Steve’s folks called with good news over the weekend. His mom’s brother and wife are going to retire just 20 minutes away from them in North Carolina. Steve’s folks retired to the area from Cleveland about ten years ago, and we’ve always been worried about their distance from extended family. Now, they have people to spend holidays with, when they can’t make the trip up to us.
They sent me a link on Zillow to their new house, so I spent a little time checking out the other homes in the area. Those homes — perfectly nice places with a couple of bathrooms and three bedrooms — are a quarter of the price of homes in my neck of the woods. This is why people are leaving the metropolitan regions, like Chicago and New York.
Not really a big deal, I suppose. If North Carolina can offer people a better quality of life than the older cities, then good for them. Families, like mine, that need alternative schooling options for disabled children and have work tied to the big cities can never go there, but there are many families who are more flexible. So, good for them, right?
However, if some areas of the country are homes of the rich and others are homes of the middle class, working class, and retirees, then it does open up some political problems.
Imagine if the representatives from some states become advocates not for the interests of the particular local industries, ie Iowa farmers, West Virginia coal miners, but for entire economic classes, ie New York Rich People and North Carolina Retirees. Then political debates would be less about opposing commercial interests and directly about class. I suppose it is that way now, but those economic tensions could be more obvious and competitive than they are already.
Any discussion about changing the electoral college or representation in Senate would also become strongly charged with these economic tension.
Sidenote — If we limit the voice of small population states in the electoral college and the Senate, it might make affairs more democratic, but it would also mean a massive disinvestment in the entire center of the country. There would be no federal projects for highway construction in Nebraska, say or farm subsidies in Iowa. There might be really cheap homes out there, but there would be no way to drive to those houses.
The growing affluence of big cities is going to have long term political implications.
43 thoughts on “Geographic Inequality”
Isn’t it a little more complicated, in that cities like New York have become homes for very rich and very poor people, with little in between? I’m not sure what class interest our senators will represent, unless they can find a way to combine both interests against the middle class.
“Then political debates would be less about opposing commercial interests and directly about class.”
Isn’t it already? With the caveat that class isn’t just about how much money you have. For example, isn’t this shift in politics part of the cause the breakdown of local boondoggle projects as a way of smoothing divisions. I don’t know how the military projects that are being cancelled to fund the border wall will play out politically. But, it doesn’t seem now like it will significantly affect the voting patterns in those red areas. The people won’t get the project, maybe. But the loss won’t change their voting patterns.
Here’s the Nebraska Interstate Highway system:
You can approximate it with a single line of wavy horizontal red sharpie.
I was expecting to find that Nebraska was a net recipient of federal highway funds, but it doesn’t really look like it.
If you look at the chart labeled “FY 2016 Highway Rate of Return Ratios,” Nebraska as listed as 100%. I presume that that means that they get almost exactly what they put into the federal highway tax pot.
It’s a really nice interstate. Three lanes from Omaha to Lincoln, all in great condition, plus a big belt around Omaha. The Lincoln to Omaha part benefited from being shovel-ready when the Obama administration was able to do stimulus. It gets worse further west, but still less crowded than the PA turnpike is in the middle of PA.
I will vouch for the excellence of I-80 around the Omaha area. There’s *a lot* of road contruction on I-80 and its connecting interchanges in and around Omaha and Council Bluffs. Enough to be a PITA on Sundays, which is my only day off to go exploring.
Illinois is an entirely different story, with rebar visible on the many eroded sections of various interstates. Iowa seems to be somewhat in between those extremes.
(nothing will beat the state of the McKinley bridge between Illinois and Missouri at St. Louis before it was finally repaired, though. I’m talkin’ actual holes you could fall through into the Mississippi. It used to be a train and streetcar crossing along with cars back in the day, so when there was no more rail use on the bridge, they paved it—kinda-sorta–and never made lane markings. This resulted in the bridge being a live-action game of “Frogger” as motorists tried to avoid the gaping holes, the well-rusted suspension supports, and other drivers trying to figure out where the lanes were. You had to see it to believe it. Bonus–it was a toll bridge! It’s pretty tame now, but back in the 90s it was an adrenaline charge!)
Just the other week, there was a big story about Nebraska having a shortage of construction labor. I guess it’s true. That won’t stop the parts of that state that aren’t in or near Lincoln and Omaha from continuing to empty out, but it’s doing great for Lincoln and Omaha.
