Thursday, November 10, 2011

Income Inequality in Metro Milwaukee

The Occupy Wall Street demonstrations have sparked a public debate over income inequality that has spread across the nation and beyond. In Milwaukee, where the city’s poverty rate has ranked among the nation’s highest for several years, the issue of income inequality is a familiar one. Could it be, however, that the Milwaukee metropolitan area actually has slightly less income inequality than the U.S. as a whole, and if so, what does that mean?

A new report from the U.S. Census Bureau analyzes and ranks states, metro areas, and even neighborhoods in terms of how evenly income is divided among the population. The method used to rank each place, called the Gini measure, is a scale from zero to one in which a measure of zero means incomes are totally equal throughout a population, and a measure of one means 100% of that population’s income is concentrated in one household. Notably, while the Gini measure captures how income is distributed, it does not take into account factors such as the relative wealth of a population or the cost of living of each place.

According to the Census Bureau study, Wisconsin has one of the lowest levels of income inequality among U.S. states. The level of inequality within the Milwaukee metropolitan statistical area (MSA), which includes the counties of Milwaukee, Ozaukee, Washington, and Waukesha, is below that of the nation as a whole and in the middle of the pack when compared with the 50 other metro areas in the U.S. with populations of at least one million. Below is a breakdown of select metro areas on the list, including those at the extremes and Milwaukee’s regional peers. Each metro area’s poverty rate and percentage of households earning at least $200,000 are also included on the chart.

Income inequality in U.S. metro areas with populations over one million, 2005-2009 (51 total)

It’s difficult to determine how to interpret the Gini measures by themselves. Because of the small difference in Gini measures found between metro areas at the extreme ends of the scale, for example, metro Milwaukee does not appear to be much different from the New York or Salt Lake City metro areas. Indeed, all of the metro areas measured fall within what appears to be a relatively narrow range.

One might logically theorize that metro areas with higher Gini measures would have higher percentages of households at the extremes – both very high-income and very low-income. Based on the data on poverty and high-income households in the chart, the Milwaukee MSA has both a lower poverty rate and a lower percentage of high-income households compared with the New York metropolitan area and the U.S. as a whole, while the State of Wisconsin has lower rates than metro Milwaukee for both categories. But perhaps most interestingly, the combined percentages of people at the extremes (poverty rate plus percentage of high-income households) follows the Gini measures almost perfectly, as shown in the chart’s final column.

While these data invoke more questions than answers, several observations can be gleaned with regard to metro Milwaukee. First, while poverty in the city of Milwaukee is unacceptably high, the poverty rate for Milwaukee’s MSA is relatively average compared with other metro areas. Thus, poverty may be less concentrated in the central city of other metro areas compared with metro Milwaukee.

Second, the Milwaukee MSA has a relatively low percentage of high-income households compared with other metro areas and the nation as a whole. In addition to the data on the above chart, a recent study by the Brookings Institution shows that metro Milwaukee is not among the 54 U.S. metro areas whose share of very high-income households (>$200,000/year) exceeds their share of all households. Some might argue that metro Milwaukee’s relatively low level of high-income households puts us at an economic disadvantage because high-income households are those most likely to create desperately-needed jobs.

Third, if income inequality is at undesirable levels in general throughout the U.S., metro Milwaukee is not significantly different. Current research has shown that the richest 20% of Americans own approximately 84% of the nation’s wealth, and that Americans across divisions of race, gender, income, and political affiliation all would prefer less inequality.

Finally, since the data used in the Census Bureau report are from 2005-2009, both pre-recession and peak recession years are included. With the economy continuing to struggle, it will be interesting to see how these numbers change over time.

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