Income Inequality Smaller in Nonmetro
The income gap between rural America’s richest and poorest residents has expanded in recent decades, but income inequality is greater in metro areas.
[imgcontainer][img:household_income_inequality.jpg] [source]Scott Albrecht/March Current Population Survey, 1968-2012Income inequality in metro areas (blue line) has accelerated beyond the nonmetro rate (orange line) since the second half of the 1980s. Click chart to enlarge.
EDITOR’S NOTE: This article is excerpted from a policy brief issued by the National Agricultural & Rural Development Policy Center. The complete brief is available here.
Household income inequality is higher today than four decades ago for both metro and nonmetro populations. The inequality trend, however, for metro households has been much steeper. …
Why has inequality risen faster among metro households than nonmetro households? Essentially, the key processes driving up income inequality between households are urban phenomena. For example, economists note that new technologies complement skilled workers, a trend known as skill-biased technological change. Tasks traditionally performed by moderately-skilled workers can now be executed more efficiently by a skilled worker with a computer, for example. This trend has been mirrored by a decline in private sector union membership and good-paying manufacturing jobs. New technologies also created new opportunities for “superstars” (actors, athletes) to reach larger markets.
The growing skill gap, declining manufacturing employment, and higher incomes for economic “superstars” are especially important in urban areas. For example, research by Don Albrecht (2012) shows that incomes for less-skilled workers are similar for metro and nonmetro workers, but the gap between those with a college degree and those without is much larger in metro areas. This has two effects. First, as opportunities for less skilled workers have stagnated over the last several decades, the impact on inequality has been larger in metro than in nonmetro areas. Second, talented, well-educated rural residents are drawn to urban areas where they can claim a higher salary.
Along those same lines, the richest Americans have enjoyed stronger income growth than most Americans; nonmetro households represent 16.3% of all households but less than 5% of the richest 1% of households by household income (according to the ACS five year sample, 2007-2011). Economic superstars – CEOs, athletes, musicians, and hedge fund managers – are concentrated in big cities. For nonmetro Public Use Microdata Areas (PUMA), there is a stronger correlation between the poverty rate and household income inequality. On the other hand, inequality in metro PUMAs is more strongly influenced by the share of very rich households.
The level of inequality also varies across rural areas. Inequality is significantly higher in the South and lowest in the Northeast and Midwest. Again, this highlights the relationship between poverty and inequality in nonmetro areas. Poverty and inequality are especially high in regions with large, historically disenfranchised populations.
[imgcontainer] [img:median_personal_incomes.jpg] [source]Source: Don E. Albrecht, “A Comparison of Metro and Nonmetro Incomes in a Twenty-First Century Economy.” Journal of Rural Social Sciences 27(1): 1-23.This chart shows the difference between average incomes of metro and nonmetro residents by education level. The higher the education level, the greater the gap between metro and non-metro income levels. Click chart to enlarge.