Income inequality is greater on the coasts and in the South than it is in the Midwest, according to a new report from the New York Federal Reserve.
Using data from the U.S. Census Bureau, the report looks at the ratio of earnings for those in the 90th percentile of wage distribution compared to the 10th percentile in cities around the country. Unsurprisingly, the Fed finds that the most unequal places in the country are large urban areas, while the least unequal places are concentrated in the Rust Belt, which includes Michigan, Ohio and Pennsylvania.
Here is where wages are most and least equal, according to the report:
- Workers in the top 90th percentile in Bridgeport, Connecticut, earned 8.7 times as much as those in the 10th percentile, the most unequal wage distribution on the list.
- In the New York metro area and San Francisco, workers in the top 90th percentile earned seven times as much as those in the 10th percentile.
- On the other end of the spectrum, 90th percentile earners in Detroit earned 5.5 times as much as those in the 10th percentile.
- Workers in the top 90th percentile in St. Louis earned 5.3 times as much as those in the 10th percentile.
The wage inequality seen in major cities like Chicago, Houston, New York City, San Francisco and Washington D.C. can be attributed to the “local effects” of technological change and globalization over the past few decades, according to the report, requiring a large number of highly-skilled workers.
As companies need more and more highly skilled and educated workers to keep up with global advancements, those workers are seeing large wage increases, while less-skilled workers see earnings stagnate. Highly-skilled workers, in turn, are flocking to these places, leading to the increased disparity in earnings. Southern cities in Texas, Alabama and Louisiana are also experiencing this growing inequality.
“In places like these, wages for skilled workers toward the top of the wage distribution have increased significantly relative to those at the middle and bottom, resulting in relatively high levels of wage inequality,” reads the report.
This map shows the ratio between what workers in the 90th income percentile and workers in the 10th percentile earn in cities across the U.S.:
Meanwhile, smaller cities like Cleveland, Minneapolis and St. Louis have seen less inequality between earners at the top and bottom. These cities have fewer companies requiring highly-skilled workers than those in the large urban areas noted above.
Still, globalization and technological changes are having profound economic impacts in the Rust Belt, too, compressing all wages “within a fairly narrow range.”
Detroit exemplifies the trend, per the report: Increased global competition and tech advances precipitated massive job losses and plant closures in the auto industry, displacing lower- and mid-skilled workers. At the same time, “demand for the most skilled workers has been weak in many of these places,” according to the report. While income inequality is lower in Detroit than in other large cities, workers of all skill levels are not seeing earnings increase like they are in other parts of the country.
The report comes a few weeks after the Census Bureau reported that in 2018 inequality in the U.S. reached the highest level since the agency started keeping track, over 50 years ago.
Skilled workers and those with college degrees have increasingly concentrated in large urban areas since the 1980s, according to the Fed. At the same time, “lesser-skilled workers have increasingly been priced out of such places — in no small part because of high and rising housing costs,” which has an impact on wage inequality growing more in larger, urban areas.
Like this story? Subscribe to CNBC Make It on YouTube!