Tag Archives: income

Education, income still linked to American digital divide

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The gap between those with Internet access at home in the United States is marked by education and income differences:

The quarter of American households still without Internet, not surprisingly, are disproportionately made up of families with less income and education. Of these 25 percent, half say they simply don’t want Internet, and about a quarter say it’s too expensive. As computers are increasingly replaced by other devices, from phones to tablets, any gap in penetration will seem less significant. Differences in internet access, though, will only become more so…

The Census Bureau’s latest data tracking internet and computer use in American homes suggest that both have become ubiquitous with impressive speed. About three-fourths of American households now boast both technologies, according to the Current Population Survey’s data, collected through late 2012. That’s up from 8.2 percent for computers back in 1984, and 18 percent for the Internet in 1997, when most of us who were online were dialing up to get there.

This is a persistent issue: those with fewer resources are not able to take advantage of what is available online. This becomes more and more problematic as all sorts of information and government services are accessed primarily through the Internet. Additionally, kids in lower income and education households don’t get as much exposure to the Internet.

It will be interesting to see if that number of Americans who say they don’t want the Internet changes in the near future. It may drop as more people see it as necessary. But, it might also rise if people see the Internet as a nuisance or is still better accessed elsewhere (like at a library).

Americans like homeownership – but some really dislike the process of obtaining a mortgage

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Recent data suggests numerous Americans don’t like the process of getting a mortgage:

To be fair, a little more than half the 1,000 people polled this fall found the buying-lending experience rather simple and easy to navigate. But nearly 1 in 4 said they would rather gain 10 pounds, and almost 1 in 8 would rather spend 24 hours with the person they dislike the most.If you think that’s bad, 7% would rather have a root canal, and almost that many would choose a night in prison over going through the mortgage process again.

Asked another way — “Which of the following makes you extremely uneasy or anxious” — obtaining financing again scored very low in the Guaranteed Rate study. In fact, more people were more comfortable with public speaking, being in high places, flying in an airplane, being around snakes and being in a confined space than they were going through the mortgage process.

This flies in the face of the latest J.D. Power mortgage origination satisfaction study, which found that more borrowers were pleased with their lenders now than at any time in the last seven years.

Overall customer satisfaction improved for the third consecutive year. But as you might expect, first-time buyers who have never had to navigate the system weren’t as tickled as repeat buyers and refinancers.

I remember a whole mess of paperwork though the actual numbers and costs didn’t seem too complicated. Several pieces of this process might lower people’s satisfaction:

1. The idea that someone knows all of your financial information. Americans are pretty guarded about their incomes (try bringing it up even vaguely in social settings) so even though the bank needs all of this information, it makes people nervous.

2. The purchase of a home will be the biggest single investment many people make so it induces nervousness about being tied down and having to make monthly payments for the next (usually) 30 years. Perhaps this kind of investment should make people nervous…

3. First-time homeowners are not well educated about what it takes to purchase a home, even if they have a strong idea that they should purchase a home. For example, HGTV shows the mortgage process isn’t much of anything at all: you go from liking a home, making an offer, to living happily ever after in the home. Granted, getting the mortgage and working out the details is not exciting television but there is little information about mortgages conveyed by these shows.

It is too bad the article doesn’t discuss the characteristics of those who disliked the mortgage process more. Could it be disproportionately lower-income residents who don’t have that much money to spare? Could it be younger adults who are used to processes going quicker?

Describing the 20% of temporary rich (“mass affluent”) Americans

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New survey data looks at new rich Americans who draw a lot of attention from companies and who might have outsized political influence:

Fully 20 percent of U.S. adults become rich for parts of their lives, wielding outsize influence on America’s economy and politics. This little-known group may pose the biggest barrier to reducing the nation’s income inequality…

Made up largely of older professionals, working married couples and more educated singles, the new rich are those with household income of $250,000 or more at some point during their working lives. That puts them, if sometimes temporarily, in the top 2 percent of earners…

Companies increasingly are marketing to this rising demographic, fueling a surge of “mass luxury” products and services from premium Starbucks coffee and organic groceries to concierge medicine and VIP lanes at airports. Political parties are taking a renewed look at the up-for-grabs group, once solidly Republican…

In a country where poverty is at a record high, today’s new rich are notable for their sense of economic fragility. They’ve reached the top 2 percent, only to fall below it, in many cases. That makes them much more fiscally conservative than other Americans, polling suggests, and less likely to support public programs, such as food stamps or early public education, to help the disadvantaged…

As the fastest-growing group based on take-home pay, the new rich tend to enjoy better schools, employment and gated communities, making it easier to pass on their privilege to their children…

Sometimes referred to by marketers as the “mass affluent,” the new rich make up roughly 25 million U.S. households and account for nearly 40 percent of total U.S. consumer spending.

