Some US cities now have worse inequality than Mexico, a study has shown

Skid Row, Los Angeles. Image: Getty.

The cities of the Americas are unequal places. US census data and recent American Community Surveys show that in most modern American metropolises, resources are unevenly distributed across the city – think New York City’s lower Manhattan versus the South Bronx – with residents enjoying unequal access to jobs, transportation and public space.

In 2014, New York City’s GINI inequality index was 0.48, meaning that income distribution was less even in New York City than in the US as a whole (0.39). It was also higher than the most unequal OECD countries, Chile (0.46) and Mexico (0.45).

Latin America, which is the world’s most unequal place, is also by far the most urbanised region of the globe. More than 80 per cent of its population lives in large cities. Between 1950 and 2005, the region’s big cities grew precipitously. Both Mexico City and São Paulo jumped from just under three million people to, in both cases, nearly 19m.

Data on urban inequality is largely unavailable, but it is clear that this rapid urbanisation has been far from equitable. According to a 2012 UN Habitat report, the large majority of Latin America’s non-poor population lives in major metro areas, while the poorest live in rural areas.

What does inequality look like?

No matter where you live, measuring inequality is tricky, because its incidence and extent changes in different parts of the city.

Sure, there are rich neighbourhoods and poor ones: high-income and low-income households sort themselves across cities according to preference (for local public goods and neighbourhood composition) and needs (according to budget, job location and housing prices).

But not every neighbourhood is comprised fully of households with the same income. Income sorting across space is often “imperfect”, meaning that rich and poor households might live in the same neighbourhood and share common social ties and local amenities.


As a result, a very specific and local kind of inequality emerges within neighbourhoods. This phenomenon is sizeable in US metro areas, Census Bureau data shows. Not only do unequal households live very close together, but neighbourhoods also represent small communities where local inequality, on average, seems to track overall urban inequality.

For example, New York City, Chicago and Los Angeles all have neighbourhood income inequality at least 20 per cent larger than Washington’s, which matches the difference in the cities’ GINI indices. We found that inequality within individual neighbourhoods has also been rising precipitously over the past 35 years (even in very small neighbourhoods), indicating an increase of income heterogeneity at the community level.

This unexpected finding is likely related to the comeback of North American cities over the past decade – the so-called great inversion. Across the Americas, jobs and firms are moving back into major metro areas, attracting more skilled people, who are generally young, receive higher wages and prefer to settle down where their jobs are.

As high-income young couples buy up homes in historically distressed neighbourhoods long dominated by the working and renting class – and gentrify them – they push up income heterogeneity in those places. This is happening in cities across the Americas.

Gentrification has occurred in many North American cities, increasing local income inequality and, in some cases, tensions. Image: Michael Premo/Flickr/creative commons.

Keeping up with the Joneses

We wanted to better understand this phenomenon. Why is local income inequality rising? How can we quantify it? What are the trends in uber-localised inequality? And what does it all mean for city dwellers?

Those were the questions driving our study – So close yet so unequal: Reconsidering spatial inequality in US cities – which focused on US cities. Our preliminary findings were recently published in a Catholic University of Milan Working Paper.

Unlike traditional assessments of inequality, which accept administrative partitions of the city as the unit of analysis and measure income inequality in those neighbourhoods, we look at inequality among neighbours, putting people at the centre of our analysis.

The underlying thought experiment consists of asking individuals to compare their income with that of neighbours living within a given distance range (from few blocks to entire census areas), thus quantifying income inequality in that particular person’s neighbourhood.

In doing so for every person in a city – any city – one should be able to measure two aspects of spatial inequality: the average income inequality within individual neighbourhoods (is my neighbour richer than me?), and inequality among the average incomes of each neighbourhood (is that neighbourhood richer than mine?).

We found that these two indices define a typology of cities that mirrors what urban planners have found at the city level. Some places are “even cities”. Like Washington DC, they display relatively low income inequality everywhere.

Other metro areas, among them Miami and San Francisco, show high urban inequality, but high and low-income households are rather evenly distributed throughout the city. These are so-called “mixed cities”.

The largest US metro areas also have the most unequal neighbourhoods. In New York and Los Angeles, the way high and low-income households are distributed across the urban footprint reflects what planners call the “unstable city” model.

The Great Gatsby in the ‘hood

Such substantial and increasing inequality appears to imply several contradictory things for cities and their residents.

As shown in Figure 1, lower neighbourhood inequality is associated, on average, with large upward mobility gains for young people who grew up in poor families, a phenomenon reported in recent work by Stanford University’s Raj Chetty.

Figure 1: upward mobility in America’s urban neighbourhoods. Upward mobility gains/losses for children living in poor families in 2000, by Commuting Zone. Image: author provided.

Children of better-off families benefit, too, from living in a homogenous local community, thanks to “positive contagion” facilitated by social interaction among wealthy young peers.

Both findings are evidence of a “Great Gatsby Curve” in America’s neighbourhoods. That is, greater income inequality in one generation amplifies the consequences of having rich or poor parents for the economic status of the next generation.
Yet greater income inequality within individual neighbourhoods may actually be a good thing for poorer locals. Figure 2 shows that they experience life expectancy gains, perhaps due to positive health modelling and increased aspirations among poor adult residents.

Figure 2: Life expectacy in America’s urban neighbourhoods. Image: author provided.

Addressing inequality

For policy makers, then, our findings create an intergenerational trade-off. A “mixed city” model would seem to promote life expectancy gains for poor adults who live there, while the “even city” ideal furthers economic mobility of young people who grow up poor.

Lessons learned from such a policy debate in the US could have important international consequences.

No one has yet applied our neighbourhood-based inequality analysis to Latin America’s unequal cities. But we can see that in metropolises such as Mexico City, and São Paulo in Brazil, as well as in smaller cities, uncontrolled sprawl and lack of urban planning has increased the distances between high, middle and low-income households.

