Over the past 30 years, wealth disparities in the United States have worsened. While high-wealth families—those in the top 20 percent—saw their average wealth more than double, low-wealth families (those in the bottom 20 percent) saw their average wealth fall well below zero. As for those in the middle, their average wealth inched up only 13 percent.
A striking dimension of this wealth inequality—disparities by race and ethnicity—is highlighted in our new brief, coauthored with Eugene Steuerle and Sisi Zhang, and in the video above. On average, white families have six times the wealth of black and Hispanic families. So for every $6.00 a white family has in wealth, black and Hispanic families have only $1.00 (e.g., $632,000 vs. $103,000). The income gap, by comparison, is much smaller, although still substantial. On average, white families have twice the annual income of black and Hispanic families. For every $2.00 of income white families earn, black and Hispanic families earn $1.00.
While these ratios have not changed much over time, the real dollar value of the gap has grown. The average wealth of white families was $230,000 higher than the average wealth of black and Hispanic families in 1983. This grew to over $500,000 by 2010 (figure 1).
Are there other time dimensions to this disparity? Yes. The racial wealth gap grows sharply with age (figure 2). In 1983, whites in their thirties had an average net worth of $184,000. Today, these whites, who are in their early sixties, have accumulated $1.1 million in wealth, on average. In contrast, black families have seen their wealth go from $54,000 to $161,000 and Hispanic families from $46,000 to$226,000. White families started with about 3.5 to 4 times more wealth than families of color in their 30s, but had 7 times more wealth in their 60s. In other words, these initial racial differences grow over the life cycle both absolutely and relatively.
Though the United States is one of the wealthiest countries, this prosperity remains out of reach for many Americans. Blacks and Hispanics, who strive to make a better life for themselves and their families, are not on the same wealth-building paths as whites. They are less likely to own homes and retirement accounts, so they miss out on these traditionally powerful wealth-building tools. Families of color also lost a greater share of their wealth in the aftermath of the Great Recession.
A common misconception is that poor or even low-income families cannot save. Evidence from savings programs and research shows they can.
Wealth is where the economic opportunity lies. Social safety net programs emphasize consumption, and many even discourage saving by making families ineligible if they have a few thousand dollars in savings in some states. Wealth-building policies, on the other hand, are delivered as tax subsidies for homeownership and retirement. Families of color are less likely to be able to use these tax subsidies, so benefit little or not at all. Without fair policies, paths to building wealth can vanish. Reforming policies like the mortgage interest tax deduction so it benefits all families, and helping families enroll in automatic savings vehicles, will help improve wealth inequality and promote saving opportunities for all Americans.
The prime ministers of Kosovo and of Serbia initialed an agreement Friday to normalize relations between their two countries. This accomplishment—at the last hour and under the careful and forceful leadership of the EU’s Catherine Ashton—does not, by itself, reconcile the long-standing enmity between neighbors in Kosovo, a territory now recognized by 90 countries as a nation. The devil is in the implementation details yet to be worked out.
Hashim Thaci of Kosovo and Ivica Dacic of Serbia have each made a calculation that balances domestic political pressures from radical elements against the need to secure the economic and political benefits of more open trade with the EU and others, greater investor confidence, and wider opportunities for citizens. The frozen conflict left behind by the Athisaari Plan of 2006 has thawed a little as a special level of autonomy from Pristina has been agreed for the Serb-majority area of Kosovo, but most pointedly for the area north of the Ibar River. Until now, this territory has been outside the effective control of the Kosovo government, and only loosely policed by NATO-KFOR troops.
Reports of the agreement are that the laws of Kosovo will apply in the North. There is successful precedent for this. Six other Serb-majority municipalities in Kosovo already have been working under the laws of Kosovo since 2008 and have formed effective and democratic local governments. They cooperate with their neighboring Albanian-majority municipalities in areas such as water distribution and solid waste management. They deliver most services to their citizens. Unlike the isolated communities in the North, they have been “getting on with getting on.”
The fifteen points of agreement reached on Friday just scratch the surface of needed implementation details, but two aspects are especially important: elections to be held ion 2013 in the communities north of the Ibar River, and the integration of police in northern Kosovo into the Kosovo Police Service.