This sounds like a group that would call themselves upper middle-class: wealthy enough to enjoy some luxuries and good things for their kids but not wealthy enough to truly compete with the millionaires and CEOs. They resent the idea that they are rich as they think middle-class values, such as hard work and providing for their kids, helped them arrive at their current position.

Yet, when the median household income in the United States is around $50,000 it is hard not see this group as wealthy. To some degree, it is all relative: the mass affluent might not be able to consistently live the high life in Manhattan or San Francisco but they could do really well in cheaper places like the Midwest or Atlanta or Dallas. Perhaps it is the perceived fragility that matters most: losing their job might be enough to move them down back near the median income, though unemployment rates are much lower for the educated and well-trained.

A few questions after reading this article:

1. How big should this group be in the United States?

2. Long-term, which party will capture these voters?

3. Will this group get a lot of negative attention as they are more accessible than the ultra-wealthy who can live more cloistered lives?

Looking at inequality in NYC by translating wealth differences into building heights

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It can be difficult to visualize inequality but here is an innovative way of doing so: imagining wealth as buildings in New York City.

In his most recent visualization project, the Pittsburgh-based artist and researcher re-imagines what the city’s skyline would look like if building height were a direct reflection of a neighborhood’s net household wealth. “I was inspired to create this project after standing atop Mt. Washington in my hometown of Pittsburgh and looking at the Pittsburgh skyline,” he explains. “I thought to myself, ‘What if you could actually see inequality?’ This relatively even landscape would look much different.”

Lamm, who is responsible for other viral visualizations like Normal Barbie, translated Esri’s map of median household net worth in New York City (based on 2010 Census data) into the bright green 3-D bars you’re looking at. Every $100,000 of net worth in a section on Esri’s map equals one centimeter in height on Lamm’s visualization. So if one section (which appears to consist of multiple blocks) had a net worth of $500,000, Lamm’s rendering would measure 5 cm high. Similarly, if another section had a net worth of $80,000, the green would appear at a much flatter 0.8 cm.

Of the maps/visualizations available here, the best one is probably the first one that shows much of Manhattan from the northwest looking southeast.

Choosing to visualize wealth rather than income is a strategic choice. Much talk about inequality involves income but this may be the wrong metric. Income is more about short-term access to money but wealth may be more important for longer-term outcomes (purchasing a house, etc.) and the wealth differences between groups are quite a big larger. For example, the differences in wealth between the top 5% and the rest of America are astounding as are the differences between whites and blacks as well as Latinos.

Additionally, singling out New York, particularly Manhattan, is an interesting choice. The differences here are indeed stark. Manhattan is the seat of the financial sector. But, few places in the United States would have this much wealth inequality.

More women now sole breadwinner (23%) or earn more of two working spouses (28%)

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USA Today takes a look at recent Census data and finds women’s status as breadwinner continues to grow:

A USA TODAY analysis of Census Bureau data reveals a revolution in the traditional roles of men and women that extends from college campuses to the workplace to the neighborhoods across this nation. Today, when one spouse works full-time and the other stays home, it’s the wife who is the sole breadwinner in a record 23% of families, the analysis finds. When the Census started tracking this in 1976, the number was 6%.

Just as telling, wives outearn their husbands 28% of the time when both work, up from 16% 25 years ago. This means the wife is bringing home the bacon — or at least more bacon than her husband — in more than 12 million American families.

Facebook chief operating officer Sheryl Sandberg (author of Lean In, which explores workplace biases) and Yahoo chief executive Marissa Mayer (who limited the company’s telecommuting policy) have stirred debate about the complex choices occurring as women push themselves higher and higher up the economic ladder. The earning superiority of women over men isn’t the rule, but it is increasingly common.

This is a consequential shift.

I do think the rest of the article illustrates the difference between journalism and sociology. The article goes on to give 12 brief overviews of couples where the woman is the primary breadwinner. They try to break down a few patterns. However, after seeing these statistics, I want to see more data (12 cases doesn’t cut out) and a more rigorous analysis (more statistics over time, more social forces that these changes affect).

Misinterpreting a graph of income in the US by misreading the X-axis categories

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Some graphs can be more difficult to interpret, particularly if the categories along one of the axes are not a consistent width. Here is an example: misreading a chart of income in the United States:

“When I was growing up in Canada,” says Jon Evans of Techcrunch, “I was taught that income distribution should and did look like a bell curve, with the middle class being the bulge in the middle. Oh, how naïve my teachers were. This is how income distribution looks in America today.”

