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Wealth Gap Is Widest In Some Affluent US Cities

Photo Credit: Stuck in Customs via Compfight

The economic divides in Atlanta, San Francisco, Washington, New York, Chicago and Los Angeles are significantly greater than the national average, according to a study released Thursday by the Brookings Institution, the Washington-based think tank. It suggests that many sources of both economic growth and income inequality have co-existed near each other for the past 35 years.

These cities may struggle in the future to provide adequate public schooling, basic municipal services because of a narrow tax base and "may fail to produce housing and neighborhoods accessible to middle-class workers and families," the study said.

"There's something of a relationship between economic success and inequality," said Alan Berube, a senior fellow at Brookings. "These cities are home to some of the highest paying industries and jobs in the country."

At the same time, Berube noted, many of these cities may inadvertently widen the gap between rich and poor because they have public housing and basic services that make them attractive to low-wage workers.

The findings come at a delicate moment for the country, still slogging through a weak recovery from the Great Recession. Much of the nation's job growth has been concentrated in lower-wage careers. Few Americans have enjoyed pay raises. President Barack Obama is pushing for a higher minimum wage. Protesters in San Francisco have tried to block a private bus that shuttles Google employees from gentrifying neighborhoods to their offices in Silicon Valley.

Many wealthy Americans, from venture capitalist Tom Perkins to real estate billionaire Sam Zell, argue that the nation has tipped toward class warfare.

Incomes for the top 5 percent of earners in Atlanta averaged $279,827 in 2012. That's almost 19 times more than what the bottom 20 percent of that city's population earned. This ratio is more than double the nationwide average for this measure of income inequality. The top 5 percent of earners across the country have incomes 9.1 times greater than the bottom quintile.

Major chasms also appeared in the tech hub of San Francisco, the financial center of New York, the seat of the federal government in Washington and the home of the entertainment industry in Los Angeles.

"In San Francisco, skyrocketing housing costs may increasingly preclude low-income residents from living in the city altogether," the study said.

San Francisco Mayor Ed Lee said in an editorial published Thursday that "working families cannot support themselves on the (city's) current minimum wage of $10.74 per hour" — already $3.49 above the federal minimum and 64 cents more than Obama's proposed increase. Lee has also announced plans to build and restore 10,000 homes for low and moderate-income families by 2020.

Not all tech hubs have witnessed rising inequality.

Seattle, where Amazon and Microsoft are based, saw its income disparity decline since 2007. So did Denver. Austin, Texas, experienced a mild uptick.

"Both the tech boom and energy boom are inequality-reducing," said Michael Mandel, chief economic strategist at the Progressive Policy Institute in Washington. "Tech introduces a path to good jobs."

The Brookings study also found that inequality increased across cities even though incomes often fell for wealthy households between the start of the recession in 2007 and 2012.

During that five-year period, average incomes for the top 5 percent in Jacksonville, Fla., tumbled $18,999 to $152,329. But the bottom 20 percent living in Jacksonville lost a greater share of their incomes over that period, so the level of inequality increased.

Significant gaps also exist in Miami and Baltimore. But that's largely because their poorest residents there earn so little. The lowest quintile of Miami residents earned just $10,348 in 2012, about half the national average for that group.

Of the nation's 50 biggest cities, just 18 experienced greater income inequality since the recession that was statistically significant. That was due primarily to falling incomes for the poorest residents. This occurred in places that suffered from the burst of the housing bubble — such as Tucson, Ariz., and Albuquerque — and Midwestern cities still reeling from the collapse of manufacturing such as Cleveland, Indianapolis and Milwaukee.

Not all the 50 largest cities are bastions of inequality. Some Western and Sun Belt cities with smaller downtowns had a noticeably smaller divide than the national average. These cities such as Mesa, Ariz., and Arlington, Texas, are essentially "overgrown suburbs," the study said. They tend to attract neither the highest-paying jobs nor the extreme poverty of the older cities.

Comments

Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | February 21, 2014 at 8:38 a.m. ― 7 months ago

And San Diego stands where ?

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Avatar for user 'Missionaccomplished'

Missionaccomplished | February 21, 2014 at 9 a.m. ― 7 months ago

Liberal San Fran. I think here San Fran shows its true colors.

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Avatar for user 'JeanMarc'

JeanMarc | February 21, 2014 at 9:09 a.m. ― 7 months ago

I don't really see why this is a problem. If people want more money, they should get an education and work hard. Sitting around asking for higher minimum wage and unemployment extensions isn't going to do it.

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Avatar for user 'Boots'

Boots | February 21, 2014 at 11:54 a.m. ― 7 months ago

JM try reading the article before commenting. A conservative's paradise-http://www.thedailyshow.com/watch/wed-february-19-2014/jason-jones-live-from-sochi-ish---better-off-red

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Avatar for user 'JeanMarc'

JeanMarc | February 21, 2014 at 2:45 p.m. ― 6 months, 4 weeks ago

Boots I did read the article.

"In San Francisco, skyrocketing housing costs may increasingly preclude low-income residents from living in the city altogether," the study said.