The existing Serb-majority municipalities in southern Kosovo have already made these transitions. Serbs there voted and elected local governments in 2009, under Kosovo laws. The governing coalition in the current Kosovo government includes an ethnic Serb party. Also, Kosovo police operate in these communities, providing security that is increasingly professional. The same can be true in northern Kosovo, given both time and patience.
The Challenges to “Normalizing” Society
For all that the weekend’s news is worth celebrating, the road ahead will be challenging. Plenty of people have benefited from the lawlessness and conflict in northern Kosovo. Criminals who are smuggling fuel (or weapons) have found northern Kosovo’s lightly governed regions a safe place to do business. These criminals represent interests unlikely to welcome a return to order.
Separately, some officials have been drawing two salaries: one from the government of Kosovo and one from the government in Belgrade, both governments staking claims to the region. Though these officials represent a more orderly aspect of life in the North, they are not likely to think well of “normalization,” with its attendant pay cuts.
To date, key public services such as health care, water, and education have been provided in northern Kosovo (however poorly) by parallel structures elected outside Kosovo laws and oversight and funded by Belgrade. This structure evolved under the umbrella of the aging UN Resolution from which Kosovo emerged from war. This mishmash of authorities has fostered isolation and exclusion from the progress made in the Serb-majority areas of the rest of Kosovo.
Indeed, isolation, exclusion, and a weak governing structure have made room for criminal behavior. Serb firms based in the North routinely use violence to intimidate competitors and these “business practices” are often reported (incorrectly) as incidents of Albanian-Serb tension. Smugglers bring goods across the poorly controlled border with Serbia, avoiding customs duties and costing taxpayers in both nations hundreds of thousands of Euros each year.
The agreement represents an important step forward in relations in the Balkans, but it will not overnight solve critical issues of governance and rule of law. It is not simply that Serbs in the North have to learn to trust new institutions governed by Kosovo laws. They must also be protected from continued predatory or rent-seeking institutions that have filled the governing and commercial gaps left open by the status quo.
This agreement opens the path for Serbia—and eventually Kosovo—to begin discussions about joining the European Union. This process ought to be accompanied by close attention to, and measurement of, their cooperation in restoring law and order in the North, creating space for modern state institutions to supplant solely ethnic or criminal social bonds.
The Urban Institute has been working with local governments in Kosovo since 2009 and with the recently established Mitrovica North Administrative Office since 2012, under contract with USAID. However, the views here do not reflect the views of the Urban Institute or of USAID.
In 2000 all 193 UN member states agreed to eight Millennium Development Goals (MDGs) for improving social and economic conditions in the world’s poorest countries. The target to reach these MDGs was set for 2015. While progress over the past 15 years is notable, much remains to be done to alleviate the plight of the poor around the world.
Discussions to establish a post-2015 global development agenda are well advanced, even if there is no clear consensus on how to reshape the global development goals and to achieve “the world we want.” Many thematic areas being discussed are already addressed by the current MDGs, including food security, access to basic education, basic health services, and clean drinking water. Some new thematic areas emerging in the post-2015 discussions include the need to improve governance, reduce inequality, and address conflict and fragility.
To a large extent, the discussions have been a debate between international development organizations based in New York, Washington, D.C., and the capitals of Europe and central government officials in the developing nations that are the most direct beneficiaries of development assistance. The debate so far has failed to look at global development from the bottom up and ask a fundamental question: how much (or how little) of the world’s official development assistance actually reaches the men, women, and children whose poverty is supposed to be reduced? Today the short answer to this question is too little. A more complete answer is that development experts pay too much attention to central governments and not enough to whether (and how) these efforts trickle down locally, to the people who should ultimately receive development assistance—and regular government services.
If the global development community is serious about achieving real, sustainable, and inclusive social and economic transformation over the next 15 years, it needs to have a much more serious debate about the nature of development and the public sector’s role in it. Four observations may help spark this discussion:
1. All development is local. Most development—and most pro-poor public services that people rely on day to day—takes place at the local level, whether it is schools for children, health care for mothers and children, seeds and fertilizer for farmers, or access to clean water and sanitation.