Re: worker shortages. As I never tire of saying, there is no shortage of skilled labor to perform the work. Where there are “labor shortages”, it means the pay scale is too low, and/or there is no overtime, and/or there is no per diem for workers to meet their traveling expenses. Most of us who are travelers are already taking a significant pay cut from our home Local’s scale, even without taking into account our travelind exenses (even fleabag motels are expensive). Companies don’t pay those expenses—we do, out of the hourly wages we receive. So, if there is no overtime, or no per diem, it literally costs us money to travel away from home for work—we would drain our savings attempting to work at that location.
I can work here because of the night shift differential and the overtime. I would not be able to afford to work here on day shift at 40 hours.
Just saying to keep that in mind whenever reading news reports regarding lack of tradespeople.
Yes, I don’t doubt that a bit.
I agree with lubiddu. Rarely if ever is there an actual shortage of labor, just a shortage of labor at prices that employers are offering. Similarly, there are no “jobs Americans won’t do,” just jobs Americans won’t do as cheap as immigrants who don’t have any better options. The crops get harvested just fine without low-paid immigrant labor in Australia and Japan.
Looks like we all agree (almost). I think there is a rare job where there might actually be a shortage (rocket scientists post-WWII, for example). The others are all compensation and conditions related. The tech industry’s arguments ring particularly false to me, especially in the context of collusion about poaching each other’s employees.
Those houses are nice. Makes me wonder where I’d be OK moving to get waterfront property for 600K.
It’s already that way. Our national legislature in both the House and Senate work solely for the rich—the “Dream Hoarders”, the top 20 percent.
The interstates would still be maintained. Farmers would still get subsidies. But you would see massive disinvestment in education, healthcare, public safety, utilities, everything that serves the local population as opposed to the few places that have an economy. There would be little to no work for teachers, cops, nurses, construction workers, firefighters, etc. and there would be very little service industry left. Those cute, affordable houses would become favelas in less than a generation.
Right now, those affordable home prices reflect a dearth of middle-income jobs. Want to know what that looks like given enough time after the degradation of the economy? Look at Danville Illinois. My dad’s neighborhood used to be single-family homeowners. The owners worked in, and retired from, that city’s once thriving factories. Now it’s all slumlord rental property, except for my dad and a couple of young families who came from the crappier, more dangerous areas of Chicago (so they don’t think of Danville as being that bad).
This is what’s coming down the pike, regardless of whether or not we dump the electoral college. Ever read “The Hunger Games”?
The science fiction writer John Scalzi and a number of the people who represent companies in dealing with the government office for which I worked for many years and patent agents seem to me all to be examples of a kind of counter trend here: jobs which are actually do-anywhere jobs now that there is Internet and .pdf, and people are choosing to do them from places where it is cheaper to live. Result is that at least some of those flyover affordable houses are lived in by top-quintile-income people who like having five acres and a view.
“It’s already that way. Our national legislature in both the House and Senate work solely for the rich—the “Dream Hoarders”, the top 20 percent.”
I was just looking at this:
I’ll comment in a follow-up.
If you click on that twitter post, it’s a chart showing US household incomes adjusted for inflation, divided into three different income bands: $35k or less, $35k to $100k and $100k or more.
Interestingly, the poorest band ($35k and under) was 37.2% in 1967 and has contracted to $27.9% in 2018–there are fewer of the poorest Americans than there used to be.
The middle band ($35k-$100k) has also contracted from 53.8% (so a true middle class) in 1967 to 41.7% in 2018.
Here’s where it gets interesting. The richest band ($100k and up) has tripled over the course of the past 50+ years, going from 9% in 1967 to a whopping 30.4% in 2018.
Strictly in terms of cash income, that means that the US has a much larger and more visible band of high income households, but that there is arguably a lot MORE economic opportunity in the US than there was in 1967, if the number of households making over $100k in 2018 dollars has tripled.
I would add a few caveats. As circa 2003 Elizabeth Warren would point out, this has a lot to do with the growth of double income households, and the existence of large numbers of double income households fuels income inequality. There are more wage earners working to produce the $100k incomes than there were in 1967, and more associated costs to produce that income (commute, daycare, etc). All things being equal, double income households can outbid single income households for stuff like houses in nice school districts. (This was a big theme of Warren’s The Two Income Trap.) Middle income/UMC families of today spend a lot more on kids’ education, recreation and cultivation than middle income/UMC families in 1967.
It’s very difficult to see how “Dream Hoarders” could be a fair description, given that far more households have that high income dream than literally ever before.