And? Then they can live outside the city. I don't understand why people think this is a problem that is not self correcting. If no one can afford to live in the city, they will leave. Then businesses in the city will have to raise their wages to attract workers. This is how the free market works.

And I also liked:
"many of these cities may inadvertently widen the gap between rich and poor because they have public housing and basic services that make them attractive to low-wage workers."

Just another example of government interference into the free market having the opposite effect of what was intended.

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Avatar for user 'benz72'

benz72 | February 21, 2014 at 4:40 p.m. ― 6 months, 4 weeks ago

So there are places that have very productive segments of the economy where people get wealthy. The purpose of working hard and earning a good living is to create or widen the income gap between you and the guy who isn't working hard and earning a good living. Good to see the process is working.

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | February 21, 2014 at 5:27 p.m. ― 6 months, 4 weeks ago

One of the problems I see with this is that these cities are losing a part of cultural fabric that helped shape their images in the first place.

Both SF and NYC have become what they are, in part, by a vibrant creative and arts-minded class of people who came from around the nation and indeed around the world and infused a unique cultural identity into the urban fabric.

The idea of a "starving artist" packing up and moving to the big city it becoming moot. If you need to be a wealthy CEO or Wall Street banker to live reasonably in Manhattan or SF proper, those centers of creativity and art that have defined them will give way to pretty bland urban centers that are exclusively for the rich.

On the plus side, maybe second or third tier cities like San Diego will benefit as grass-roots art and culture becomes priced-out of the traditional big markets, and dynamic organic urban arts and culture begins to migrate to places a little more reasonable.

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Avatar for user 'sdreefer21'

sdreefer21 | February 21, 2014 at 7:40 p.m. ― 6 months, 4 weeks ago

401ks will be the death of the middle class.

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Avatar for user 'Boots'

Boots | February 21, 2014 at 8:52 p.m. ― 6 months, 4 weeks ago

Are the Ayn Randian cons willfully ignorant or ingnorantly willful?
Extreme wealth inequality destroys the middle-class, democracy and the very fabric of civilized society. A Lack of empathy for one's fellow man and sense of civic responsibility is the definition of a psycopath.Narcissistic Personality Disorder runs rampant in extreme wealthy areas. Out of control wealth inequality is not sustainable

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Avatar for user 'Boots'

Boots | February 21, 2014 at 8:53 p.m. ― 6 months, 4 weeks ago

The causes which destroyed the ancient republics were numerous; but in Rome, one principal cause was the vast inequality of fortunes.
–Noah Webster
American editor and writer (1758-1843)

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Avatar for user 'Boots'

Boots | February 21, 2014 at 8:53 p.m. ― 6 months, 4 weeks ago

40% of Americans, or 120 million people, own just 0.3% of Americas wealth. 1% of Americans, or 3 million people, own 21%. Inequality of wealth has not been this wide in USA since 1928 – and we know what happened the following year.

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Avatar for user 'Boots'

Boots | February 21, 2014 at 8:54 p.m. ― 6 months, 4 weeks ago

“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”
–Plutarch
ancient Greek biographer (c. 46 – 120 CE)

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Avatar for user 'Boots'

Boots | February 21, 2014 at 8:56 p.m. ― 6 months, 4 weeks ago

Executive Excess 2010: CEO Pay and the Great Recession
The 17th annual executive compensation survey looks at how CEOs laid off thousands while raking in millions.http://www.ips-dc.org/reports/executive_excess_2010

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Avatar for user 'Boots'

Boots | February 21, 2014 at 9:02 p.m. ― 6 months, 4 weeks ago

It seems the "conservatives" that post have never run a business or taken Econ 101
If you run a business in completely isolated gentrified areas you will eventually have no one to sell to

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | February 22, 2014 at 10:26 a.m. ― 6 months, 4 weeks ago

Boots, conservatives win because many of their voters are willing to vote against their own economic best interests.

A certain percentage of these people are poor social conservatives who are so obsessed with their cult-like religious beliefs that they are willing to vote for people who destroy the very safety nets they rely on because they are against gay marriage, or a woman's right to choose, or maintaining a secular government, etc. They are willing to give up their economic rights and freedoms and give away the country to the 1% because of these social issues.

Another cohort of conservative voters who vote against their best economic interests are those who have been conned by right wing propaganda that is disseminated constantly and saturated in American Society.

This is the propaganda we get from big corporations and people like the Koch brothers who think that "true capitalism" means buying votes to give them a friendlier business climate.

So many people who are actually hurt by conservative economic principles of "trickle down" keep buying into it because of all the propaganda.

It's the same corporate propaganda that doesn't want environmental regulations so they have a good chunk of our country believing the 99.5% of the worlds climate scientists who agree humans are impacting climate change are in some kind of "hoax", and the people claiming this, who just so happen to be those who profit from environmental degradation are the honest brokers here.

The misinformation is astounding.

I'll never forget many years ago, I had a neighbor who I saw several times using government aid ("food stamps") at the grocery store, yet he would go on these "anti-leftist" rants in which he complained about "freeloaders" and how the government wastes too much money on them.

The hypocrisy is astounding.

