Income inequality in US Metro Areas – Rising in more than 2 in 3

Income inequality appears to have grown in more than 2 in 3 metropolitan areas from 2005 to 2012, according to one rough measure, a new study finds.

The study, released by the U.S. Conference of Mayors, explores how the Great Recession affected wages and income in hundreds of metropolitan statistical areas — population and economic hubs typically encompassing a large city or cities. Among the key findings is that the jobs gained in the recovery paid an average of 23 percent less than those lost. And in most metro areas, income inequality appears to have worsened.

“While the economy is picking up steam, income inequality and wage gaps are an alarming trend that must be addressed,” U.S. Conference of Mayors President Sacramento Mayor Kevin Johnson. The Monday release of the study, conducted by IHS Global Insight, was timed to coincide with the launch of the nonpartisan conference’s new Cities of Opportunity Task Force, meant to address problems arising from growing income inequality and economic immobility.

The report confirms what state-level data have consistently shown: the income divide is growing. (Relatedly, economic insecurity has spread like a virus through the nation over teh past several decades.) Nationally, the top fifth of earners have steadily accounted for a larger and larger slice of the income pie, as expressed in the chart below using data from the report.

via Income inequality seems to be rising in more than 2 in 3 metro areas – The Washington Post.

The report – Key Findings 

THE WAGE GAP IN THE US

• The US has regained the 8.7 million jobs that were lost during the Great Recession, and employment has surpassed its pre-recession peak of 138.4 million jobs in 2008.
• Average annual wage of jobs lost in 2008-09 was $61,637, and average wage of job gains through the second quarter of 2014 equaled $47,171. This wage gap of 23% is significantly larger than that of the earlier recession and recovery (2000-2006), and implies $93 billion in lower wage income.
• In comparison, the wage gap following the 2000-2003 recession was 12%. Wages earned in advancing sectors fell $27 billion short of the annual wages lost in the declining sectors over 2000-2003.
• Extensive job losses in high-wage manufacturing ($63K) and construction ($58K) sectors were replaced by jobs in the lower wage sectors of hospitality ($21K), health care ($47K), and administrative support ($37K). (See Figures 2 and 3)THE INCOME DISTRIBUTION IN THE US

• The 2012 household median income of $51,017 was, in real terms, the lowest since 1995. The median was greater in the West ($55,157), and Northeast ($54,627), than in the South ($48,033) and Midwest ($50,479).
• The highest-earning 20% of households saw their share of income rise from 43.6% in 1975 to 51.0% in 2012. Most of this gain was among those in the highest 5% of income, which rose from 16.5% in 1975 to 22.3% in 2012, a gain of $490 billion in 2012. (See Figure 4)
• Each of the lower quintiles experienced a declining share of income since 1975. The lowest two quintiles, or 40% of households, received just 6.6% of all US income gains since 2005, and 9.5% of gains since 1995.
• The highest 20% of households captured 60.6% of total income gains from 2005 to 2012, and the top 5% received 27.6% of total gains.
• In 2012 the 80th percentile (the lowest income in the top 20%) income of $104,906 was more than double (2.04x) the median. That ratio has increased from 1.73 in 1975.METROPOLITAN AREA HOUSEHOLD INCOME

• In 2012, among US households, 34.8% earned less than $35,000, 31.8% earned between $35,000 and $75,000, while 33.5% earned more than $75,000.
• Metros with the largest percentage of households making less than $35,000 are largely in the South, especially in Texas and Georgia. The top three are Brownsville-Harlingen (55.1%), Dalton (52%), and McAllen-Edinburg-Mission (51.5%). (See Figure 5, full listing in Appendix Table 2)

• Jacksonville (NC) (42.8%), Fond du Lac (42%), and Holland-Grand Haven (39.4%) have the greatest share of households making between $35,000- $75,000. (Figure 6)
• Washington DC (57.5%), San Jose (57.3%), and Bridgeport-Stamford (52.5%) have the largest percentage of households making $75,000 and more. All metros in the top 10 are in the Northeast and coastal California with the exception of Anchorage, AK and Honolulu, HI. (Figure 7)
• 261 of 357 metros have a greater share of poor households (making less than $35,000) than of upper- income households.
• Phoenix, Riverside, Milwaukee, St. Louis, Cincinnati, Indianapolis, Charlotte and Providence are among the large metros that have a nearly equal number of low (less than $35,000) and high ($75,000 and more) income households.HOUSEHOLD INCOME INEQUALITY 2005-2012

• Average income nationwide increased 14.0% from $62,556 in 2005 to $71,317 in 2012. Median income improved at a slower pace of 11.1% from $46,242 to $51,371. The ratio between the average and median household income increased by 2.6%, as wealth shifted to upper income households during these years.
• Adjusted for inflation, average household income fell 3.0%, while median income dropped by 5.5% from 2005-2012.
• 248 Metro areas experienced a shift in wealth towards upper-income households from 2005 to 2012, while 109 moved in the opposite direction.THE FORECAST FOR MEDIAN HOUSEHOLD INCOMES

• In 2014 median household income will increase by 2.5%, and then by 3.8% annually through 2017. Mean household income will increase by 2.7% in 2014, and by 4.1% through 2017. Thus, the middle income household continues to fall behind as a greater share of income gains are captured by higher income levels.
• The metro areas with the fastest growing median income rates are geographically diverse, and several of the 10 fastest growing metros, each growing at a rate above 4%, share proximity to oil and gas plays (Williamsport, Wheeling, and Midland) or tech company agglomerations (San Jose and Boulder). (Figure 11, full listing in Appendix Table 4)
• With the exception of Vallejo-Fairfield, the ten slowest-growing areas in terms of median household income are all located in the South and Midwest.MINIMUM WAGE

• The federal minimum wage, at $7.25 per hour, corresponds to a full time equivalent annual income of $15,080. In real, equal purchasing power terms, the real wage has declined dramatically from its 1968 peak of $10.69. Thus the annual income of a minimum wage earner has eroded by 32% from $22,235 to $15,080.

Chosen excerpts by Job Market Monitor. Read the whole story at Income and Wage Gaps Across the US The U.S. Conference of Mayors : Metro Economies Report Index.

U.S. jobs rose since ’08 crisis, but pay is 23 pct less: report

Jobs growth in the U.S. since the 2008 recession has been undermined by lower wages, with workers earning an average 23 percent less than earnings from jobs which were lost, a report by an organization representing U.S. cities said on Monday.

The average annual salary in sectors where jobs were lost – particularly manufacturing and construction – during the 2008-9 financial crisis was $61,637, according to the report by the United States Conference of Mayors (USCM), which represents cities with populations of more than 30,000.

Job gains through the second quarter of 2014 in comparative sectors showed average wages of $47,171, implying $93 billion in lower wage income, the report said.

The report also showed that the majority of metro areas – 73 percent – had households earning salaries of less than $35,000 a year.

Chosen excerpts by Job Market Monitor. Read the whole story at U.S. jobs rose since ’08 crisis, but pay is 23 pct less: report | Reuters.