H-S looks at economic growth, widening income inequality in Durham

I sometimes ding the local media for focusing too much on the story-of-the-day, not enough on the big picture, analytical pieces that speak to broader trends of what's behind the story.

Hats off to the Herald-Sun, therefore, for picking up on a Brookings Institution story on metropolitan area economies and growth.

The report, available for download from the Brookings web site, tells the good and bad news of the Bull City's economic growth -- and engine that's moved the metro area ahead while leaving some citizens behind:

• Durham's average GDP per job grew by almost 3.4% from 2001-2005, compared to just over 1% for Greensboro and a rate more than 50% above the average growth level.
• All in all, Durham ranks 11th in the U.S. metro areas studied for productivity growth as measured by percent change in GDP per job over the period.
• Total GDP per job soared 14.1% in total from 2001-2005, compared to Raleigh's 3.1% growth over the same period (which was significantly worse than the 100-metro average of 9.5% growth.)
• The Bull City's MSA (including Chapel Hill) ranked #1 in the U.S. for PhD attainment rate (3.1%) and third for the share of population working in R&D -- behind just San Jose and Palm Bay, Fla.
• From an environmental perspective, Durhamites emit 20% fewer metric tons of carbon per capita than the average U.S. resident, though the average vehicle miles travelled for passenger and freight vehicles exceeds top-100 metro areas averages by one-ninth.
• For all the good news, though, Durham ranked seventh-worst in income inequality, with top earners in Durham-Chapel Hill earning almost seven times more than the lowest earners. (San Jose, not surprisingly, was the worst in this regard in the country.)

Read more over at the Herald-Sun or via the Brookings web site.

Comments

[barry]

"For all the good news, though, Durham ranked seventh-worst in income inequality, with top earners in Durham-Chapel Hill earning almost seven times more than the lowest earners. (San Jose, not surprisingly, was the worst in this regard in the country.)"

Kevin - i know we wanted to discuss this in depth on the radio show at some time. First, i'm glad to see that the report has been corrected to reflect that there's a 7x gap between lowest and highest wage earners in the county, rather than the 7% that was initially published.

But those numbers are still not making sense to me, to be honest. Let's assume (as good economists) that our lowest wage earners are making minimum wage, or $5.15/hour. That puts our top wage earners at $36.05/hour, or just about $75K per year. Quite honestly, that doesn't strike me as inequitable, or even realistic. I know plenty of people making minimum wage or thereabouts, and plenty more who are making well above $75K. Those numbers just don't make any kind of sense.

If you assume that our lowest wage earners are making less than the minimum wage, it gets even screwier.

It's not the people earning in the $75K to $500K range who make for inequity in wealth distribution. It's the CEOs who are making 8 figures plus bonuses while at the same time their companies are losing ungodly amounts of money (cf - Ford Motor) and laying off hourly wage earners, renegotiating health benefits out of retirement contracts, underfunding pension plans and expecting the feds to bail them out, etc.

Now, granted, i'm just reading the summary, and not the entire report, so perhaps this mistake is corrected in the nuts and bolts. But i'm having a hard time getting worked up over a paper that just doesn't pass the smell test in a major way.

[Todd]

Page 25 of the report states that "To begin with, wage inequality—as measured by the ratio of the highest to the lowest hourly wage deciles—remains high."

If you assume the lowest hourly wage is indeed minimum wage, I guess it's possible that the 90th percentile of earners make $75K, although I also would have expected it to be higher as well...

[Andrew Edmonds]

I had heard long ago that a 7:1 ratio between the top and bottom income earners was a decent attempt at equity. Ben and Jerry of ice cream fame certainly thought so.

http://query.nytimes.com/gst/fullpage.html?res=9C01EFD71E3AF937A25755C0A962958260

[KH]

Note - I haven't read the article or the report yet.

With that being said, inequity usually occurs when you have a significant number of people making over a certain amount while you another considerable batch of people who are barely making it.