And the Democrats, for the most part, go along with it.

If we completely overhauled our gigantic prison-industrial complex, stopped the defunct "war on drugs",and kept a lean but powerful NON-preemptive military then we could pay for the things conservatives don't want to pay for, namely:

Social security

Healthcare for every citizen (yes the worlds largest superpower CAN and SHOULD be doing this)

Infrastructure (it's not talked about much in the media, but the USA is embarking on an infrastructure crisis, ours is outdated and rapidly falling behind the rest of the world ).

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | February 22, 2014 at 10:40 a.m. ― 6 months, 4 weeks ago

Benz: So there are places that have very productive segments of the economy where people get wealthy. The purpose of working hard and earning a good living is to create or widen the income gap between you and the guy who isn't working hard and earning a good living. Good to see the process is working.

---------------------------------------------------------------------------------

Benz, I don't agree this is working.

Having rich and poor neighborhoods is one thing, but when you have entire cities becoming their own "upscale gated communities", it's a problem.

First off, you need people at all levels of the economy to keep a large city functioning.

With rich, healthy economies, you get upscale restaurants, hotels, convention centers, etc. where are all the people who work in service sector jobs supposed to live?

You also seem to assume everyone who works in a successful sector like tech is wealthy.

They aren't.

MOST aren't.

We are not talking about these cities simply pricing out the poor, we are talking about them pricing out the UPOER MIDDLE CLASS.

You could have a very nice salaried IT job making 100,000 in the tech sector, and you would struggle to live in SF. In fact, if you had a family you simply COULDN'T live in SF.

Same is true for NYC. Even boroughs around manhattan like Brooklyn are becoming this way.

So why is it healthy for places with a vibrant sector to ONLY accommodate those at the very top of that sector while leaving everyone else priced out ?

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Avatar for user 'Boots'

Boots | February 23, 2014 at 6:36 p.m. ― 6 months, 3 weeks ago

Thank You PD,for the excellent analysis as usual,again facts are ignored by the tea people

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Avatar for user 'Boots'

Boots | February 23, 2014 at 7:42 p.m. ― 6 months, 3 weeks ago

....Crickets

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Avatar for user 'JeanMarc'

JeanMarc | February 24, 2014 at 8:17 a.m. ― 6 months, 3 weeks ago

I don't care about culture, I care about my income. I also don't care about the wealth gap, nor do I think it is a problem. I, like benz, believe I should earn more if I work harder than the guy on unemployment.

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Avatar for user 'benz72'

benz72 | February 24, 2014 at 9:08 a.m. ― 6 months, 3 weeks ago

PDSD, I see that issue as a self-balancing problem. If the people who wnat those services are willing to pay more for a local expert to provide on-site service then tose technicians will ba able to live in the area. If they cannot it is a sign that the people who demand those services are not willing to pay that cost and can substitute a remote technician based in a lower cost of living area or simply replace the malfunctioning system.

I also think some here are making false assumptions. As shown in a previous thred (I believe the topic was EBT) the actual cost of living (for food) can be very low. A similar exercise can provide numbers for group housing if you care to undertake it.

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Avatar for user 'Boots'

Boots | February 24, 2014 at 10:37 a.m. ― 6 months, 3 weeks ago

Again, no facts to back conservatives assumptions,Benz I've no idea what you're talking about.

“The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”
–Adam Smith
Scottish political economist (1723-1790)

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Avatar for user 'Boots'

Boots | February 24, 2014 at 10:39 a.m. ― 6 months, 3 weeks ago

Executive Excess 2010: CEO Pay and the Great Recession
The 17th annual executive compensation survey looks at how CEOs laid off thousands while raking in millions.http://www.ips-dc.org/reports/executive_excess_2010

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | February 24, 2014 at 1:46 p.m. ― 6 months, 3 weeks ago

Benz and JM, why are you bringing up food stamps?

This article is not talking about rich vs poor, it's talking about cities that have priced out even the MIDDLE CLASS.

I find this assertion that how high your salary is equates to how hard you work to be completely absurd.

There are plenty of people who do very well for themselves doing next to nothing, and a lot of people who do extremely hard work for little money.

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Avatar for user 'benz72'

benz72 | February 24, 2014 at 7:19 p.m. ― 6 months, 3 weeks ago

PDSD, I brought up the EBT argument in response to the assertion that one could not live on $100k in San Francisco, which I think is false. It really is a question of what one wants to spend one’s money on.
I think that one’s income (not necessarily salary) is influenced by how hard one works, but effort is by no means the sole determiner, nor should it be. Are you claiming that this is not the case?
Anyway, what difference does it make if a city is too expensive? There are already plenty of neighborhoods where members of the middle class cannot purchase homes. Those jobs that cannot be mechanized can use either remote service or commuters from less expensive areas.

Boots, are you saying that you are confused by the self-correcting nature of the situation people are labeling as a problem? If not, what is the source of your confusion?
By self-correcting I mean that the market will reach a new equilibrium, probably via either higher wages, the substitution effect or a combination.
Also since you quote Adam Smith to make your point, I hope you won’t object when I do so to make mine. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

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