2. As such, subnational governance and the local public sector are critical to sustainable development. While good governance, equality, and inclusiveness are important development objectives in their own right, these themes are central to achieving development goals across the full range of proposed post -2015 targets. For instance, whether ensuring education for all or achieving universal access to clean drinking water, succeeding sustainably requires achieving good local governance, securing a strong role for the local public sector, and considering the notions of equity and inclusiveness. Without an effective local public sector, sustainable development will remain a pipe dream.
Achieving equitable and inclusive development requires us to think carefully about the (1) the structure of the public sector and (2) the importance of achieving a degree of equity in delivering public services across the national territory.
3. In order to be inclusive, the public sector has to be close to the people. One measure of inclusiveness is the efficiency of public expenditures—how much is spent on actual services people use. However, the public sector is “closer to the people” in some countries than other countries. For instance, in South Africa over half of public-sector spending takes place below the national level (the blue shaded areas in the graph below). This includes spending by provincial and local governments, as well as national government spending on services that are delivered locally. In contrast, in Bangladesh less than a fifth of public resources reach the front line for service delivery. Indeed, initial evidence suggests that the “vertical allocation” of public-sector resources varies considerably across countries. As such, an important target for the post-2015 development agenda should be to increase the share of resources used for frontline services, and to ensure that public resources are governed and managed close to the people.
4. In order to be equitable, the public sector has to distribute resources fairly across the national territory. Donors also need to target the territorial allocation of services. Government resources and development assistance should be spent where needs are greatest. The graph below illustrates a common situation in many countries: some local jurisdictions receive much greater allocations per person or per capita than other places—often up to 5–10 times more. While an equitable allocation of resources would mean the local jurisdictions with greater needs would receive more resources, the opposite is often true: often the politically well-connected places receive the greater per person allocations, while poor, rural communities are left to fend for themselves.
To the degree that development is about empowering people over their own lives, the discussions surrounding “the world we want” need to question the top-down development approach that has guided the implementation of the MDGs. People in the villages and towns and cities in Bangladesh and Tanzania, in Nepal and Peru don’t care about donor programs that mostly benefit those who run them, nor about abstract development indicators discussed in New York or Washington, D.C. They care that they have a school in their village to send their kids to; they care that the streets in their town are free from trash; they care that the water they drink won’t make them sick; and they care that they don’t have to bribe the doctor at the local health clinic in order to receive basic health services when they are sick or pregnant. In order to achieve real, transformative and sustainable development in a way that realizes the ambitions of the global development community, we cannot ignore the inclusiveness of the public sector, we cannot ignore good local governance, and we cannot ignore the equity with which government resources are distributed across each country’s national territory.
Photo by Flickr user mark242 used under Creative Commons License (CC BY-NC-SA 2.0)
Like most of us here at the Urban Institute’s Metropolitan Housing and Communities Policy Center, I live close to the heart of a vibrant and rapidly changing city that often inspires our research. Unlike most of my colleagues, however, this city is not Washington, D.C. I live in Baltimore, and every morning at a quarter to six I join my fellow “supercommuters” on the long trip south to D.C.
The stereotype of the supercommuter, born of the recent housing boom, is a drive-thru Starbucks-chugging road warrior, fighting bumper-to-bumper traffic to return to his McMansion in the middle of a former corn field in a far-flung exurb. But today’s supercommuters face diverse challenges that lead them to have long commutes.
Supercommuters may live far from their workplaces, not in search of nicer houses or better schools, but because they had to change jobs and couldn’t sell their houses. Or because the family is trying to accommodate two workers with jobs in different cities. In fact, supercommuters are increasingly under 29 and over 55—the most vulnerable workers in the current job market. Under-29s and workers earning less than $40,000 a year are more represented among supercommuters than in the general workforce.
These data reflect my own experience as a supercommuter. For the past eight years, I have cycled through a series of supercommuting routes, first as a Ph.D. student and then as a post-doc: Berkeley to Honolulu every two weeks (but that was hardly what I’d call hardship duty), Berkeley to Philadelphia every two weeks, Philadelphia to New York every week, and Baltimore to D.C. every day. My transportation ranged from long-distance flying, to Amtrak, to regional bus—you name it.
