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.
Wednesday, May 21, 2008
Income Inequality in Montgomery County
Tuesday, May 20, 2008
Income Inequality in Maryland
Last month, the Center on Budget and Policy Priorities (CBPP) and the Economic Policy Institute (EPI) released a study on income inequality in all 50 states. We reproduce their results for Maryland below and add some new research of our own in Part One of a two-part series.
The above analysis shows that income inequality has been growing steadily in Maryland since at least the 1980s, as it has been in the rest of the country. Why is that? There are many potential explanations, but as a union researcher, my natural inclination is to look at the labor market. What is happening to pay for Marylanders?
The Bureau of Labor Statistics’ Occupational Employment Survey program releases occupational employment and wage data from surveys of employers at the national, state and metropolitan area levels. The program has produced methodologically consistent longitudinal data going back to 1999. While some of the data is handicapped by small sample sizes and resulting large standard errors, many occupations report wage levels within 95% confidence intervals even at the state level.
We picked a list of 15 of the highest-paying occupations and 15 of the lowest-paying occupations in Maryland. The high-paying occupations all paid at least $35 per hour in 2007 dollars and the low-paying occupations paid $14 per hour or less. All of these occupations reported standard errors associated with their wage estimates of 6% or less. Together, these occupations accounted for 28% of all employment in the state in 2006 and they accounted for most of the employment at the upper and lower ends of the wage distribution.
For each occupation, we report employment and mean hourly earnings in 1999 and 2006, deflated with the CPI-W into 2007 dollars. We then compute weighted averages (by employment) for each occupational group and compare it to the state average. Below are our results.
As you can see, the 15 high-paying occupations saw a weighted average hourly earnings gain of 19.2% in real dollars. The 15 low-paying occupations saw a gain of just 0.4%, a statistically insignificant difference from zero. Six of these occupations saw real earnings losses. On average, Maryland workers saw a gain of 7.2% in real dollars, or about 1% per year over the period.
But the employment data is also instructive. The fifteen high-paying occupations saw a combined employment drop of 11%. The fifteen low-paying occupations saw employment grow by 18%. This change in employment patterns may be just as meaningful in driving labor market inequality as the change in the wage structure.
The above data applies to only 30 occupations over just one seven-year period. It cannot be considered as comprehensive as EPI’s work or a true peer-reviewed academic study. But the behavior of the upper and lower ends of Maryland’s occupational earnings distribution strongly suggests one source of the state’s growing income inequality.
Maryland’s labor market is rewarding a smaller and smaller number of people at the top with above-average real earnings gains. At the same time, it is punishing a larger and larger number of people at the bottom with no real earnings gains at all. And there is no reason to believe that this trend will end anytime soon.
In Part Two, we will use a very different methodology to examine income inequality in Montgomery County.
