Why are metropolitan areas more “equal” than their central cities?
By Daniel Hertz
To butcher Orwell, all cities are unequal, but some cities are more unequal than others. While working with some of the Census-calculated income inequality numbers—in particular, the Gini index—we noticed an interesting pattern: the central city of a metropolitan area is almost always more unequal than its metropolitan area as a whole. What’s going on?
Previously, we’ve made the case that applying the sort of income inequality metrics that we apply to our country is a tricky business. At the national level, having more income inequality is pretty much unambiguously bad. (Theoretically, of course, some amount of inequality is desirable, but we’re way past the point of where diminishing returns become negative.)
Given a certain amount of national inequality, however, more local inequality isn’t necessarily bad. In fact, it may be good. For one, economic productivity tends to be concentrated in metropolitan areas, and so you’d expect there to be disproportionately more very wealthy people—executives of major corporations and nonprofits, star performers in the arts and sports, and so on—just like you’d expect Fortune 500 CEOs and major theater directors to be underrepresented in rural areas and small towns. A city without those economic and cultural institutions is probably a city in trouble.
Traditionally, American cities have also had a disproportionate share of people whose incomes are very low. There are a lot of unsavory historical reasons for this, from redlining to exclusionary zoning, but there are also some advantages for low-income people to living in cities. A big one is transportation costs: a household can save thousands of dollars a year by living in a place where they can walk or take transit to most of their destinations instead of driving. And, as jobs and amenities increasingly re-concentrate in central cities, they improve low-income residents’ access to essential quality-of-life goods.
Subsidized housing and market housing in a desirable Manhattan neighborhood: high inequality.
To get a low level of income inequality, then, a city has to either lack the high earners who, in an unequal country, suggest the presence of a strong local economy, or be so unfriendly to low-income people—usually via exclusionary zoning and inflated home prices, as well as bad public transit service and high transportation costs—as to essentially banish the poor.
So, for example, one of the most “equal” cities in the country is the Dallas suburb of Flower Mound, where the median household income is $120,000 (compared to $48,000 in the metro area), and 78 percent of people are white (compared to 50 percent in the metro area). Flower Mound hasn’t turned itself into a Scandinavian-style social democratic utopia; it’s simply figured out how to get all the poor people in the Dallas area to live somewhere else.
And this isn’t rare or accidental: as Robert Reich (and others) have been pointing out for a long time, municipal borders are frequently drawn to facilitate the “secession of the successful” and ensure that public services funded by their taxes can’t be used for the benefits of the less wealthy.
Homes only affordable to the wealthy in Flower Mound, TX: low inequality.
Which, in turn, gets to the actual heart of the issue: given a national level of inequality, the role of cities is in large part to create either Flower Mound-style enclaves of the wealthy (and, on the flip side, places with extreme concentrations of poverty) or neighborhoods that are home to people across the income spectrum.* The former allows for the hoarding of public resources and has found by researchers to be a major mechanism for the reproduction of inequality from generation to generation; the latter is much better, from the perspective of social mobility and the civic commons—but will also lead to having a higher level of “income inequality” in these integrated neighborhoods.
So we would argue that the fact that central cities tend to have greater measured income inequality is actually mostly a good thing, as it suggests that the same municipalities are able to be home to both the wealthy and the poor. That’s far superior to the many smaller suburban municipalities that use zoning and other techniques to create a more homogenous population.
Unfortunately, of course, in a large city, simply having rich and poor inside the same city limits doesn’t mean that individual neighborhoods are also integrated. While segregation within a single city is, all else equal, better than between municipalities, because it makes it easier to share a tax base and the public resources that come with that tax base, it’s still a generally rotten situation. But the point is that, at the local level, the real question isn’t “inequality”: it’s a question of integration.
* Do cities not have any role in actually reducing inequality? Well, sure: fostering integration rather than segregation meaningfully reduces inequality of quality of life, and improves intergenerational equity. Cities can also pass measures like local minimum wage increases to lift low-end workers’ income. But given that even New York makes up less than 3 percent of the country’s population, it’s unlikely that any of this is going to change national inequality levels, at least in the short or medium term.