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“That big bulge up above? It’s moving up and to the left. America is well on the way towards having a small, highly skilled and/or highly fortunate elite, with lucrative jobs; a vast underclass with casual, occasional, minimum-wage service work, if they’re lucky; and very little in between.”…

Er, no.  Look closely at those last two brackets.   Now look at the brackets immediately to the right of them? What do you notice?

Probably, you notice the same thing that immediately struck me: the last two brackets cover a much, much wider income band than the rest of the brackets on the graph.

Each bar on that graph represents a $5,000 income band: Under $5,000, $5000 to $9,999, and so forth.  Except for the last two.  The penultimate band is $200,000 to $250,000, which is ten times as wide as the previous band.  And the last bar represents all incomes over $250,000–a group that runs from some law associate who pulled down $251,000 last year, through A-Rod’s $27 million annual salary, all the way to some Silicon Valley superstar who just cashed out the company for a one time windfall of hundreds of millions of dollars.  Unsurprisingly, much wider bands have more people in them than they would if you kept on extrapolating out in $5,000 increments…

To put it another way, the apparent clustering of income along the rich right tail of the distribution is just an artifact of the way that the Census presents the data.  If they kept running through $5,000 brackets all the way out to A-Rod, the spreadsheet would be about a mile long, and there would only be a handful of people in each bracket.  So at the high end, where there are few households, they summarize.

The Census likely has good reasons for reporting these higher-income categories in such a way. First, because there are relatively fewer people in each $5,000 increment, they are trying to not make the graph too wide. Second, I believe the Census topcodes income, meaning that above a certain dollar point, incomes don’t get any higher. This is done to help protect the identity of these respondents who might be easy to pick out of the data otherwise.

But, this is a classic misinterpretation of a graph. As McArdle notes, this is a long-tail graph with very few people at the top end. The graph tries to alert reader to this by also marking some of the notable percentiles; above the $130,000 to $134,999 category, it reads “The top 10 percent reported incomes above $135,000” and above the top two categories, it reads, “approximately 4 percent of households.” Making the right interpretation depends not just on the relative shape of the graph, bell curve or otherwise, but looking closely at the axes and categories.

Selling car insurance by the mile

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The idea of replacing the gas tax with a tax by miles driven is being tested so what about car insurance by the mile? One company has introduced the concept in Portland:

You wouldn’t buy an unlimited fare card if you only took a few transit rides per month, but when it comes to car insurance that’s pretty much how things work. Drivers who are similar in age, gender, and residence pay about the same premium even if some drive 5,000 miles a year and others 50,000 miles. The problem is not only that low-mileage drivers end up subsidizing high-mileage ones — it’s that everyone has an incentive to drive as much as they can.

One idea to undercut this system is pay-per-mile car insurance. Earlier this month at The Atlantic, Matthew O’Brien explained (via this 2008 Brookings report; PDF) just how much America stands to save with such a service. Driving would fall 8 percent nationally; oil usage and carbon emissions would drop 2 and 4 percent, respectively; fewer traffic and accidents could be worth upwards of $60 billion a year.

Since city residents have transportation alternatives at their disposal, they’re likely to benefit from mileage-based systems more than most. That’s the basic idea behind MetroMile, a new per-mile car insurance company that launched earlier this month in Portland, Oregon. While conventional car insurance companies dabble in mileage programs, MetroMile was created explicitly with that low-car lifestyle urban driver in mind — even down to the name…

MetroMile users receive a device called a Metronome (sadly, the “N” isn’t capitalized) that plugs into the car and tracks mileage in real-time. Drivers pay a monthly base rate that’s around $20-30, says Pretre, then pay 2 to 6 additional cents per mile. He says anyone driving fewer than 10,000 miles a year should start to save, and once you get down to 8,000 miles, the savings approach 20 to 25 percent over major car insurers…

While it makes sense to introduce this in Portland or a number of other dense cities where mass transit usage or alternatives to driving are common, would this work as well in the suburbs? Would the costs of paying car insurance be enough to prompt people to change their living patterns? Maybe it depends on how much cheaper that car insurance could be or perhaps the quest for the cheaper house that provides more bang for the buck would still win out.

The 2008 Brookings report cited above titled “Pay-As-You-Drive Auto Insurance: A Simple Way to Reduce Driving-Related Harms and Increase Equity” makes an interesting point: increased driving is related to increased income (see page 10 and 40). In other words, Americans who have the money to do so drive more. This helps explain the reluctance of higher-income Americans to use buses.

What if education can’t level the playing field for Americans?