New York has been losing seats since at least 1940. https://www.census.gov/population/apportionment/data/2010_apportionment_results.html (Table: Change in Number of Seats in the U.S. House of Representatives, by State, Ordered by Seats Gained and Lost)
In 1940 it had 48 seats; it had 27 seats in 2010. As a long term trend on that PDF, since 1940, long term losers are Illinois (-8), Pennsylvania (-15) and New York(-18). The long term winners are California (+30), Texas (+15) and Florida (+21).
It is predicted NY will lose two seats in the next census: https://www.brennancenter.org/potential-shifts-political-power-after-2020-census Which means that New York is on a long term track to eventually lose more than half of the political power it had in 1940.
I assume the recent changes in the SALT deduction rules will only accelerate the trends already in place, that is, to move away from high-tax states. https://www.biggerpockets.com/blog/americans-flee-high-tax-states
I’ve noticed many “for sale” signs on the nicest street in the wealthy town next door. Many more than normal. From Zillow, the property tax for such properties can run from 20 -60,000 per year. I assume most of them are moving to Florida. They might be downsizing to a condo, of course. Then again, there don’t seem to be lots of buyers eager to snap up the trophy properties, so the town’s real estate assessments probably should fall for those properties long-term, which will mean a large increase in the property tax bills for everyone else.
Illinois is ahead in this process: https://wirepoints.org/illinois-shrinking-tax-base-310-billion-in-accumulated-losses-from-out-migration-part-3/.
Big cities are becoming very expensive places to live in, but that doesn’t mean there will ever be enough wealthy voters to make the politicians pay attention to their interests, although the sudden drops in state income tax collections are noticeable.
“I’ve noticed many “for sale” signs on the nicest street in the wealthy town next door. Many more than normal.”
There are other explanations than moving out of state for house sales.
One of my neighbors (a 90-something widow) just left for assisted living and will be selling her house soon.
The Baby Boom generation is also headed out of the building:
But come to think of it, even aging will have different impacts on different states:
The median age in US states ranges from 44.7 in Maine to 30.9 in Utah.
We’ve been driving down that street for decades. There have been many years with no houses for sale. I’d estimate some 10 to 12 have come to market this year. It’s exceptional.
Most of the people living on that street have other houses. Maybe an apartment in a city, a weekend house on the Cape, etc. At some point, even those people notice when they aren’t able to deduct their state real estate taxes from federal taxes. It all adds up.
I will confess to a moment of Schadenfreude when it seemed the hurricane was heading for Jupiter Beach.
I keep wanting to see a cage match between Elizabeth Warren, talking about the two-income trap, and Linda Hirshman, saying that women should be forced to work outside the home.
There’s a lot in the Two Income Trap that runs counter to what Warren is saying right now. I proposed an article looking closely at that book to a big publication, but they turned it down and I never shopped it elsewhere.
“There’s a lot in the Two Income Trap that runs counter to what Warren is saying right now. I proposed an article looking closely at that book to a big publication, but they turned it down and I never shopped it elsewhere.”
I think it deserves some more discussion.
If she’s changed her views, what did she get wrong then?
You might try shopping it to the DC Examiner if you can’t place it elsewhere.
Ah, but that was the 2003 version of Elizabeth Warren.
Lubiddu said, “Amy P: There is certainly more economic opportunity for WOMEN than there was in 1967.”
“But double-income households don’t drive income inequality. Those two individuals within the double-income households are still earning the same money they would as single people.”
But they can afford twice as much house and hence can afford a better school district. In an area with $500k homes, it may not even be possible to buy a $250k house that is half the size of a $500k home and in the same school district.
Also, while two cannot live quite as cheaply as one, there are a lot of items that you only need one of rather than two as a two-person household. For example, you only need one microwave and one washing machine.
Taking this to an (admittedly) extreme extent, our family of five manages fairly comfortably with just one vehicle.
“Income inequality wasn’t created because two parents work. It was created when as a matter of economic policy, our minimum wage has not kept up with the actual cost of living (and the astronomical rise of housing, healthcare, and education), and our largest (and fastest growing) portion of jobs are in occupations with very low wages and no benefits (like healthcare or pension).”
How do you square that with the chart I linked to, showing that the lower household income bands have shrunk and that it’s the upper income band that has tripled in size?
“Meanwhile, fewer and fewer people have disposable income—their income is already spent before their check is in hand.”
Again, how does that square with the chart, or the evidence of our own eyes regarding consumption levels?
(I agree that housing can be expensive and that labor-intensive goods like education and healthcare are less affordable than in the past.)
As for education and healthcare, the primary explanation is below. As for housing in coastal urban areas, strict restrictions on development, imposed by noble Democrats to rein greedy developers, do drive up prices. Everything else is cheaper than it was 50 years ago, if it even existed.