The view from the Rocinha favela, in Rio de Janeiro, where ‘urban renewal’ is now encroaching on some of the poorest parts of the city. Image: AHLN/Flickr/creative commons.

This is the “polarised city” model, and our paper found little evidence of it in US cities (with the exception of Detroit and Washington). Such places have substantial heterogeneity in income across neighbourhoods and relatively little heterogeneity within neighbourhoods.

In Latin America’s polarised cities, the poor are separated from the rest of the population. As a result, they have lower access and opportunities for education, employment and services. This inequality has been exacerbated by gentrification and by the region’s growing global economic engagement. This has strengthened urban elites’ connections to the world while relegating Latin America’s poor further into the periphery.


In such cases, increasing the urban income mix seen in New York City might actually have beneficial effects for the city’s neediest residents. This is a relevant area for future study. It would be interesting, for example, to plot cities across the Americas on the same graph, examining regional trends in longevity and mobility based on neighbourhood-level inequality.

The ConversationSuch hyper-local analysis would offer both policymakers and international agencies the kind of information they need to improve the lives of today’s city dwellers, both now and in the future.

Eugenio Peluso is associate professor of economics at the University of Verona. Francesco Andreoli is a post-doctoral researche at the Luxemburg Institute of Socio-Economic Research (LISER).

This article was originally published on The Conversation. Read the original article.

 
 
 
 

Businesses need less office and retail space than ever. So what does this mean for cities?

Boarded up shops in Quebec City. Image: Getty.

As policymakers develop scenarios for Brexit, researchers speculate about its impact on knowledge-intensive business services. There is some suggestion that higher performing cities and regions will face significant structural changes.

Financial services in particular are expected to face up to £38bn in losses, putting over 65,000 jobs at risk. London is likely to see the back of large finance firms – or at least, sizable components of them – as they seek alternatives for their office functions. Indeed, Goldman Sachs has informed its employees of impending relocation, JP Morgan has purchased office space in Dublin’s docklands, and banks are considering geographical dispersion rather concentration at a specific location.

Depending on the type of business, some high-order service firms will behave differently. After all, depreciation of sterling against the euro can be an opportunity for firms seeking to take advantage of London’s relative affordability and its highly qualified labour. Still, it is difficult to predict how knowledge-intensive sectors will behave in aggregate.

Strategies other than relocation are feasible. Faced with economic uncertainty, knowledge-intensive businesses in the UK may accelerate the current trend of reducing office space, of encouraging employees to work from a variety of locations, and of employing them on short-term contracts or project-based work. Although this type of work arrangement has been steadily rising, it is only now beginning to affect the core workforce.

In Canada – also facing uncertainty as NAFTA is up-ended – companies are digitising work processes and virtualising workspace. The benefits are threefold: shifting to flexible workspaces can reduce real-estate costs; be attractive to millennial workers who balk at sitting in an office all day; and reduces tension between contractual and permanent staff, since the distinction cannot be read off their location in an office. While in Canada these shifts are usually portrayed as positive, a mark of keeping up with the times, the same changes can also reflect a grimmer reality.  

These changes have been made possible by the rise in mobile communication technologies. Whereas physical presence in an office has historically been key to communication, coordination and team monitoring, these ends can now be achieved without real-estate. Of course, offices – now places to meet rather than places to perform the substance of consulting, writing and analysing – remain necessary. But they can be down-sized, with workers performing many tasks at home, in cafés, in co-working spaces or on the move. This shifts the cost of workspace from employer to employee, without affecting the capacity to oversee, access information, communicate and coordinate.

What does this mean for UK cities? The extent to which such structural shifts could be beneficial or detrimental is dependent upon the ability of local governments to manage the situation.


This entails understanding the changes companies are making and thinking through their consequences: it is still assumed, by planners and in many urban bylaws and regulations, that buildings have specific uses, that economic activity occurs in specific neighbourhoods and clusters, and that this can be understood and regulated. But as increasing numbers of workers perform their economic activities across the city and along its transport networks, new concepts are needed to understand how the economy permeates cities, how ubiquitous economic activity can be coordinated with other city functions, such as housing, public space, transport, entertainment, and culture; and, crucially, how it can translate into revenue for local governments, who by-and-large rely on property taxes.

It’s worth noting that changes in the role of real-estate are also endemic in the retail sector, as shopping shifts on-line, and as many physical stores downsize or close. While top flight office and retail space may remain attractive as a symbolic façade, the ensuing surplus of Class B (older, less well located) facilities may kill off town-centres.

On the other hand, it could provide new settings within which artists and creators, evicted from their decaying nineteenth century industrial spaces (now transformed into expensive lofts), can engage in their imaginative and innovative pursuits. Other types of creative and knowledge work can also be encouraged to use this space collectively to counter isolation and precarity as they move from project to project.

Planners and policymakers should take stock of these changes – not merely reacting to them as they arise, but rethinking the assumptions that govern how they believe economic activity interacts with, and shapes, cities. Brexit and other fomenters of economic uncertainty exacerbate these trends, which reduce fixed costs for employers, but which also shift costs and uncertainty on to employees and cities.

But those who manage and study cities need to think through what these changes will mean for urban spaces. As the display, coordination and supervision functions enabled by real-estate – and, by extension, by city neighbourhoods – Increasingly transfer on-line, it’s worth asking: what roles do fixed locations now play in the knowledge economy?

Filipa Pajević is a PhD student at the School of Urban Planning, McGill University, researching the spatial underpinnings of mobile knowledge. She tweets as @filipouris. Richard Shearmur is currently director of the School, and has published extensively on the geography of innovation and on location in the urban economy.