Bacon's Rebellion

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If Income Inequality Makes You Unhappy, Virginia Is Not a Bad Place to Live

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James A. Bacon
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inequality

Jed Kolko, the chief economist at Trulia Inc., by way of the Atlantic Cities blog, has published another spin on income inequality in the United States. This data set measures inequality on a regional basis (as opposed to a “city” basis, as I blogged about Virginia Beach recently.) Among the United States’ 100 largest metropolitan regions, inequality has grown worse since 1990 in all but seven regions.

Kolko measures inequality by generating a ratio of the average income of households at the 90th percentile (rich) and the 10th percentile (poor). His broadest conclusions: “We found that some metros are much more unequal than others, and the most unequal metros tend to have higher housing costs and slower economic growth.”

The graphic at the top of this post shows the numbers for Virginia MSAs, ranking Washington, Hampton Roads and Richmond by inequality (with lower numbers indicating more equal and higher numbers indicating less equal) among the 100 metros.

By Kolko’s measure, Virginia’s MSAs were considerably less unequal than the national average in 2012. However, when ranked by the increase in inequality, Virginia has been moving up the inequality scale somewhat more rapidly. Inequality in the Washington metro grew 16th most rapidly in the country, in Virginia Beach the 44th most rapidly, and Richmond, the smallest of the three MSAs, 81st most rapidly.

I take all these inequality measures with a grain of salt. First, they are based upon income reported to the Internal Revenue Service. Like most discussions of income inequality, they do not take into account the shift of business income to individual income due to changes in the tax code. They do not include means-tested welfare payments and other government income transfers. They do not include cash income generated in the black market economy. (The U.S. economy is $17 trillion. The size of the black market economy has been estimated at $2 billion. Lower income brackets are disproportionately engaged in the black market economy.) In other words, much of the discussion about income inequality is totally bogus and driven by politics.

Still, Kolko’s data provides a useful rough cut of what’s happening at the metropolitan level.

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3 responses to “If Income Inequality Makes You Unhappy, Virginia Is Not a Bad Place to Live”

  1. Peter Galuszka Avatar
    Peter Galuszka

    Interesting data and believable. My guess is that Richmond’s 26 percent poverty rate balances badly against the higher income and mostly white areas of Chesterfield and Henrico. I think in the DC area you are seeing more wealth moving in the city and more minority middle class people moving out to PG County and NOVA.

  2. larryg Avatar
    larryg

    If you think of a metro economy – one might think that you would have a certain number of plumbers per capita, pizza stores per capita, etc… and you’d certainly have a a robust service sector with folks who primarily earn a minimum wage.

    so what makes the metro areas different in this regard?

    it doesn’t make sense that the would be less or more service jobs… per capita nor much difference in the typical wages made in service jobs…so are we seeing some metro areas with larger numbers of higher paying jobs?

    or are we seeing Metro areas with larger numbers of unemployed folks on entitlements?

    I don’t think we have sufficient data to draw any conclusions until we better understand the basic data … and that means – we really want to understand more deeply than at a sound-bite level.

    I call these things data swamps… because you can slice and dice data in so many myriad ways – and I know this is a huge shock but in manipulating data .. synthesizing data.. it can lead to not a more informed view – but a wrong view…

    I would have to 1. understand what the fundamental concern is with income inequity…

    2. understand it not only in a US urban context but a US rural context AND a North American and World context.

    it’s almost like we get down in the weeds on some of this stuff and even when we come up for air – it’s not a particularly intelligent endeavor.

    we have a problem in our schools in the US – primarily in the area of critical thinking and the ability to problem solve – real world challenges and I think we’re continuing to have that problem as adults on some of these issues – to include knowing the difference between weather and climate – and to realize that Smart Growth is a government induced paradigm – not a free market critter.

    clarity. we need clarity in these things… we need it forced on us sometimes because we are at times all to willing to go an inch deep and a mile wide on stuff (and I include myself in that assessment).

  3. Breckinridge Avatar
    Breckinridge

    Wow. More rich people in the areas with the highest housing costs. Now there is a deep insight that qualifies for a Nobel Prize. Anybody got the phone number for the palace in Stockholm…? And be sure to add the brilliant deduction that a slow economy with anemic job growth also fosters income inequality. Wow. How about a Pulitzer for this guy, as well!

    Just this morning on Today there was a segment about a working mother living on the edge of poverty, earning $9.63 an hour as a nurse’s aide and trying to raise three kids after a marriage broke up. Of course she is struggling, but nobody asked about the father. Nobody asked her why no child support. Income inequality follows educational inequality and marketable skills inequality and family stability inequality.

    Oh and Jimbo – lower income people are more likely to be engaged in the black market? Really? You want to walk that one back a bit?

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