America's cities with the largest income inequality

Income inequality is greater on the coasts and in the South and less so in the Midwest, according to a new report from the New York Federal Reserve.

Фото: Depositphotos

Using data from the U.S. Census Bureau, the report looks at how the salaries of those at the 90th percentile of the pay distribution scale compare to the 10th percentile in cities across the country. The greatest inequality is observed in large urban areas, and the least in the so-called Rust Belt, which includes Michigan, Ohio and Pennsylvania, writes CNBC.

Here is what the report showed:

• Workers in the top 90th percentile in Bridgeport, Connecticut, earned 8,7 times more than those in the 10th percentile—the city topping the list with the most unequal wage distribution.
• In the metropolitan areas of New York and San Francisco, workers in the upper 90 percentile earn 7 times more than in the 10 percentile.
• Workers in the 90 percentile in Detroit earned 5,5 times more than in the 10 percentile.
• Workers in the 90 percentile in St. Louis earned 5,3 times more than in the 10 percentile.

According to the report, wage inequalities observed in large cities such as Chicago, Houston, New York, San Francisco and Washington, DC, can be explained by the “local effects” of technological change and globalization over the past few decades, which requires large the number of highly skilled workers.

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As companies need more and more highly skilled and educated workers in order to keep up with global achievements, these workers significantly increase wages. At the same time, it remains the same for less skilled workers. Highly qualified, in turn, flock to these places, which leads to an increase in income inequality. Southern cities in Texas, Alabama, and Louisiana are also experiencing growing inequality.

“In such places, wages at the top of the skilled wage distribution have increased significantly relative to wages at the middle and bottom, resulting in relatively high levels of wage inequality,” the report said.

Meanwhile, smaller cities such as Cleveland, Minneapolis, and St. Louis have less income inequality. In these cities there are fewer companies requiring highly skilled workers than in the large urban areas indicated above.

Nevertheless, globalization and technological changes have a profound economic impact in the Rust Belt, squeezing all wages "in a fairly narrow range."

Detroit illustrates this trend: increased global competition and technological advances have led to massive job losses and the closure of factories in the automotive industry, which has led to the crowding out of lower and middle-skilled workers. At the same time, “demand for the most skilled workers in many of these places was weak,” the report said. And while income inequality in Detroit is lower than in other large cities, workers at all skill levels do not observe an increase in income, as in other parts of the country.

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The report was published a few weeks after the Census Bureau reported that in the 2018 year, inequality in the United States reached its highest level since more than 50 years ago it began to be monitored.

Since the 1980s, skilled and college-educated workers have become increasingly concentrated in large urban areas, according to the Fed. At the same time, “less-skilled workers are increasingly being pushed out of such locations, in no small part due to high and rising housing prices,” which is reflected in rising wage inequality in larger urban areas.

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