Click to access helland-tabarrok_why-are-the-prices-so-damn-high_v1.pdf
Amy P: There is certainly more economic opportunity for WOMEN than there was in 1967. Back then, we were legally barred from many occupations (including mine) or even educational opportunities.
But double-income households don’t drive income inequality. Those two individuals within the double-income households are still earning the same money they would as single people. Income inequality has becone an issue because there are fewer avenues to “work your way up”, and fewer opportunities for people without advanced educations (which have also become more expensive).
Income inequality wasn’t created because two parents work. It was created when as a matter of economic policy, our minimum wage has not kept up with the actual cost of living (and the astronomical rise of housing, healthcare, and education), and our largest (and fastest growing) portion of jobs are in occupations with very low wages and no benefits (like healthcare or pension). By “low wages”, I mean jobs at which one can’t simultaneously afford housing, utilities, transportation, and food—let alone anything else most people find necessary (like student loans or childcare). It isn’t the cop-married-to-a-nurse that generated that problem. Our economy is structured to be supported by consumer spending. Meanwhile, fewer and fewer people have disposable income—their income is already spent before their check is in hand.
Speaking of rural Nebraska, which has been coming up more than lately than it has for a long while, that story in your (Laura’s) twitter about Caroline Calloway got me googling because her original name was both unusual and one I knew from growing up. I think she must have been from my hometown or have an uncle there.
I guess it isn’t all just the wealthy areas endangering the rural, but the rural areas actively defrauding the urban. If you add in that the guy who is running the astroturf “WalkAway” thing (he went to my high school), that’s a lot of lies from people coming out of a very small town from a region that prides itself on heartland values and such.
Also worth a mention for income inequality: CEO to worker compensation ratio, which also influences compensation for other executive class positions. The wealthy and the upper middle class got a raise, the rest of us didn’t—we’re either treading water or losing ground.
Sorry, I ditched you guys for a couple of days. I finally polished off a personal essay about Jonah and the college application process that has been on my to-do list for a month. Now, I’m switching gears to talk about school infrastructure and the states, which is kinda relevant to this discussion. States and localities aren’t putting money into schools. Some states are worse than others. Weirdly, ND is one of the best because of all the fracking money. Hoping to get a superintendent on the phone who can tell me stories about duct tape holding the boiler together.
But this is a new topic for me, so I have a steep learning curve now. Gotta put in a couple of hours into that this morning. Hopefully, I’ll get a post up this afternoon, so we can talk about something new.
Is there a general tendency to overprioritize new buildings / new structures and underprioritize ongoing maintenance?
I remember there being a number of issues like that around my hometown when I was a kid, both with regard to school buildings and road issues, and I’ve seen some like that at my husband’s college. You know, huge shiny new buildings in one area, plus dilapidated old stuff in another?
Of course, it’s always hard to prioritize limited resources…
Here in my Democrat-dominated city and state, I feel like the priority is to spend public funds on good neighborhoods (they’ve resurfaced a lot of the Upper West Side in the past few years) and slight poorer neighborhoods, whose residents (i) don’t make political contributions and (ii) always vote Democratic anyway. The schools in my neighborhood seem very well-maintained, but I’m not sure if it’s due to the City or to parents volunteering and/or harassing the bureaucracy into doing the right thing. The fiscal history of New York, Detroit, etc. indicates that the one thing they don’t do is cut spending when revenues decline, they just spend themselves bankrupt.
I recently realized that Republican dominated states spend money when it fell off a truck (i.e. is captured through newly minted extraction of resources). The realization came wen some folks from northern middle states (Montana, Wyoming, ND, . . .) were talking about the resources they thought they had in their home states compared to WA. The (relative) homogeneity and lack of alternative school resources may also play a role. But, the lift seems to be temporary — once the resource extraction funds become part of the longer term budge, the financing is squeezed again (Alaska, Oklahoma, . . . ).
I had a friend in grad school who was from Alaska and – if i have rhis right- got a check from the state every year in the 1990s. Would be interesting to see how they got from there to proposing crazy cuts to their higher ed system this year. Did they invest wisely when they had money?
The governor campaigned on sending the full amount of those checks as before despite falling oil prices. The cuts are entirely so they can send out bigger checks.
Reading about Alaska’s budget in the context of the Alaska Permanent Fund (paid $1600/person in 2018) is fascinating (and, somewhat un-understandable, to the novice, like me). I’m seeing more talk of the PFD (permanent fund dividend) more generally because of Yang’s Universal Basic Income proposal.
