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Income inequality continues to rise in the United States. The Gini coefficient, a standard measure for the distribution of wealth in an area, rose significantly in the 1980s and 1990s, indicating growing inequality. Since the end of the recession, the top 1% of earners have reached a new high while income gains for the bottom 99% has been much more incremental.
Some degree of income inequality seems to be necessary for any capitalist system to function optimally. However, beyond a certain level of income inequality, its ability to promote broad economic growth breaks down.
The U.S. economy relies on consumer spending and as wealth becomes increasingly concentrated, the highest earners need to use a smaller share of their income, which can ultimately reduce consumer spending. Meanwhile, the working and middle and lower classes depend increasingly on borrowing, often going deeper into debt.
Despite growing inequality, the nation as a whole is becoming wealthier and financial hardship, or poverty, is becoming scarcer. The share of Americans living below the poverty line fell from 15.9% in 2012 to 13.4% in 2017. Over the same period, the share of U.S. households earning $150,000 or more climbed from 9.2% to 13.2%.
Not every part of the country is following this pattern. There are 10 metro areas where low income households getting poorer and high income households getting richer is contributing rising income inequality.
In these metro areas, the share of households earning less than $35,000 a year is larger now than it was five years ago. The changes include a 0.2 percentage point uptick in Las Cruces, New Mexico, where the share households earning less than $35,000 a year climbed from 47.6% in 2012 to 47.8% today. In Houma-Thibodaux, Louisiana the change was even more pronounced, climbing by 5.4 percentage points from 36.6% to 42.0%.
At the same time, the share of households earning $150,000 or more a year in these 10 areas is also up. In Rapid City, South Dakota, there was a small uptick in the households earning at least $150,000 a year, from 6.1% in 2012 to 6.4% today. In Bismarck, South Dakota the increase was larger, from 8.3% to 12.6%.
While income inequality is not necessarily as pronounced in these cities as it is nationwide, it is growing faster in each of them than the nation as a whole. The increase in the Gini index expressed as a percentage over the last five years ranges from 0.9 in Wichita Falls, Texas, to 5.3 in Dover, Delaware. For reference, the Gini index climbed 0.7 nationwide over the same period.
Some degree of income inequality seems to be necessary for any capitalist system to function optimally. However, beyond a certain level of income inequality, its ability to promote broad economic growth breaks down.
The U.S. economy relies on consumer spending and as wealth becomes increasingly concentrated, the highest earners need to use a smaller share of their income, which can ultimately reduce consumer spending. Meanwhile, the working and middle and lower classes depend increasingly on borrowing, often going deeper into debt.
Despite growing inequality, the nation as a whole is becoming wealthier and financial hardship, or poverty, is becoming scarcer. The share of Americans living below the poverty line fell from 15.9% in 2012 to 13.4% in 2017. Over the same period, the share of U.S. households earning $150,000 or more climbed from 9.2% to 13.2%.
Not every part of the country is following this pattern. There are 10 metro areas where low income households getting poorer and high income households getting richer is contributing rising income inequality.
In these metro areas, the share of households earning less than $35,000 a year is larger now than it was five years ago. The changes include a 0.2 percentage point uptick in Las Cruces, New Mexico, where the share households earning less than $35,000 a year climbed from 47.6% in 2012 to 47.8% today. In Houma-Thibodaux, Louisiana the change was even more pronounced, climbing by 5.4 percentage points from 36.6% to 42.0%.
At the same time, the share of households earning $150,000 or more a year in these 10 areas is also up. In Rapid City, South Dakota, there was a small uptick in the households earning at least $150,000 a year, from 6.1% in 2012 to 6.4% today. In Bismarck, South Dakota the increase was larger, from 8.3% to 12.6%.
While income inequality is not necessarily as pronounced in these cities as it is nationwide, it is growing faster in each of them than the nation as a whole. The increase in the Gini index expressed as a percentage over the last five years ranges from 0.9 in Wichita Falls, Texas, to 5.3 in Dover, Delaware. For reference, the Gini index climbed 0.7 nationwide over the same period.
Methodology
To identify the cities with rising income inequality, 24/7 Wall St. reviewed five-year change in the Gini Index for metropolitan statistical areas. To be considered, each metro area’s Gini Index, share of households earning less than $35,000 a year, and share of households earning $150,000 or more a year all needed to have increased over that period. Household incomes and Gini scores came from the U.S. Census Bureau’s 2017 American Community Survey.
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