Wednesday, May 21, 2008

Income Inequality in Montgomery County

In Part One of our two-part series on income inequality, we reported that growing labor market inequality was fueling rising income disparities in Maryland. Today, we look at what is happening in Montgomery County.

The Bureau of Labor Statistics’ Occupational Employment Survey produces data at the metropolitan area level, including a series combining Montgomery and Frederick Counties. But small sample sizes at this geographic level handicap some of the individual occupational observations with unacceptably large standard errors. So we turned to a rich source of locality data that is less burdened with sample size issues: the decennial census.

The Census Bureau reports detailed demographic, economic and real estate data down to the census tract level (and even further) every ten years. We identified the five wealthiest neighborhoods and the five poorest neighborhoods, defined as census tracts and using per capita income, in Montgomery County in 2000. We then compared real per capita income, measured in 2007 dollars, in each of these census tracts between 1989 and 1999. We also looked up black and Hispanic population percentages for each census tract. In Potomac, we had to merge two census tracts to obtain comparable data for 1989 and 1999 because of changes in the area’s census tract definitions in the 1990s. We report our results below.

Measured by per capita income, the five wealthiest neighborhoods in Montgomery County are Chevy Chase Village, Potomac, the section of Bethesda west of its Central Business District, the Bethesda neighborhoods on either side of Democracy Boulevard and the Martin’s Addition and Rollingwood sections of Chevy Chase. The five poorest neighborhoods are Langley Park (separated into two census tracts), the section of Rockville east of the CSX tracks, the section of Wheaton west of Veirs Mill Road reaching up to Rockville, and the Oakview neighborhood in Silver Spring (southwest of the intersection of the Beltway and New Hampshire Avenue). On average, the percentage of black and Hispanic people living in the poorest neighborhoods is ten times their percentage in the richest neighborhoods.

Between 1989 and 1999, four of the five richest neighborhoods saw double-digit gains in real per capita income. Over the same period, every one of the poorest neighborhoods saw real losses. Together, the richest neighborhoods enjoyed a 15% real per capita income gain while the poorest neighborhoods suffered a 12% drop. The county as a whole saw a 4% real per capita income increase over this decade.

The 1990s was a relatively decent decade for America’s middle and working classes. Real wages ceased their two-decade drop and rose a little bit in many occupations. If Montgomery County’s poorest neighborhoods saw a double-digit real income drop in the 1990s, what is happening to them now?

Rising income inequality is a national, indeed a global, trend. Can Maryland’s state or county policymakers truly reverse it? Measures that might help thwart inequality include:

1. Encouraging unionization.
2. Funding public employee contracts, especially for the lowest-paid workers.
3. Investing in public education, the state university system, vocational training, apprenticeship programs and ESOL instruction.
4. Supporting minimum wage, living wage and prevailing wage laws as well as other worker protections (like Montgomery County’s domestic worker bill).
5. Cracking down on unscrupulous employers who cheat workers.

Will all of the above, if implemented with gusto, really make a difference? Possibly. But one thing is certain:

Every state legislator who voted to pass the regressive special session tax package and then opposed the millionaire tax effectively voted to make Maryland’s – and Montgomery County’s – income inequality worse.