Page 27 - The City of Greensboro Conditions and Trends

CITY OF GREENSBORO COMPREHENSIVE PLAN CONDITIONS & TRENDS

The Disparity Gap & the Shrinking Middle Class

The Trend

A disparity gap in the United States has been developing in America for decades. Wealth and income inequality in America
is at an all-time high, and the disparity between the wealthiest and poorest US households is far greater than in other
developed countries. The share of income going to the wealthiest one percent of the population has increased
disproportionately since the mid-1970s. Real incomes for the highest wage earners have nearly tripled, while incomes for
median-level wage earners have increased by only 25% during that same period. The Center for Economic and Policy
Research reports that between 1979 and 2007, the share of national income going to the top one percent of wealthy
households grew from 9.6% to 20%.

While income disparity is more apparent, wealth disparity is also important, and there is a significant difference between
the two. Simply put, income is how much one earns, and wealth is how much one owns. The majority of the top one
percent’s wealth comes from the accumulation of assets that generate revenue, earn interest, and/or appreciate in value
over time. Studies show that America’s top one percent holds nearly half the national wealth invested in stocks and mutual
funds. Wealth inequality manifests differently than income inequality, but has far-reaching repercussions when looking at
aspects of the economy like home- and car-ownership, debt per capita, and share of total assets. The majority of wealth for
the poorest ninety percent comes from their principal residences. Conversely, the top ten percent’s wealth comes primarily
from stocks and mutual funds.

This gap in wealth is greater when looked at through the lenses of race and ethnicity. Because homeownership is the most
common and effective means used by typical US households to retain and grow wealth, reducing disparities in
homeownership rates across racial and ethnic groups would also reduce the wealth gap. The historical context of America
explains some of the disadvantages for minority households, for example outlawed practices such as redlining. More
recently, the Great Recession disproportionately affected minority households compared to white households. Research
suggests that working toward a more equal playing field in homeownership could have substantial positive effects for
reducing the wealth gap.

Background

Cities

While the disparity numbers are indeed stark for the country as a whole, they are worse when looking at America’s largest
cities. In Washington D.C., for example, white families are on average 81 times richer than non-white ones. In Los Angeles,
median wealth for whites was close to 89 times as much as non-whites, and in Miami it was 30 times as high. Studies
suggest that since this is a national problem, municipalities struggle to find effective strategies to close the gap since many
of these factors are out of their control.

According to the National Equity Atlas (NEA), achieving economic inclusion would benefit not only persons of color, but the
economy as a whole. NEA argues that raising wages and incomes, especially for low-income households, leads to more
consumer spending which is a key driver of economic growth. For instance, in Greensboro, NEA estimated that average
annual income would have been approximately $21,000 higher for both the Black and Latino population in 2014 if there
had been racial equity in income.

DRAFT -27- March 15, 2018