. If everyone benefited equally, then the rise in median household income would be commensurate with the rise in the average household income.
That, however, was not the case. A few wealthy people reaping huge income gains would pull the average up even as the median remains relatively unchanged. And that’s exactly what seemed to happen in more than two thirds of metros from 2005 to 2012, according to the report.
Inequality in 2012
The map below shows the relative size of that mean-to-median gap in more than 350 metropolitan areas. It was largest in the Bridgeport-Stamford-Norwalk, Conn., metro area, where the median income was just under $80,000 but the average was more than $131,000. It was smallest in the Fond du Lac, Wis., area, with a $53,000 median income and nearly $63,000 average.
(Note: Click and hold the maps below to move around. Use the buttons to the top-left side to zoom in and out. In both maps, a few dozen metro areas are approximations due to a discrepancy between the areas available in the mapping software and those included in the report.)
How inequality seems to have worsened from 2005 to 2012:
In 248 of the 357 metro areas examined in the report, average incomes rose more quickly than median incomes from 2005 to 2012.
In four metro areas — Albany, Ga., Ithaca, N.Y., Dalton, Ga., and Pascagoula, Miss. — the gap between growth in average incomes and growth in median incomes was greater than 15 percentage points. Albany led the list, posting a 2 percent rise in average incomes and a 16.4 percent decline in median incomes. The trend, the report estimates, are likely to continue.
While the analysis suggests continuing income inequality is a permanent feature of the modern economy, the report highlights some programs that can boost earnings and productivity for low-wage workers in the long run. One is universal pre-kindergarten programs. Another is an expanded earned income tax credit, which reduces the tax burden for low-wage workers. Minimum wage increases are another potential solution, though some argue higher wages discourage businesses from hiring. And policies that chip away at high unemployment also can help to reduce inequality by providing workers who wouldn’t otherwise get it with a source of income.