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The Wealth Gap Widens, As The Poor Lose Ground

Tuesday, March 25, 2014 at 2:48 PM

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Cities tend to be hubs of the extreme when it comes to income. In an urban center you will find the best-paid lawyer or banker, just as you will find folks relying on social assistance and public housing. The causes and effects of income inequality play out differently depending on the city, but in many places the wealth gap is widening. And it isn't because the rich are getting richer.

Cities tend to be hubs of the extreme when it comes to income.  In an urban center you will find the best-paid lawyer or banker, just as you will find folks relying on social assistance and public housing.  The causes and effects of income inequality play out differently depending on the city, but in many places the wealth gap is widening. A study from the Brookings Institution showed that 18 of 50 top US cities showed a significant uptick in inequality over the recession, and Cleveland was among them.

To find out why, ideastream’s Tony Ganzer spoke with Brookings Institution researcher Alan Berube.  Then, to hear why inequality is not overly present in political speech, we hear from Jason Johnson, professor of political science and communications at Hiram College.

BERUBE: “Yeah, when we looked back…just before the recession in 2007, and then the trend forward to 2012, you did see an increase in the measure of inequality that we use, which is the ratio of the incomes of people at the top to incomes of people at the bottom.  But in a lot of cases that wasn’t because the rich got a lot richer than the poor did, it was because the poor got poorer.  And the rich got poorer, but the poor got more poor than the rich got poor, if you will.  So Cleveland was one of those cities where both the rich and the poor lost some ground, but at least on a proportional basis the losses at the bottom were more significant than those at the top.”

GANZER: “Is this a new conception of inequality, or at least a formulation of what’s happening in cities—that it’s more about the poor earning less than, necessarily, the folks at the top of the food chain earning more?”

BERUBE: “You know, from 2007 to 2012 it was a pretty weak economy.  So if you look at that five year period you’d see inequality increasing because of this phenomena where the poor are getting poorer, and the rich are losing a little bit of ground, but not that much.  If we were to look at a much longer time trend in cities or indeed nationwide, you’d see inequality increasing as the rich get richer, and those toward the bottom of the distribution go nowhere, or indeed lose a little bit of ground.”

GANZER: “While inequality was up in a place like Cleveland, Indianapolis, Milwaukee, you pointed out that they are not necessarily leading political issues, they are political issues but not leading ones.  Do you have any idea why that is?”

BERUBE: “The inequality issue has become a stand-in for, really, affordability issues in a places like New York, San Francisco.  In places like Indianapolis, and Cleveland, and Milwaukee, you know the rich don’t actually earn as much as the national average.  Let’s take Cleveland for instance: the average household that just cracks the top 5% of the distribution in Cleveland earned $101,000 in 2012, a good income.  But that average household cracking the top 5% in San Francisco earned $354,000—so 3.5 times as much.  Inequality is an issue because affordability is an issue in San Francisco because of the runaway incomes at the top and the pressures that’s creating in the city.  That’s really not a dynamic that’s characterizing places like Cleveland, Milwaukee, and Indianapolis right now.”

GANZER: “What does this do for the middle class?  Does this put more pressure on folks not at either extreme of the spectrum?”

BERUBE: “Yeah, and in fact it is a bit of a statistical identity, that the more inequality you have the smaller middle class you have.  It’s a real pressure there in a couple of ways.  One is that the existing middle class households feel themselves getting squeezed out.  And lower income households, if they are in affordable, subsidized housing right now they don’t necessarily see a path forward for themselves.  That in turn leads to further suburbanization of lower-middle income households, and the danger that over time these cities will just become provinces of the very, very wealthy, and I think that is not a good thing.  Nor is it good for how their economies work: you need a working and middle class to actually fill the jobs and provide the services that these higher income people demand.”

If income inequality is a growing fact of Cleveland’s economy, why is it not overly present in state and local politics?  Jason Johnson is a professor of political science and communications at Hiram College, and he says inequality has not been a big issue-period-across the country.  Politicians talk about paying your fair share, but that is less nuanced than inequality. And the reason they do that is because of what most voters care most about.

JOHNSON: “Most people are concerned about jobs and making sure that they get paid.  And as much as it sounds sexy to reporters and sociologists to say that ‘Americans are concerned about the difference between their pay and the fat cats who work upstairs’ that’s not the primary concern.  He’s less concerned about what the executive at the top is making, than whether or not what he makes in his position allows him to live his lifestyle.  Inequality becomes an issue when you get to upper-middle class, college and post-secondary educated people who feel that they are hitting an economic glass ceiling ever since the recession. So, if you are going for the ‘burbs economic inequality might work, if you are going for the vast majority of people in the United States, the vast majority of people in the Cleveland metropolitan area who are working class, working poor, and just getting by, income inequality is above their pay grade.”

GANZER: “I guess one of the arguments why politicians maybe should be paying more attention to the issue would be that inequality in general says something about the economic health of a region, and if there is too big a gap between the different income levels, then overall the city is not as healthy.  What do you make of that argument?”

JOHNSON: “Oh, I completely agree.  And it is always important to make a distinction between what voters care about and what politicians should be talking about.  Because voters have a responsibility of thinking about what is immediately in front of them, but it’s the city councilperson who has to serve for four years.  It’s the mayor, it’s the county commissioner, it’s the governor who has to think, ‘Look, even if I bring in an auto plant in here or there, I have to think that the long-term viability of this city cannot be secured if we have a situation where 70% of the people in the county are making under $35,000 a year and 4% in the county are making over $400,000.’ So yes, it is something that politicians should talk about more, and should make an argument to the public to change policy to make these things less problematic, it’s just that most politicians don’t want to step up to the plate.”

GANZER: “Do you think that’s going to change any time soon, especially in a place like Cleveland where jobs really are still the primary issue?”

JOHNSON: “No, I don’t.  And one of the issues that Cleveland has: Cleveland has a population problem in addition to a jobs problem.  The city has a great deal of difficulty keeping 20-somethings and 30-somethings, and even young 40-somethings in the city. People reach a certain window, and rather than fighting to get that job that will jump you from 55 to 75, they just move.  They move to Seattle, and they move to San Francisco, and they move to Richmond, Virginia, and they move to Philadelphia.  So Cleveland has to find a way to attract people with stable jobs before executives, in addition to city leaders, can work on improving income inequality. There is a dual problem that this city faces.  As long as this Cleveland continues to shrink, as long as we look at this horrible gap that the city proper was a million people in 1979, and now we’re hovering somewhere around 375,000, as long as we’ve got that sort of loss of population, income inequality is going to be hard to put at the top of anyone’s concerns.”

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