America's Wage Gap Just Keeps Getting Worse

Since the recession, low-income households have turned into low-income regions.

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Workers demonstrate for a wage hike in front of McDonald's Illinois headquarters in May 2014 (REUTERS/Jim Young)

The economic paradox facing the United States becomes clearer every day: Even as the economy recovers, the gap between the haves and have-nots gets worse.

The U.S. economy now has more jobs than it did before the Great Recession. But the jobs being added are largely low-paying ones, and the wage gap between high and low income earners has grown substantially, according to a new report released this month by the U.S. Conference of Mayors and based on analysis from IHS.

Consider the gap between Americans’ annual wages before and after the Great Recession. As the report notes, the U.S. economy lost 8.7 million jobs in 2008 and 2009. The authors found that the average annual wage in sectors that experienced job losses in those years was $61,637. By contrast, in the 2nd quarter of 2014, the average annual wage in sectors that experienced job gains was $47,171. That 23 percent difference is nearly double the wage gap that followed the previous recession in 2000-2003.

Worse, those in the 80th percentile of earners took home an average of $104,906 in 2012, more than double (2.04 times) the median nationwide income of $51,017. That's a substantial increase from the 1975 ratio of 1.73.

And this was not driven by a few isolated cases. More than two-thirds of U.S. metro areas saw a shift in wealth toward higher income households from 2012.

The chart below, from the report, shows the metros that have the largest and smallest shares of low-income households, defined as those earning $35,000 or less. Metros in the South have the largest concentrations. More than half of households in Brownsville-Harlingen (55.1 percent) and McAllen-Edinburg-Mission (51.5 percent), Texas; Dalton, Georgia (52.0 percent); and Gadsden, Alabama (50.7 percent) take home less than $35,000 a year.

Conversely, the metros with the smallest shares of low-income households are mainly bi-coastal knowledge and tech hubs, like Washington-Arlington-Alexandria (17.0 percent); San Jose-Sunnyvale-Santa Clara (20.1 percent); Oxnard-Thousand Oaks-Ventura (22.7 percent); and Bridgeport-Stamford-Norwalk (23.1 percent). Of course, workers and their families face far higher housing costs in these metros, so their higher wages don’t always improve quality of life. 

U.S. Conference of Mayors and IHS 

The second chart, also from the report, shows the metros with the largest and smallest concentrations of higher income households, or those with incomes of $75,000 or more. It is more or less the reverse of that first chart.

U.S. Conference of Mayors and IHS 

There are three metros where more than half of all households make over $75,000: Washington, D.C., tops the list with 57.5 percent, followed close behind by San Jose with 57.3 percent, and Bridgeport at 52.5 percent. The rest of the top ten include tech hubs like San Francisco and Boston and higher-priced places like Anchorage and Honolulu. Southern metros dominate the list of those with the smallest shares of high-income households. Less than a fifth of workers in Dalton, Georgia; Brownsville, Texas; Fort Smith, Arkansas; and Gadsden, Alabama make more than $75,000 a year.

Once again, we come face to face with America's dual economic divides. Not only is the gap between the rich and the poor, the one percent and the rest, growing wider—the nation continues to split into have and have-not regions, with widely divergent economic prospects.

About the Author

  • Richard Florida is Co-founder and Editor at Large of CityLab.com and Senior Editor at The Atlantic. He is director of the Martin Prosperity Institute at the University of Toronto and Global Research Professor at NYU. More
    Florida is author of The Rise of the Creative ClassWho's Your City?, and The Great Reset. He's also the founder of the Creative Class Group, and a list of his current clients can be found here