I haven’t seen the question of whether Alaska invested wisely discussed in an economic contest. My read (naive, notably) is that Alaska has funded services from the capital fund and continued to pay the divident & keep taxes low. Is that investing? not sure.
Love personal college stories, partly in a voyeuristic way, but also because it is a reminder of all the varieties of stories. My hyperlocal environment is very skewed.
Y81: In the SF Bay Area much of the constraints on development are due to communities not wanting more density. I haven’t been following too closely but there have been fiercely contested battles to get high density housing built close to public transit hubs. Communities like Palo Alto do not look kindly on apartment complexes, at least not on the upper middle class side of town.
In the neighborhood of San Francisco proper where I lived up till a few years ago there was an effort to build some apartments for teachers and city workers that got angrily slapped down by folks who wanted their mostly single family neighborhood to remain that way.
The east coast may be another matter.
I stand by what I said. In coastal communities, like San Francisco, noble Democrats (that is pretty much everyone in San Francisco) stand strong and united against development. Sometimes a greedy developer (that is all developers) claims to be putting up housing for middle class people, but San Francisco see through that and don’t permit it. The effort to liberalize zoning near transit hubs has been unsuccessful to date. It’s the same on the Upper West Side of Manhattan, which is why our co-op values keep going up and the working and middle class keeps getting squeezed out.
I have seen no evidence that developers will build affordable housing. What I see is 1.8M dollar lots being subdivided into two 3M dollar houses. Or the development of overpriced dorms for 20 something tech workers who still want to live like they were in college.
I don’t have any magical solutions, but I see no evidence that zoning changes produce more affordable housing — with New York being a case in point with — google searching– interesting — 25% of condos builtin the past six years remaining unsold. High density developments — what kind of zoning would produce more affordable residences? When given the choice,
Apparently, when they build, they build 700 square foot condos for 1.4 million.
The usual process in less illustrious places is that the older housing has a tendency to become the affordable housing as the new units come in even though nobody ever sets out to build anything affordable. Here, basically no new housing was constructed in the city up between 1980-something and 2010 (just one development that I can think of). There was job growth here during the recession and more demand for housing in the areas adjacent to the jobs and urban amenities. So, new buildings started going up in large numbers in after 2010 or so. The new apartments and condos are expensive, one-bedroom rents are $1,400 for some of them. That’s a house payment in these parts, and a nice house. But the older apartments got cheaper as soon as the new units hit in sufficient numbers.
MH said, “The usual process in less illustrious places is that the older housing has a tendency to become the affordable housing as the new units come in even though nobody ever sets out to build anything affordable.”
And that makes sense, because if you’ve ever priced new single family homes, they are substantially more expensive per square foot than existing single family homes.
But building new homes opens up existing houses to lower income buyers. (We see this a lot in our area, where there’s been an exodus to new stuff in the suburbs while nicer older homes have become more affordable to lower income people. On the other hand, the public schools tend to collapse in the nice older area as the population diversifies…)
A lot of city neighborhoods used to be a lot swankier than they currently are (as you can tell from size of home and level of detail).
“The usual process in less illustrious places is that the older housing has a tendency to become the affordable housing as the new units come in even though nobody ever sets out to build anything affordable.” – this worked well for years and years after the Second World War, and is breaking down now, hence the discussion of ‘housing crisis’.
What’s changed? In my view the relatively lower cost of new construction and the ease of commuting in from former potato fields/apricot orchards/orange groves close in to town after the War made Levittown (and the Eichler developments, etc etc) relatively more attractive – so this moved a lot of then-older housing into the ‘newly affordable’ area. This is how so much housing became available in center cities. Now, not so much: those close in orange groves are full of ranch houses, the potato fields are gone, too. And the cost of construction relative to middle-middle and fourth quartile incomes is up, so it’s less attractive to abandon the existing housing to the lower-middle, who could not then and cannot now afford the cost of building new.
And I think this may be generally more the case near chattering-class haven cities on the coasts than in, say, Cleveland or Pittsburgh, and in particular those with ocean close in to city center.
“And I think this may be generally more the case near chattering-class haven cities on the coasts than in, say, Cleveland or Pittsburgh, and in particular those with ocean close in to city center.”
Yeah, I think this varies a lot according to local economy, size of metropolitan area (i.e. proximity to orange groves, potato and corn fields), and of course coastal versus non-coastal.
Median home value in our city is $120k-ish, but of course that does not get you a nice public school, especially not through high school. Both of the big public high schools in our city are a 3 on Great Schools.
Our suburbs range from a median of $200k-$260k, depending on the suburb, with the fancy pants high school being an 8 on Great Schools.
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