From my vantage point, Baltimore and D.C. are just a hop, skip, and a jump apart. And public transit makes it affordable—but not easy.While many who commute this route choose to drive (which no doubt contributes to our region’s perennial presence in Top Ten Worst Traffic lists), I use a combination of Baltimore city bus, MARC commuter train, DC Metro subway, Capital Bikeshare bicycle, driving, and walking—sometimes all in the same day.
In an upcoming series of posts, I’ll explore the growing stock of research on how commuting matters — for people’s economic well-being and happiness, local and metropolitan-area sustainability and resiliency, and the housing people choose as they enter young adulthood or old age. Look for reports from my own research, my Urban Institute colleagues’ work, and others’—all through the lens of a supercommuter.
Despite the recent recession, average household wealth approximately doubled between 1983 and 2010, and average incomes rose similarly. Older Americans shared in the rising economy and doubled their wealth. But, our recent research with Eugene Steuerle and Sisi Zhang reveals that younger generations have been largely left behind.
Today, people in their 20s and 30s (Generations X and Y) have accumulated less wealth than their parents when they were the same age about 25 years ago. The average wealth of 20- and 30-year-olds in 2010 was 7 percent below that of those in their 20s and 30s in 1983.
Change in Average Household Net Worth by Age Group, 1983-2010
Source: Authors' tabulations of the 1983, 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010 Survey of Consumer Finances (SCF). Notes: All dollar values are presented in 2010 dollars and data are weighted using SCF weights. The comparison is between people of the same age in 1983 and 2010.
As a society gets wealthier, children are typically richer than their parents, and each generation is typically wealthier than the previous one. But younger Americans’ wealth is no longer outpacing their parents’. Americans expect every generation to do better than the previous one, but this young generation is not. Why?
The Great Recession’s effect on housing hit the young particularly hard, as they were more likely to have the largest balances on loans and the least equity relative to their home values. Some ended up underwater on their mortgages and could not take advantage of recent low interest rates. Also, many young Americans have limited job opportunities in the post-recession economy, particularly as they leave school and enter the labor force.
But the young were falling behind even before the Great Recession. Student loan debt stands near $1 trillion, surpassing credit card debt. Other likely factors include delayed entry into the workforce, stagnant wages, and lack of educational attainment that is higher than previous generations.
In addition, public policy now burdens the young with ever-increasing interest payments on the federal debt. The cost of preserving retirement and health benefits for older Americans and baby boomers should not be passed on to younger generations who have already been losing out on their share of private wealth. Education has been shortchanged amid tightening state and local budgets, and post-recession policy has discouraged homeownership.
If current trends are not reversed, when today’s younger Americans retire, they may be more dependent on safety net programs less capable of providing basic support. The fall in wealth building among Gen X and Y may also have far-reaching implications for budget, tax, and education reform.
If we want to secure our economy’s future, we must make asset-building among the young a priority.
Created to help researchers, reporters, and residents understand how their local areas are changing, the new MetroTrends Data Dashboard transforms complex datasets into easily accessible, interactive charts and maps. Data are available on the local level, with comparisons to the United States as a whole.
The highlights:
Local unemployment trends.
Trends in employment by sector (private vs. government) and subsector. Maps of jobs by location. Trends in subsector employment and salary.
Housing price trends.
Trends in loan activity by loan type, loan amount, and borrower’s race and income.
The latest demographic and migration data. Maps of income, age, race, and education level.
Trends in property and violent crime.
What can we discover by examining the Washington, DC, metro region? The DC metro area gained 31,300 jobs between November 2011 and November 2012, driven primarily by education and health services, which gained 11,400 jobs. Over the past decade, the private sector in DC has experienced much greater job growth than the nation as a whole. Growth in professional and business services occupations, hardly impeded by the Great Recession, makes up most of DC’s private-sector job expansion.
Unemployment in the District has fallen to 5.1 percent, 2.5 percentage points lower than unemployment in the country as a whole. Housing prices have fallen slightly, but this decline is smaller than in most other metro areas. New residents from outside the metro region continue to move to DC. And crime has been decreasing faster than the rate for the entire United States.
Most occupations in the DC metro area pay higher salaries than similar occupations elsewhere. Compared with the nation as a whole, DC has about twice the average share of households making $100,000 or more. The District is also home to a higher share of African-American and Asian-American residents, adults with college degrees, and young professionals and middle-aged adults.
