Income inequality since the 2007 recession has grown faster in the city of New Haven than in any other American city, according to a Jan. 14 study.
Natalie Holmes ’10, a senior research assistant at the Brookings Institution — a nonprofit public-policy organization based in Washington, D.C. — and Alan Berube, a senior fellow and former policy advisor to the U.S. Treasury, led the study. It analyzed income inequality in both major cities and surrounding metropolitan areas. Holmes said she and her co-author took 2014 data from the Census Bureau to determine the gap between what the top 5 percent of earners make relative to the bottom 20 percent in each city and region. To determine the rate at which income inequality is growing, Holmes and Berube compared the 2014 data to the income inequality from 2007 to 2014. While New Haven topped the list for the rate at which inequality is widening, it placed sixth on the list of cities with the largest disparity between the top 5 and bottom 20 percent of earners. In 2014, the residents composing New Haven’s top 5 percent made 15.3 times as much as those in the bottom 20 percent.
In 2014, the bottom 20 percent of New Haven residents earned $12,293 or less, while members of the top 5 percent earned $187,984 or more.
“In New Haven between 2007 and 2014, we saw a 30 percent decrease in what bottom income earners were making,” Holmes said. “That merits investigation.”
According to the data, income inequality has been increasing across the country since the 2007 recession.
Holmes said while she and Berube have conducted the study for three consecutive years, the previous two papers looked exclusively at cities, which are legal entities whose legislation affects income inequality within their jurisdictions. But, Holmes noted, economies are often regional in scale, which is why she and her co-author examined metropolitan areas for this year’s study.
She said one of the largest problems posed by income inequality is the challenges it raises for municipal authorities who may then struggle to maintain a tax base large enough to support services for residents. Berube added that inequality also causes significant housing problems, limiting the availability of affordable housing for those in lower income brackets.
“Local officials concerned about maintaining economic diversity and vitality should use housing and land-use policies to ensure that rising inequality doesn’t foreclose opportunities for a wide range of households to live in their cities,” Berube said in a statement.
But New Haven Economic Development Administrator Matthew Nemerson SOM ’81 said income inequality in the city is not a mark of failure. He said an effective economy is one in which members of higher income brackets have money to invest and spend in a way that benefits lower earners living in the same geographic location.
Nemerson said cities should focus on getting “more money into everyone’s pockets” — especially into the pockets of the bottom 20 or 40 percent.
“I think there’s not any necessary correlation between wealth and poverty within the defined geographical area,” Nemerson said. “The healthiest places on Earth have wealthy people living next to poor. I believe the saddest and least sustainable places are monocultures.”
Nemerson added that one factor that may drive Elm City inequality is its appeal to both immigrants and low-income residents. He said New Haven is a “sanctuary” featuring a mayor with a vested interest in providing services to residents, a strong housing authority and a host of nonprofits such as IRIS. Because New Haven is welcoming and inclusive, Nemerson said, it offers benefits to lower income individuals that other cities do not.
Between 2007 and 2014, the income of the bottom 20th percentile in New Haven fell by $3,767.