Place-Based Income Inequality in the Rural North Central Region

1. Place-Based Income Inequality in the Rural North Central Region Presented to the North Central Regional Center for Rural Development on November 17, 2011. David J. Peters, Ph.D.Assistant Professor of Sociology Extension Rural Sociologist 1

2. OVERVIEW - Data and Methods. • Purpose … • To create a statistically valid typology of income inequality over time across micro-scale geographies. • To describe the demographic and economic characteristics of these groups in the NCR-W. • Data ... • Sub-county block-groups to prevent aggregation errors. Rural BGs for states in the NCR-W. • Data from 1979 and 2009 to offer long-term yet current look at inequality. 1980 Census and 2005-09 ACS. • Methods … • Cluster analysis to statistically group places rather than used arbitrary thresholds. 2

3. OVERVIEW - Why understand inequality? 3

4. OVERVIEW - Why understand inequality? • An equal place in 1979 … • 92% of places had Gini scores under 0.4. • 1% had scores over 0.5. • 65% had Gini scores under0.3. • 27% had Gini scoresbetween 0.3 to 0.4. 4

5. OVERVIEW - Why understand inequality? • An unequal place in 2009 … • Only 5% of places have Gini scores under 0.4. • 69% have scores over 0.5. • 40% have Gini scores between 0.5 to 0.6. • 29% have Gini scoresover 0.6. • What happened in the • NCR-W over the last 30 years? 5

6. KEY FINDINGS 6

7. KEY FINDINGS ... inequality and space. • How to classify high and low inequality places? • Use of cluster analysis to avoids using arbitrary criteria. • Uses distribution and mean for each period instead of thresholds. • Incorporates change over time. • 5 distinct groups were identified. 7

8. KEY FINDINGS ... inequality and space. • More low inequality places than high inequality ones between 1979-2009. • 21.5% of places are in the persistent low inequality cluster. • Highest concentrations in ND and NE. • 3.4% of places are in the persistent high inequality cluster. • Highest concentrations in SD and KS. • More rising inequality places than falling inequality ones between 1979-2009. • 26.9% of places are in the rising inequality cluster. • Highest concentrations in SD and KS. • 14.8% of places are in the falling inequality cluster. • Highest concentrations in IA. 8

9. KEY FINDINGS ... inequality and space. 9

10. KEY FINDINGS ... inequality and space. 10

11. KEY FINDINGS ... inequality and space. DISCUSSION In your community/region, is income inequality higher or lower than your state’s average? 1 Higher than state average 2 About state average 3 Lower than state average 4 Don’t know In your community/region, is income inequality rising or falling? 1 Rising 2 Stable 3 Falling 4 Don’t know 11

12. KEY FINDINGS ... inequality and socioeconomics. • High inequality places have better socioeconomic outcomes, while low inequality places have poorer ones. • Characteristics of high inequality places … • Fewer single-headed families • Better educational attainment • Higher labor force participation • Lower rates of poverty and near-poverty • Higher median HH incomes HOWEVER, this finding is counter to much of the social inequality literature, which links high inequality with poorer outcomes. 12

13. KEY FINDINGS ... inequality and socioeconomics. The results are mixed for rising inequality places. • Positive characteristics of rising inequality places … • Faster declines in near-poverty rates • Faster growth in median HH incomes • Negative characteristics of rising inequality places … • Slower population growth • Faster growth in minority populations • Slower declines in poverty rates 13

14. KEY FINDINGS ... inequality and socioeconomics. By the numbers … 14

15. KEY FINDINGS ... inequality and socioeconomics. By the numbers … 15

16. KEY FINDINGS ... inequality and socioeconomics. High inequality places have better socioeconomic outcomes, while low inequality places have poorer ones. Possible explanations for this counter finding … • Assume results are likely reflective of socioeconomic reality. • Suggests that inequality is a consequence of economic growth and prosperity … inequality is normatively “good”. • Supported by inequality-growth literature in economics. • Assume results are not reflective, but result of “averaging” effects. • Suggests that inequality increases income at the top of the distribution, which artificially pulls the average upwards. • Presents a false picture of average prosperity since the middle and lower distributions are hollowed out. 16

17. KEY FINDINGS ... inequality and socioeconomics. DISCUSSION In your experience, do high inequality places tend to have better socioeconomic outcomes than low inequality places? Agree 1 2 3 4 5 Disagree What are some possible explanations for these effects? Is inequality and unintended consequence of economic prosperity? 17

18. KEY FINDINGS ... inequality and employment. The coming of post-industrial society and inequality? • Polarization Thesis - change from industrial to post-industrial economy increases inequality. • Decline in middle-skill and middle-wage industrial jobs in goods-producing sectors like manufacturing, agriculture, construction. • Growth in high-skill and high-wage services jobs in professional, finance and business services. • However, parallel growth in low-skill and low-wage services jobs in administrative, leisure, retail, and personal services. • Process bifurcates income distributions increasing inequality. 18

19. KEY FINDINGS ... inequality and employment. • High inequality places are more specialized in high-skill services employment. • Employment characteristics of high inequality places … • More finance, insurance, real estate jobs • More professional and administrative jobs • More education, health, and social services jobs • Growth in high-skill services jobs • Slower declines in agriculture • Declines in manufacturing Findings generally support the polarization thesis. 19

20. KEY FINDINGS ... inequality and employment. • Low inequality places are more specialized in traditional goods-producing employment. • Employment characteristics of low inequality places … • More agriculture jobs • More construction jobs • More manufacturing jobs • Slower declines in manufacturing • Faster declines in agriculture Findings generally support the polarization thesis. 20

21. KEY FINDINGS ... inequality and employment. By the numbers … 21

22. KEY FINDINGS ... inequality and employment. By the numbers … 22

23. KEY FINDINGS ... inequality and employment. DISCUSSION In your experience, do low inequality places tend to have more employment in traditional industrial sectors? Agree 1 2 3 4 5 Disagree In your experience, do high inequality places tend to have more employment in services sectors? Agree 1 2 3 4 5 Disagree Do you agree or disagree with the polarization thesis that a shift from an industrial to post-industrial economy has increased inequality? Agree 1 2 3 4 5 Disagree 23

24. QUESTIONS AND COMMENTS THANK YOU! For more information David Peters 515-294-1122 dpeters@iastate.edu www.soc.iastate.edu/dpeters 24