The MetroTrends team hopes that the Data Dashboard provides convenient, data-driven context and research assistance for exploring your metro area. All data used in the charts and maps are available for download via a link next to each dashboard subsection. For more technical users, custom downloads and the full metro datasets can be downloaded through our new Data Download Tool or through our additional data repository. We have also grouped all the dot density maps in one location to make comparison easy.
The third post in a MetroTrends series about California's incarcerated population. Read the first and second posts.
California’s jail population is rising as the result of the state’s realignment plan, which shifted offenders from the state prison system to local county facilities. But it’s not only the size of the California jail population that’s changing, it’s the composition. Jails hold sentenced inmates and pretrial detainees, and the majority of jail inmates in the United States have not been convicted of the offense that landed them behind bars. Since the Public Safety Realignment plan began, the number of jail inmates in California held pending adjudication has dropped 4 percent, while the sentenced jail population has increased 40 percent.
Under realignment, newly sentenced lower-level felons and supervision (parole and probation) violators who would have gone to state prison are now serving their time in county jails. This, in turn, has made the allocation of jail beds, already a scarce resource in many California counties, a critical public safety policy issue. Over the short term, we appear to be seeing a reallocation of those jail beds from pretrial to sentenced individuals. But this process is playing out differently in each of California’s 58 counties, based on pre-realignment jail populations, available jail capacity, budgets, crime problems, and other local factors.
Consider the 10 largest jail systems in California. Five of them (Alameda, Fresno, Kern, Los Angeles, and Riverside counties) saw their average daily population of sentenced inmates climb by 50 percent or more in the first nine months after realignment. By contrast, Sacramento and Santa Clara counties saw relatively small increases. In many of the large systems, the rise in sentenced jail inmates drove overall increases in the jail population. But in three of these large systems, the overall jail population fell due to declines in the pretrial population, with Alameda County seeing a large decrease (13.6 percent) in their jail population.
This variation early in the realignment era is an important reminder that not only is California undertaking a bold experiment in correctional policy, but also that this experiment is unfolding in very different ways at the local level.
In a recent report on truancy in DC, we found that for four public high schools in DC, most of the students were chronically truants in 2010-11, as defined by at least 25 unexcused absences. By definition, these students missed at least 5 weeks of school unexcused; on average, they actually had more than 40 absences. In four other high schools, more than 40 percent of students were chronically truant. At the other end of the scale, three high schools had a less than 5 percent chronic truancy rate and another three had rates below 10 percent.
Students who don’t attend school cannot learn very much and are on a path to dropping out. What should we do about this? I have three observations today.
1. Should we punish these students or expel them? Or punish their parents?
Expelling students for not attending school is an ironically ineffective way to improve attendance. Sometimes policy-makers want to use the justice system – in this case the Family Court – as a major way to respond. But when you think about the numbers, it becomes clear that the Family Court cannot practically be the major response to chronic truancy. In 2010, there were about 2,500 truants in DCPS high schools. Sending all of them—or their parents—to Family Court would swamp the court. Nor is it reasonable to send half the student population of several schools to court. Imagine the news coverage. Unfortunately, the court can do little with chronic truants that is constructive. It can order them to attend school. But when they don’t obey, the Court is in the position of threatening other punishments, such as detention, which do not improve school attendance. Truancy is not delinquency—even if it is a risk factor for delinquency—and should not be treated as such. And because punishing chronic truants through the court is unrealistic, the threat to do so is not very credible and has little deterrent value.
2. Are these high schools especially bad at managing attendance? Not necessarily. We found that the level of absenteeism across high schools in 2010-11 was very strongly predicted by the absenteeism history of current students when they were in eighth grade.
The differences among schools in their absenteeism levels were mostly about the tendencies of their students when they arrived at high school, than about how the schools managed those tendencies. I conclude that the most effective way to reduce high-school absenteeism is to address it before high school.
3. I believe that truancy and educational improvement and reform are largely interwoven, and at scale, these problems cannot be addressed independently. We have a chicken and egg problem: unless students attend school, they cannot learn, but unless the school is an effective place to learn, students have too little reason to attend. So, these problems need to be addressed simultaneously. The Chancellor of DC Public Schools, Kaya Henderson, has made clear in statements and testimony to the DC City Council that she believes schools need to be effective and engaging places for youth in order to make headway in addressing truancy. I agree.
