|Passengers waiting for the train in Stamford, Connecticut|
photography via Flickr/MTA of New York
Today we are back to the growing challenge of inequality facing the United States. Inequality is most pronounced in the largest American cities and metropolitan areas. In an article for CityLab titled "Inequality and the Growth of Cities," Richard Florida writes, "Several recent studies (two of which I've already written about here at CityLab) have found inequality to connected to economic clustering-the very force that propels innovation and economic growth." This article looks at: the connection between inequality and economic growth whether or not economic success is tied to inequality. To understand the connection between inequality economic growth; answer the question whether inequality is the price of economic success, Charlotta Mellander, of the Martin Prosperity Institute, "...ran a basic correlation analysis between the standard measure of income inequality based on the Gini coefficient and economic output for U.S. metro areas for two years 2006...and 2012..., as well as the change between the two to provide a measure of economic growth." Remember, "Correlation does not equal causation, but simply points to associations between variables."
|Small Cities USA Growth, Diversity, and Inequality|
|Inequality Map Distribution|
Troublingly, the fast-growing energy belt metro of Midland, Texas, combines extraordinary high inequality with a high rate of economic growth. While not so extreme, the leading tech hub of San Jose also has relatively high inequality alongside relatively fast growth. Even more worrying, Bridgeport, Connecticut, combines a very high level of income inequality with below average economic growth. But Washington D.C., and Minneapolis both have comparatively low levels of inequality accompanied by moderate economic growth between 2006 and 2012.
The study authors highlight three important findings. First, Richard Florida notes with no surprise, "...societies that redistribute more have lower rates of inequality." Second, lower levels of net inequality, i.e. inequality remaining once redistribution policies are factored in, "...are strongly and positively associated with 'fast, durable growth.'" Last and most important, the study reveals the effects redistribution are benign, "...meaning both the direct and indirect effects of redistribution are generally pro-growth. Redistribution only appears to have direct negative effects in extreme situations."
|Income inequality protest|
It would still be a mistake to focus on growth and let inequality take care of itself, not only because inequality may be ethically undesirable but also because the resulting growth may be low and unsustainable....And second, there is surprisingly little evidence for the growth-destroying effects of fiscal redistribution at a macroeconomic level....The average redistribution, and the associated reduction in inequality, is thus associated with higher and more durable growth.
|The GCI and Income Inequality|
Martin Prosperity Institute
Richard Florida shares his own findings for the MPI (http://www.martinprosperity.org) on the link between "...inequality and combined economic and creative performance (a "Global Creativity Index") on a global scale in order to provide greater insight.
The MPI analysis identified no one "...trade-off between inequality and economic performance, but rather distinct paths." On one side is the low road path, evident in the United States and United Kingdom, "...where economic growth comes with relatively high levels of inequality. But on the other, is a high road path, taken by countries like Sweden, Finland and Denmark, where economic growth goes together with substantially lower inequality."
The takeaway here is: Cities and nations have a choice to make about inequality. They can maintain the status quo, allowing the chasm between rich and poor to grow wider thus "...allowing those at the bottom to fall through the porous safety net." Or, combat inequality by implementing redistribution policies that do not inhibit growth. The choice is yours.