Calculating and using the Gini index for suburbs

The Gini index is often invoked for countries but it would be interesting to see it regularly utilized for suburban communities:

There are multi-million dollar McMansions and blue-collar families just trying to make ends meet. Across New Jersey, the gap between the rich and the poor continues to get wider.

But how are things changing in your town?

The Census calculates income inequality using a measure called the Gini index, which assigns a value between 0, which would mean complete equality, and 1. The closer a score is to 1, the more wealth is concentrated among fewer people and the bigger the income inequality.

My first thought is that I wonder how much income hetereogeneity suburbs have. There can be quite a bit of income or class segregation across different suburban communities but some of the larger suburbs could have quite the variation.

Then, it would be interesting to see how such information would be used. Would suburbs with less inequality use this as a selling point? Would community groups and activists be able to pressure suburbs into change with this statistic?

Finally, it would probably take a lot of work for this figure to become as widely known for suburbs as it is across countries. Yet, at this point, there is not an agreed-upon figure that works like this in order to compare suburbs. Median household income or the poverty rate can be used in this manner. Population figures probably matter the most for suburbs: it gives a sense of the character of the community and also hints at the growth that may be taking place.

New Census data on income inequality by state, metro areas

Based on American Community Survey data from 2005 and 2009 and working on the assumption that “Spatial income inequality is neither intrinsically bad nor good,” the Census has a new report on income inequality. Here are some of the findings:

The report, by Daniel H. Weinberg, analyzed income data at various geographical levels and found that the region encompassing New York, northern New Jersey, Long Island and parts of Pennsylvania had the highest income inequality of any large metro area.

New York State also has the highest income inequality of all 50 states (although Washington, D.C., was worse).

Below is a map showing three measures of income inequality for each state: the Gini index (which ranges from 0.0, when all households have equal shares of income, to 1.0, when one household has all the income and the rest has none); a ratio of household income at the 90th percentile to that at the 10th percentile; and a ratio of household income at the 95th percentile to that at the 20th…

After New York, Connecticut, Louisiana, Mississippi and Texas have among the most unequal income distributions. At the low end are New Hampshire, Alaska and Utah, which is the most economically homogenous state in the nation.

The states that are above the US averages are an interesting group: Texas, New York, and California (tied to larger populations?) but also Louisiana, Mississippi, Alabama, Connecticut, Massachusetts, and Washington D.C. Table 8 and 9 of the report have correlations and regression coefficients to look at the relationship of inequality measures to demographic characteristics. (Intriguingly, the regression is a stepwise regression analysis.)

Of more local interest: Illinois is lower than the US averages on two of the three measures and Chicago has a very similar Gini Index to the US average. And of places with more than 100,000 people, Elgin, Illinois has the lowest Gini Index value.

Here is part of the conclusion of the report:

This paper has shown that low income inequality at the neighborhood level is most likely a result of income sorting. In other words, it may be that higher-income households, when they can, choose to live away from lower-income ones, sometimes forming “enclaves” with little income variation. Alternatively, it may be that developers concentrate higher-end houses in certain tracts and those can be afforded only by households of higher incomes.

This uses more neutral language of sorting but we could probably tie this to larger processes of residential segregation: those with money (with wealth related to race) have the opportunity to live in their own communities and leave everyone else behind.

It will be interesting to see how this report gets spun by Occupy Wall Street supporters and those opposed and in the ongoing presidential race.

New census findings on growing American income gap

The United Census Bureau released 2009 income figures recently and the news is not good: the income gap between the richest and poorest is at its widest level since 1968.

The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations.

At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower.

Several key things to note:

1. A complete historical perspective is not possible since the Census didn’t collect household income information before 1967. But this most recent data can still be compared to 40+ years.

2. The US has the largest Gini coefficient, a statistic used in a lot of international comparisons of income, of any “Western industrialized nation.”

3. Even with the recent economic troubles, the incomes of the wealthiest (the top 5%) went up while those around the median income (about $50,000), with 50% of American below this income level, went down.

These are statistics that still matter and have important societal consequences without having to get into a discussion about whether it is moral or immoral for people to earn a lot of money.