In an area that constantly wins awards for its quality of life and education attainment, the people who are barely making it can be forgotten. Warning: The following isn't based on scientific data...Based on the many people who I've come across in Durham, there are many who are making significantly less money than they were 5-8 years ago. There were many well-paying manufacturing jobs at Nortel, IBM, etc. that do not exist anymore. These people don't show up in too many stats (i.e. unemployment, median income, etc.).

So basically, we have to rediscover how to be globally competitive. That is the reality of the current economic environment.

[Bull City Rising]

@Barry: I'm not surprised at all to see $75k at the upper decile of income and earnings. I've not had time to dig into original sources, but according to this helpful Wikipedia retelling of Census data (http://en.wikipedia.org/wiki/Household_income_in_the_United_States), if you look at households together, HHs with $150k or more of income -- the equivalent of 2 $75k workers -- represent a small portion of the population, perhaps 5% of HHs.

As you'd expect, the data indicate that a two-person household with two wage-earners is the key to economic sustenance. One-earner male-headed HHs are next, followed by single-parent female-headed HHs.

The fact that we both know plenty of people who make over $75k per year, I suspect, says more about our access to economic elites -- and the decline of the middle class that makes us realize how little, really, $75k actually represents. The fact that we know people in the bottom decile, too, speaks both to the economic diversity of Durham and, sadly, the lack of wealth equality in the U.S.

Incidentally, Harvard Magazine's cover story this month on growing income inequality is a good read for those interested in the subject: http://harvardmagazine.com/2008/07/unequal-america.html

"The United States is becoming even more unequal as income becomes more concentrated among the most affluent Americans. Income inequality has been rising since the late 1970s, and now rests at a level not seen since the Gilded Age—roughly 1870 to 1900, a period in U.S. history defined by the contrast between the excesses of the super-rich and the squalor of the poor.

Early in the twentieth century, the share of total national income drawn by the top 1 percent of U.S. earners hovered around 18 percent. That share hit an all-time high in 1928—when top earners took home 21.1 percent of all income, including capital gains—then dropped steadily through the next three decades. Amid the post-World War II boom in higher education, and overall economic growth, the American middle class swelled and prospered, and the top 1 percent of earners took home less than 10 percent of all income through the 1960s and 1970s. Since then, the topmost 1 percent have seen their share rise again: it shot past 15 percent in 1996 and crested at 20.3 percent in 2006, the most recent year for which numbers are available."

[Barry]

Man, i've just spent the past 45 minutes crunching numbers and maybe that's correct - $75k might just represent the 90th percentile of wage earners in Durham County.

At least, based on what's published here:
http://quickfacts.census.gov/qfd/states/37/37063.html

That still doesn't feel like such a wide gap to me. I guess that in towns where the 90th percentile is much higher than that, there are far fewer people at the minimum wage end of the scale.

BTW - that Ben and Jerry's article is getting on almost 15 years ago. Ben Cohen's salary then was given as $133,212. Dividing that by 7, you get around $19K, or about $9.15 an hour. They were paying a lot more than minimum wage back in the day. I wonder if retail clerks were making that in 1994, or if they were considered to be employees of the franchisee rather than the corporation?

[Paul Dudenhefer]

I was less impressed by the article. It was simply an account of the statistics in the Brookings study, rather than a piece of investigative reporting. What's more, I found the headline terribly misleading. The income gap was just one of many statistical items the story reported.

[chris]

I am also surprised to see that $75K represents the 90th percentile for wages in Durham. I don't really view $75K as being a particularly good salary in this area. I've heard that a traditional measure of how much one should spend on a house is 2.5 times annual salary. So, at $75K, a house priced at $187,500 would be appropriate. That amount just doesn't seem to buy a very extravagent house in Durham, particularly in the nicer urban neighborhoods.

[KH]

Isn't 187,500 close to the median housing price in Durham? If that's the case, that would explain our high rental rate. It would also mean that there a bunch of people stretching to afford a little more/better house.