Why are metropolitan areas more “equal” than their central cities?
To butcher Orwell, all cities are unequal, but some cities are more unequal than others. While working with some of the Census-calculated income inequality numbers—in particular, the Gini index—we noticed an interesting pattern: the central city of a metropolitan area is almost always more unequal than its metropolitan area as a whole. What’s going on?
Previously, we’ve made the case that applying the sort of income inequality metrics that we apply to our country is a tricky business. At the national level, having more income inequality is pretty much unambiguously bad. (Theoretically, of course, some amount of inequality is desirable, but we’re way past the point of where diminishing returns become negative.)
Given a certain amount of national inequality, however, more local inequality isn’t necessarily bad. In fact, it may be good. For one, economic productivity tends to be concentrated in metropolitan areas, and so you’d expect there to be disproportionately more very wealthy people—executives of major corporations and nonprofits, star performers in the arts and sports, and so on—just like you’d expect Fortune 500 CEOs and major theater directors to be underrepresented in rural areas and small towns. A city without those economic and cultural institutions is probably a city in trouble.
Traditionally, American cities have also had a disproportionate share of people whose incomes are very low. There are a lot of unsavory historical reasons for this, from redlining to exclusionary zoning, but there are also some advantages for low-income people to living in cities. A big one is transportation costs: a household can save thousands of dollars a year by living in a place where they can walk or take transit to most of their destinations instead of driving. And, as jobs and amenities increasingly re-concentrate in central cities, they improve low-income residents’ access to essential quality-of-life goods.
Subsidized housing and market housing in a desirable Manhattan neighborhood: high inequality.
To get a low level of income inequality, then, a city has to either lack the high earners who, in an unequal country, suggest the presence of a strong local economy, or be so unfriendly to low-income people—usually via exclusionary zoning and inflated home prices, as well as bad public transit service and high transportation costs—as to essentially banish the poor.
So, for example, one of the most “equal” cities in the country is the Dallas suburb of Flower Mound, where the median household income is $120,000 (compared to $48,000 in the metro area), and 78 percent of people are white (compared to 50 percent in the metro area). Flower Mound hasn’t turned itself into a Scandinavian-style social democratic utopia; it’s simply figured out how to get all the poor people in the Dallas area to live somewhere else.
And this isn’t rare or accidental: as Robert Reich (and others) have been pointing out for a long time, municipal borders are frequently drawn to facilitate the “secession of the successful” and ensure that public services funded by their taxes can’t be used for the benefits of the less wealthy.
Homes only affordable to the wealthy in Flower Mound, TX: low inequality.
Which, in turn, gets to the actual heart of the issue: given a national level of inequality, the role of cities is in large part to create either Flower Mound-style enclaves of the wealthy (and, on the flip side, places with extreme concentrations of poverty) or neighborhoods that are home to people across the income spectrum.* The former allows for the hoarding of public resources and has found by researchers to be a major mechanism for the reproduction of inequality from generation to generation; the latter is much better, from the perspective of social mobility and the civic commons—but will also lead to having a higher level of “income inequality” in these integrated neighborhoods.
So we would argue that the fact that central cities tend to have greater measured income inequality is actually mostly a good thing, as it suggests that the same municipalities are able to be home to both the wealthy and the poor. That’s far superior to the many smaller suburban municipalities that use zoning and other techniques to create a more homogenous population.
Unfortunately, of course, in a large city, simply having rich and poor inside the same city limits doesn’t mean that individual neighborhoods are also integrated. While segregation within a single city is, all else equal, better than between municipalities, because it makes it easier to share a tax base and the public resources that come with that tax base, it’s still a generally rotten situation. But the point is that, at the local level, the real question isn’t “inequality”: it’s a question of integration.
* Do cities not have any role in actually reducing inequality? Well, sure: fostering integration rather than segregation meaningfully reduces inequality of quality of life, and improves intergenerational equity. Cities can also pass measures like local minimum wage increases to lift low-end workers’ income. But given that even New York makes up less than 3 percent of the country’s population, it’s unlikely that any of this is going to change national inequality levels, at least in the short or medium term.
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