Posts Tagged ‘cities’

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Yesterday, I discussed new findings concerning the fact that, while the United States is getting richer every year, American workers are not.

That same problem is showing up in American cities, which since 1970 have experienced a “hollowing-out” of the middle-class.

The graphic above shows the change in income distribution in 20 major U.S. cities between 1970 and 2015. In 1970, each of these cities exhibits a near-symmetrical, bell-shaped income distribution—a high concentration of households in the middle, with narrow tails of low and high-income households on either end. By 2015, the distributions have grown more polarized: fewer middle-income households, and more households in the low-income and/or high-income extremes.

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Chicago is a good example of what has taken place in urban areas across the country. It boasted a thriving manufacturing sector in 1970. As illustrated in the map on the left above, incomes were lowest in the city center, growing higher radially outward toward the city’s borders. And while Chicago was largely successful in transitioning away from manufacturing to a service-based economy by 2015, that transition created a heavy concentration of wealth in the business/financial district and marked decline in most of the surrounding areas (as indicated in the map on the right).

To listen to the champions of American capitalism, cities represent the solution to growing inequality and the decline of the middle-class associated with the “old” manufacturing economy. But, as it turns out, urban centers are characterized by the same kind of grotesque inequalities and hollowing-out of the middle-class as the rest of the country.

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Liberal stories about who’s been left behind during the Second Great Depression are just about as convincing as the “breathtakingly clunky” 2014 movie starring Nicolas Cage.

For Thomas B. Edsall, the story is all about the people in the “rural, less populated regions of the country” who have been left behind in the “accelerated shift toward urban prosperity and exurban-to-rural stagnation” and who supported Republicans in the most recent election.

Louis Hyman, for his part, argues that the people who have been left behind—rural Americans and the people “who live and work in small towns”—hold a misplaced nostalgia for Main Street, which has been exploited by Donald Trump. What they really need, according to Hyman, is to find new jobs online so that they can “find their way from Main Street to the mainstream.”

In both cases, and many more like them, the great divide is supposedly one of geography: everyone is prospering in the big cities—with high-tech jobs, soaring incomes, and a proliferation of non-chain boutiques and restaurants—and everyone else, outside those cities, is being left behind.

Except, of course, nothing could be further from the truth. Yes, lots of people outside of the country’s metropolitan areas have been excluded from the recovery from the crash of 2007-08 (just as they were during the bubble that preceded it). But that’s true also of cities themselves, from Boston to San Francisco.

The problem is not geography, but class.

According to a 2016 report from the Economic Policy Institute, in almost half of U.S. states, the top 1 percent captured at least half of all income growth between 2009 and 2013, and in 15 of those states, the top 1 percent captured all income growth. In another 10 states, top 1 percent incomes grew in the double digits, while bottom 99 percent incomes fell.

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Much the same is true in the nation’s metropolitan areas. In the 12 most unequal metropolitan areas, the average income of the top 1 percent was at least 40 times greater than the average income of the bottom 99 percent. In the New York City area, the average income of the top 1 percent was 39.3 times the average income of the bottom 99 percent, in Boston 30.6, and in San Francisco, 30.5 times.

By the same token, some of the nation’s non-urban counties have very high levels of income inequality. Lasalle County, Texas, for example, has an average income of the bottom 90 percent of only $47,941 but a top-to-bottom ratio of 125.6. Similarly, Walton County Florida, with a bottom-90-percent income of $40,090, has a top-to-bottom ratio of 45.6.

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The fact is, across the entire United States—in large cities as well in small towns and rural areas—the incomes of the top 1 percent have outpaced the gains of everyone else. That’s been the case during the recovery from the Great Recession, just as it was in the three decades leading up to the most recent crash.

While it’s true, the voters in most metropolitan areas went for Hillary Clinton and those elsewhere supported Trump. The irony is that the majority of those voters, inside and outside the nation’s cities, have been left behind by an economic system that benefits only those at the very top.

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The folks are Bankrate have calculated, for each of the fifty largest U.S. cities, the affordable price for a new car. Their analysis is based on median incomes, average insurance costs, payments on a new car loan, and sales tax data.

The chart above shows how those affordable price points compare. The lower a city appears on the list, the more difficult it would be for the typical car buyer to come up with the money for what Kelley Blue Book said was the average price for a new car or light truck at the time of their analysis: $33,865.

Thus, for example, the average buyer in San José can afford a new car that was priced close to the national average, while residents of Detroit can only afford a car worth just over $6,000, less than a fifth of the cost of the average new car.

Sure, the average price of a new car continues to rise. But the list tells us much more about what’s happened to incomes in the United States. From 2000 to 2014, the average income of the bottom 90 percent of Americans actually fell by $4561 (from $36,913 to $32,352).*

That’s the real reason why most of the residents of the fifty largest U.S. cities can’t afford to come up with the money to purchase a new car.

 

*The data, from the World Wealth and Income Database, are in real 2014 dollars.

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We already knew (thanks to a Pew Research Center report I discussed here) that the United States is no longer a middle-class nation. Now we know (based on a new Pew report), that American cities have become increasingly less middle-class in the past decade and a half.

Not surprisingly, given the size and diversity of the U.S. economy, not all cities followed the same trajectory: in some cities (a good example is Odessa, Texas, with an energy-based economy), the hollowing-out of the middle-class was because the share of adults who were upper-income increased, while in other cities (such as Springfield, Ohio, with a decline in manufacturing) there was a downward movement, with a large increase in the proportion of the adult population falling into the low-income category.*

But there are broader trends that characterize most cities: they’ve become decreasingly middle-class, and the middle income itself has declined precipitously. Thus, from 2000 to 2014, the share of adults living in middle-income households fell in 89 percent of U.S. cities (203 of the 229 metropolitan areas for which data were available, which accounted for three-quarters of the nation’s population in 2014), while in 97 percent of those cities the median income itself declined by more than 8 percent (from $62,462 in 1999 to $67,673 in 2014). In fact, double-digit losses in median incomes (10 percent or more from 1999 to 2014) prevailed in 95 metropolitan areas.

Once again, two highly cherished ideas in the United States—that the nation’s cities are characterized by and based on the middle-class, and that the middle-class itself is improving over time—are shattered by these findings.

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The Pew report also revealed that there’s a strong correlation between the overall level of inequality and the decline in the “middle-classedness” of U.S. cities.

When incomes of households near the bottom of the distribution are closer to the incomes of households near the top, it means that relatively more households may be found sitting within a narrower band of income. In other words, it raises the likelihood that more households are situated within the $41,641-to-$124,924 income band that defines the middle class. Meanwhile, if the distance between the top and bottom reaches of the income distribution is stretched farther, households are spread thinner and fewer of them are likely to fall within the middle-income band.

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The proportion of middle-income households is also strongly correlated with the change in inequality since 2000.

As it turns out, then, while the change in the share of middle-income adults in U.S. cities is not related to changes in median income, it is strongly correlated with the degree and the change in the degree of income inequality. In other words, as the United States has become more unequal in the past decade and a half, its cities have become increasingly less middle-class.

My previous question thus remains: in the midst of the current political debate, will the decline of the United States as a middle-class nation based on middle-class cities be used as a source of fear, intimidation, and scapegoating—or, alternatively, will it serve as a wakeup call to imagining and creating the kinds of real changes that will finally end the declining fortunes of the working-class and its exclusion from the major decisions about how the economy is organized?

 

*Pew’s categorization remains the same in this study: “middle-income” households are those with an income that is 67 percent to 200 percent (two-thirds to double) of the overall median household income, after incomes have been adjusted for household size and location. Here’s what the numbers look like:

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