Is inequality the price you pay for economic success? That’s a question you might ask from reading this report looking at the U.S.’s most unequal places. The worst performers–cities like San Francisco and Boston–are the best performers economically-speaking.
The study from the Brookings Institution looks at the “95/20 ratio” for the 50 largest cities in 2012–the difference between 95th percentile and 20th percentile income. Atlanta comes out worst with a 18.1 ratio, with major cities like Miami (15.7), Washington D.C. (13.3) and New York (13.2) also in the top 10. Cities generally are more unequal than non-cities, but some are more unequal than others. In Atlanta, a household in the top 5% earns $280,000 each year and the bottom 20% gets $15,000.
Cities with relatively low income inequality tend to be in the South and Southwest. Virginia Beach, Virginia (ratio of 6), Arlington, Texas (7.3), and Mesa, Arizona (7.5) take the bottom three places (or top three places, depending on how you look at it). A 95th percentile household in Mesa earned $157,190 in 2012 compared to $21,007 at the bottom.
Cities are unequal for different reasons. San Francisco’s gap is the result of stratospheric incomes at the top end more than low incomes at the bottom. Households in the 95th percentile earned $353,000, more than anywhere else. Miami’s inequality, by contrast, is due primarily to poverty at the bottom. Incomes in the 20th percentile were $10,438, against $164,013 for top earners.
Inequality was also more likely to widen because of trouble at the bottom than gains at the top. The report compared incomes for 2012 with 2007, finding 18 cities where ratios rose significantly. In most cases, the reason was “reduced work opportunities for poor households,” largely as a result of the housing crash.
San Francisco stands out as a special case. Between 2007 and 2012, income in the 20th percentile fell $4,000, while top household income increased by $28,000. “Skyrocketing housing costs may increasingly preclude low-income residents from living in the city altogether,” the report explains. Which could mean, perversely, that the city becomes less unequal over time rather than more.
What’s certain is that inequality isn’t good in the long-run. The report argues that maintaining “mixed-income school environments that produce better outcomes for low-income kids” becomes more difficult. It’s harder to raise revenue for city services, because the tax base is too narrow. And housing becomes unaffordable to middle-class families. Inequality changes a city’s character, too, and usually for worse.