Debates about income inequality and the shrinking middle class have largely focused on globalization, the declining share of middle-wage jobs, the eroding role of unions, technological change that benefits more educated workers, tax policies, and the share of income going to the top 1 percent. Often ignored is the question of whether we’re really measuring inequality accurately. Do standard measures of money income really capture inequalities in living standards? Not really. Because of differences in living costs across communities, higher incomes don’t necessarily translate into higher living standards. Housing costs reduce purchasing power in some communities more than in others. At the same time, income gaps can become more pronounced when low-wage workers are discouraged from moving to areas with high housing costs. Where people live, it turns out, matters a lot in measuring and accounting for the inequality of living standards.
Analysts of poverty trends have long recognized that cash income does not tell the whole story, since it ignores the importance of noncash public benefits, such as food stamps, housing assistance, and health coverage. Indeed, the Census Bureau is now taking into account noncash benefits and differences in housing costs when measuring poverty. Recently, researchers have begun analyzing geographic differences to explain trends in income inequality.
Several mechanisms are potentially at work, as Enrico Moretti of the University of California, Berkeley points out. Living costs may increase faster in areas where high-income, highly educated people are concentrated. The rise in living costs may come from more rapid growth in housing prices and in the prices of other goods and services linked to rising land values. High-income people may have moved to metropolitan areas where housing costs are especially high. By contrast, low-wage, less-educated workers have been less likely to move to areas where they would earn higher wages but not higher living standards. Moretti finds all of these factors at work, showing that the rising inequality in money income didn’t completely translate into rising inequality in purchasing power. According to Moretti, more than 20 percent of the rising money advantage of college graduates over high school graduates between 1980 and 2000 did not represent an advantage in living standards.
Locational differences can make income inequality appear worse than the actual inequality of living standards. Economists have long viewed local zoning requirements as harmful to low-income families by limiting their access to attractive suburban neighborhoods. By requiring large lot sizes, towns have priced low-income families out of their housing markets. Now, as highlighted by the New York Times Economix blog, Peter Ganong and Daniel Shoag of Harvard University have demonstrated that differential housing regulations are a major culprit in slowing the convergence of regional income gaps, thereby lessening the migration into high cash income, high cost areas communities and adding to the inequality in money incomes. High-wage areas used to attract all types of workers. As the supply of workers, including low-skill workers, went up in high-wage metro areas and fell in low-wage metros, wage differences between metro areas declined. In recent years, because high housing costs have increasingly offset higher wages, fewer workers have chosen to migrate within the United States. Thus, low-income families lose in two ways from restrictive regulations—those in highly regulated areas face higher prices because of limitations on supplies and those in other locations lose access to better paying jobs because they cannot afford the high-priced housing. Housing subsidies can shield some low-income families from increased housing costs in high-priced areas, but most low- and middle-income families receive no housing benefits at all.
To see how money income fails to capture purchasing power differences, compare the ability of low- and middle-skill workers and of median-income families to buy homes in four high-priced and four low-priced metropolitan areas. To simplify, let’s look only at the burden of a 30-year mortgage at a 4 percent interest rate. As the table shows, workers at moderate education levels face enormous mortgage burdens trying to buy homes in the four high-priced metro areas. But, homes in low-priced areas are quite affordable even among workers without a college degree. The gaps in affordability are far less in the case of family income. Still, a median-income family would have to spend more than double their share of income on the median-priced home in the Los Angeles or San Francisco metro areas than in the four low-priced metro areas. As a result, family income inequality across cities looks far higher when we don’t account for differences in housing costs. Median family incomes are 40 percent higher in San Francisco than in Oklahoma City, but the gap in income after mortgage payments falls to 9 percent. Since other living costs are higher in San Francisco, the differences in purchasing power are even smaller. The figures illustrate how inequality in purchasing power is often lower than inequality in money incomes.
Metropolitan Area
Median Wage High School Graduate Buys at the 25th Percentile of Home Values
Median Wage Worker with Some College Buys Median Priced Home
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