New Haven made a top ten list — of cities with the widest gaps between rich and poor.
Our city landed sixth in a new Brookings Institution study of cities where the greatest gaps exist between households with annual incomes in the 95th and 20th percentiles. The difference was between $187,984 and $12,293 in 2014, the year on which the study was based. Those top earners earned 15.3 times the income of the lower earners.
And we landed at the top — numero uno —in a ranking of how fast the income-inequaity gap has widened since the Great Recession.
New Haven County ranked ninth in the rankings of metro areas with the widest gaps. Greater Bridgeport — which includes the city of Bridgeport and hedge fund-billionaire-populated lower Fairfield County — topped the list, ahead of even greater New York City and the Bay Area.
Read the full Brookings income inequality study here.
Natalie Holmes, who coauthored the study with Alan Berube, said in an interview with WNHH radio’s “Dateline New Haven” program that they chose the 95th percentile because that represents the bottom rung of the very top earners, while the 20th percentile represented the top of the low-wage sector.
She said that in New Haven, as in cities across the country, the plummeting in purchasing power of lower incomes drove the widening of the gap more than the increase in top salaries did. As mentioned often on the current presidential campaign trail, working people have been seeing their inflation-adjusted salaries dropping or else failing to keep ground with the overall uptick in the economy during the recovery from the Great Recession.
That problem — of falling wages — was more severe in New Haven than in any other city in the nation. The Brookings report found that the 20th percentile of family earners saw their real wages plummet 31 percent (that’s not a typo) from 2007 to 2014; the top 95 percentile in town (a much smaller group) saw wages rise 24 percent. That produced an overall 6.7 percent change in the equality gap, higher by far than in any other city in the country.
Overall, though, “it is consistent with trends we are seeing across the country,” Holmes, a 2010 Yale grad, said in the interview.
The report found that cities with the greatest income inequality also had some of the highest housing costs. “This is not a causal statement at all,” Holmes said. But “in more unequal places, it may be pulling up the cost of housing.”
“To be sure, many low-income households receive housing subsidies that reduce their rental cost burdens. Yet local inequality may serve to raise the price governments pay for those subsidies (e.g., for vouchers that cover the difference between “fair market rents” and 30 percent of household income). And for the majority of eligible low-income households who do not receive such subsidies, higher private market rents can pose serious financial challenges,” Berube and Holmes write in the report.
What Is To Be Done?
Travis Carbonella Photo
New Haven Rising members at a December “jobs crisis” protest.
“Inequality is most often a function of economic forces acting not at the city scale alone, but at the wider metropolitan scale. This is evident in the strong relationship that exists between levels and changes in income inequality over time in cities and the metro areas they anchor. Thus, comprehensive strategies to address the effects of gaps between rich and poor households should engage regional, as well as local, actors and institutions around issues such as education and workforce development, transportation, and even minimum and living wages,” Berube and Holmes write.
In general, states enact minimum-wage raises, not cities (though some, like Seattle, have done so).
Still, officials and activists in New Haven are pursuing city-focused strategies to raise incomes.
A local activist group called New Haven Rising has been organizing rallies and calling on major employers to address the problem, which it casts as a “jobs crisis.” New Haven Rising and Yale’s unions, with which it is affiliated, negotiated a deal last month with Yale in which the university pledged to hire 1,000 people from lower-income New Haven neighborhoods over the next three years. This week it issued a report calling on Yale-New Haven Hospital to make a similar commitment.
Yale and the hospital worked with Yale’s unions and city political and business leaders to launch New Haven Works, which is helping unemployed and underemployed city residents land living-wage jobs.
Paul Bass Photo
Nemerson: Target Yale’s purchases.
City Economic Development Administrator Matthew Nemerson suggested that broadening the focus on a larger pot of potential job-creation money: the services major institutions purchase.
“I understand the focus on the next 500 people or the next 1,000 people at Yale,” Nemerson said in an interview. “These anchor institutions are [also] spending billions of dollars. One of the most important economic development things we can do is look at Yale and Yale-New Haven Hospital and get a larger percentage of what they buy [to be purchased locally].
“That’s one of the things that are really changing about America. It’s not globalization. It’s hyper-regionalization.” You can buy food for Yale from a distribution service in Pennsylvania.”
Nemerson, who had read the Brookings report, noted that regions with strong tech sectors — which tend to pay higher wages — in general fared better than New Haven. He said the city has focused on growing those kinds of jobs, which in turn spin off high “multipliers,” or support jobs. A new tech hub is being planned, for instance, at a former state bus depot at 470 James St. (he project is expected to reach a milestone this week, when the State Bonding Commission votes on whether to approve $5.5 million for an environmental clean-up of the property.)
In addition, the Harp administration has helped 70 New Haveners launch enterprises through a new Small Business Academy (as its director, Jackie James, discussed last week in a WNHH interview).
Click on or download the above sound file to hear Brookings’ Holmes discuss the study and the broader issue on “Dateline New Haven.” Or subscribe to WNHH’s new podcast “Dateline New Haven,” where episodes of the show will be delivered directly to your phone or smart device. (Click here for details on how to subscribe.)
Basically, places like New Haven and Boston are working on "catching up" to the much-worse levels of inequality that are already seen in super-rich areas like Fairfield County, New York City, and San Francisco.
This is a major issue, but at the current rate of change, it is going to take a while before New Haven in any way approaches the levels of inequality that are already experienced in those regions. The "top 5%" in Greater New Haven make $222K per year - way less than the $559K in Fairfield County, or the nearly $400K in the San Francisco area. Low income workers in those areas make slightly more, on average, but housing costs there are at least twice what they are in New Haven.
The question for New Haven is how to respond to this national trend. Should we continue to block new housing construction downtown, so that our housing costs will eventually rise to the levels already seen in Fairfield County, NYC, and San Francisco?