Inequality Grows in Large American Cities

As it often happens, lack of better living conditions in less urbanized areas results in a massive migration to large cities, where most newcomers become victims of urban inequality.

The growing income inequality in America has its greatest reflection in large cities, where the pressing income gap between rich and poor becomes more palpable and real. Inequality is such a deep problem that even Barack Obama labeled it as ”the greatest challenge of our time”. The causes and ramifications of urban inequality reveal how the aftershocks of the economic crisis 2008 have hit the poor more than the rich, and have significantly undermined the foundations of the American middle class.

According to a recent report by Brookings, a think tank based in Washington, the wealthiest 5% of the population in the top 50 cities accumulate 10.8 times more income than the poorest 20 %, while in the whole of the U.S. the difference ratio is 9.1. Since 2008, while the richest of the rich got bigger bonuses and inexcusable bailouts, the poorest have lost their homes, jobs and almost everything that comes with that.

In absolute numbers, data from 2012 reveals that the most prosperous in the cities earned $ 196,000 as opposed to $ 192,000; the national average, while the poorest earned only $ 18,100 in large cities, a number that is lower than the national average of $ 21,000. Overall, of the 50 large cities, 31 recorded levels above those of the average American inequality.

The discussion about the disparity and how to combat it has also ventured into the political arena in some cities like New York, Boston, Seattle, San Francisco and Minneapolis. But in a country of enormous magnitudes like this the picture is not homogeneous, and imbalances will vary by municipality.

According to the document issued by Brookings, Atlanta, San Francisco, Miami, Boston and Washington DC are the five most unequal cities in the U.S.. It also highlights the sixth place, New York, the seventh Chicago and the eighth Los Angeles. At the other end, the cities with less income disparities are Virginia Beach, Arlington, Mesa, Las Vegas and Wichita.

“Inequality can be the result of global economic forces that matter at local level,” says report author Alan Berube, head of the Brookings Metropolitan department. “Much of the public services are provided locally, and in an unequal city it is complicated to sustain funding for these services.” This is an example of how globalization does not only work its way into every nation state, but also into every city and neighborhood, even in so-called developed countries. Macro economic policies and management are not able to drive national issues, but also local realities.

For example, the tax base may be too tight to pay for certain services, which can also undermine political support; schools in the city are at risk of not having an appropriate mix of students from different socio-economic backgrounds or the council may have difficulties providing affordable housing to the humblest citizens.

While in Atlanta the richest enjoy an income 18.8 times bigger that the poorest people, in Virginia Beach the wealthiest earn six times more. There is no single pattern that explains this wide difference, but is the result of multiple economic and social factors. Most of these factors, again, are the result of macro economic policies adopted at the local level.

Atlanta and Virginia Beach have almost the same number of people (about 440,000), but, instead, in the first the poor earn half of the income than in the second, while the rich earn two thirds more. According to Berube, this is because Atlanta – like San Francisco, Boston, Washington or New York – has economic sectors that pay high salaries to its employees, who are highly educated, while Virginia Beach- like in the rest of the cities with less inequality, it is expanded over more territory, with multiple suburbs, which creates a larger number of people who are considered middle class and whose difference in income is less significant.

Thus, the most unequal cities in the United States are characterized by the opposite: they have in common a relatively small middle class. But despite this coincidence, there are fundamental differences between them. For example, San Francisco and Miami have a similar gap, but in the city of California this reality is true because it focuses on people with higher incomes in the USA, thanks to the technological potential of Silicon Valley, while in Florida is the third largest city with the lowest revenue. In fact, despite the effects of the 2008 crisis, the rich of San Francisco have become richer in recent years while the poor became much poorer.

San Francisco, however, is an exceptional case. Between 2007 and 2012, most of the wealthiest cities lost revenue, but the key lies in that they did so at a much slower pace than the most impoverished. “The reductions in incomes of the rich were investment losses while the poor suffered drastic reductions because of unemployment. Therefore, their problems are proportionally more severe,” says the researcher. For example, in Jacksonville, the fifth city with the most increased income inequality – the more prosperous fell 11 % over the five-year interval, but the least prosperous collapsed three times, up to 31%.

It is no surprise, therefore, that the cities that top the list as the most unequal are those that have experienced a greater increase in the gap between rich and poor in recent years. Between 2007 and 2012, the disparity in San Francisco grew 3.9 times, in Atlanta 3.1 and in Miami 2.1. Of the 50 largest cities, 18 reported significant increases in inequality in that period of time.

Most of the cases were the result of a loss of purchasing power in low-income families as a result of the effects of the economic slowdown following the outbreak of the crisis. Most of the cities with the greatest loss of income are in the south and west of the country. Among them is Sacramento, Charlotte and Tucson, which were affected by the collapse of the housing bubble and its direct effect on the creation of jobs. In the north, Cleveland, Indianapolis and Milwaukee were the most affected because of the industrial decline that triggered a higher poverty rate .

At the other spectrum of the scale, El Paso, Seattle and Denver were the cities where inequality fell more in those five years due to in part to higher minimum wages, which caused revenue to fall with less intensity among the least prosperous. But in some cases, as in Seattle, this is a good false result, because the poor establish themselves on the outskirts of the city, so their low income level is not accounted for in the municipal charts.