How The 1 Percent Is Pulling America’s Cities And Regions Apart

Commuting zone mean family income relative to the nation, 1980

(Social Forces)

Commuting zone mean family income relative to the nation, 2013

(Social Forces)

The map for 2013 is very different. Now we see many more regions shaded in dark red than before, indicating the mean family income is less than 80 percent of the national level. At the same time, there are many more—and larger—bands of dark blue. The blue of the Washington, D.C., region grew to include more of Virginia and Maryland, and the blue New York City region grew to include more of New Jersey and Connecticut. Plus, the Bay Area, Boston, and Minneapolis, are now blue on the map.

Changes in commuting zone mean family income relative to the nation, 1980–2013

(Social Forces)

The pattern can also be seen in the scatter graph above which compares mean family income for U.S. regions in 1980 to mean family income in 2013. Coastal metros like New York and its suburbs, Boston, San Francisco, and Washington, D.C., are above the line. These places, which were already more affluent in 1980 have grown even more so by 2013. But other city-regions—a few large ones like Detroit, Phoenix, and Miami, and many more small ones—are below the line, indicating the relative decline in their economic fortunes.

In the more than three decades spanning 1980 to 2013, Manduca finds that the share of Americans living in affluent metro areas (those with incomes 20 percent higher than average) rose nearly four-fold, from 4 percent to 16 percent, while the share of Americans living in poor metros (those with incomes 20 percent lower than the national average) also rose from 12 percent to 31 percent. Putting both of these trends together, the share of Americans living in either rich and poor metro areas (those where incomes were either 20 percent higher or lower than the national average) nearly tripled from 1980 and 2013, rising from 12 percent to more than 30 percent. The “middle” is disappearing, as more Americans are in one of the extremes.

But what has produced such staggering growth in spatial inequality? Manduca employs a variety of statistical techniques and counterfactual simulations to parse whether spatial inequality is a product of geographic sorting, or a product of people getting richer and poorer while staying in place.

Indeed, fully half of growth in spatial inequality over the past three decades can be pinned on the economic gains of the 1 percent, with the rest of the top 10 percent of income earners accounting for an additional 25 percent of America’s geographic divide. As the 1 percent has hauled in a growing share of the economic pie, the places where they live have pulled away from the rest of the country. “Income sorting has played a role in driving regional divergence, but income inequality has played a larger one,” Manduca writes.Using a counterfactual approach to compare the impact of geographic sorting and national income inequality based on 1980 baselines (before national inequality exploded), Manduca finds that: “If income inequality had remained constant at 1980 levels, the observed income sorting would have resulted in just 23 percent as much divergence as actually occurred. In contrast, even if there had been no income sorting whatsoever, growth in income inequality would have produced 53 percent of the observed divergence on its own.”

This suggests that many of the policy strategies advocated to deal with spatial inequality—such as place-based policies to build up lagging places, people-based policies to train them with more skills, or policies to increase housing supply—may help at the margin, but will ultimately not make much of a significant dent in America’s worsening regional divide. That’s because they fail to address a key underlying driver: national income inequality and its geographic consequences, where hugely outsized gains have gone to a very small fraction of America’s places.“Regional income divergence results in large part from national trends, which are generally attributed to changes in economic policy and the economic environment like financial deregulation … and declines in the real minimum wage, among others in the 1970s and 1980s,” Manduca told me via email. “This means that regional income disparities are a national problem.”

And this has implications for the way we think about and respond to different parts of the country. “We’re often too harsh on economically struggling regions,” he adds. “We tend to blame them for their troubles, and say that they’re not doing enough to attract or create high-paying jobs.”At the other end of the economic spectrum, we also tend to blame expensive cities and their onerous land use restrictions for their increasingly unaffordable housing. Instead, it’s more helpful to think about how these local trends are largely a consequence of national-level policy changes.

Coping with America’s escalating regional divide cannot, and will not, happen unless we grapple with the even larger national problem of structural inequality and its causes. “Narrowing the disparities between different parts of the country will be almost impossible without also reducing the total amount of income inequality between people,” Manduca adds. This narrowing will take a big change the rules to reduce the hold the 1 percent has on the economy and redistribute wealth to a much broader spectrum of society.

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