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.