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American society often suggests education is the way to level out social inequalities. But, what if education isn’t playing that role in society? Three investigative journalists argue those getting the bigger payoff from education are wealthier Americans:

Yet over the past 20 years, America’s best-educated state [Massachusetts] also has experienced the country’s second-biggest increase in income inequality, according to a Reuters analysis of U.S. Census data. As the gap between rich and poor widens in the world’s richest nation, America’s best-educated state is among those leading the way…

If the great equalizer’s ability to equalize America is dwindling, it’s not because education is growing less important in the modern economy. Paradoxically, it’s precisely because schooling is now even more important…

Just to stay even, poorer Americans need to obtain better credentials. But that points to another rich-poor divide in the United States. Educators call it the scholastic “achievement gap.” It has been around forever, but it’s getting wider. Lower-class children are getting better educations than before. But richer kids are outpacing their gains, which in turn is stoking the widening income gap.

Across the country, a Stanford University study found last year, the achievement gap between rich and poor students on standardized tests is 30 to 40 percent wider than it was a quarter-century ago. Because excellent students are more likely to grow rich, the authors argued, income inequality risks becoming more entrenched.

This is a complicated matter and, as the article suggests, it is a politicized topic. Trying to sort this out would be very difficult, particularly since it is tied to where people live and how they can use their own resources to help their children succeed.

Washington D.C. the wealthiest city/metropolitan area in the country

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According to 2011 American Community Survey data, Washington D.C. is the wealthiest metropolitan area in the country:

D.C. area residents have a median household income of $86,680, well above the national average of $50,502.

The large salaries may be attributable to the nearly 47 percent of workers who hold college degrees, making Washington one of the most highly educated areas in the country.

The list also shows more adults in the area were able to find employment during a down economic time. Just 5.8 percent of the workforce were unemployed in 2011.

Only 8.3 percent of Washington homes are living below the poverty line — the fifth lowest ranking in the country.

Here is some common traits of the wealthier cities in the United States:

The biggest factor in determining a city’s income, according to Alex Friedhoff, a Research Analyst at Brookings Institute’s Metropolitan Policy Program, is the underlying industries that employ the most residents, as well as the type of jobs. High-tech jobs, particularly those related to computers and information technology, tend to pay higher salaries and are more likely to be located in areas with affluent residents. On the other hand, most of the jobs in the lower-income metro areas tend to be in retail, service, agriculture and low-tech manufacturing.

A review of the employment characteristics of the different cities confirms this. Included among the richest cities are the information technology centers of Boston and Boulder, the finance hub of Bridgeport-Stamford, and the San Jose region, better known as Silicon Valley, home to some of the largest chipmakers and computer parts manufacturers in the world. Nationwide, 10.7% of workers are employed in professional, scientific, and management positions. Of the 10 wealthy metro regions, nine have a larger proportion of workers in that sector. In Boulder, 21.9% fall into that category.

In the poorest economies, there is a much higher proportion of low-end manufacturing and retail jobs. In the U.S. as a whole, 11.6% of workers are employed in retail. In the 10 poorest metro areas, eight exceed that number by a wide margin, including Hot Springs, Arkansas, where 17.3% of its workforce is employed in retail.

Based on these listed traits, perhaps we can make this conclusion: cities that have better adapted to the new information age economy based on innovation, computers, and highly educated workers are doing the best in terms of income. Places that haven’t been able to attract this kind of industry are playing from behind.

An important note about these stories: while headlines suggest this data is about cities, it is really about metropolitan regions. So when Washington D.C. is cited as the wealthiest city, this is not quite true; the region is the wealthiest. While some might that the city itself is necessary for the whole region to exist or thrive, a lot of this wealth plus many of the jobs are actually suburban. Don’t confuse the two though this often happens in the media.

With the rise of single-person households, why would Money magazine report family income for their best places to live?

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I was recently looking at Money‘s 2012 list of the 2012 Best Places To Live and noticed something strange: they report family income and not household income. For example, look at the figures for Naperville, Illinois, #53 on the list (how Naperville has fallen so far on this list after being very near the top less than 10 years ago is another topic for another day): the median family income is $123,511.

Why does this matter? The median family income is generally higher than the median household income because the first only counts households with relatives living together while the second can include single-person households (as well as households with roommates and non-relatives.) This is not a small issue: tied for the most common household type in the United States today is the single-person household.

According to 2011 census data, people who live alone–nearly 33 million Americans–make up 28% of all U.S. households, which means they are now tied with childless couples as the most prominent residential type, more common than the nuclear family, the multigenerational family and the roommate or group home. These aren’t just transitional living situations: over a five-year period, people who live alone are more likely to remain in their current state than anyone else except married couples with children.

Perhaps Money‘s readers are primarily in family households but this still skews the data for the best place to live. Perhaps the feature should really be called the “Best Places for Families to Live”?

(Note: there is another issue for Naperville. The population in Money is listed at 152,600 while the Census reports a 2011 estimate of 142,773.)