Between 1990 and 2020, the share of families living in middle-income neighborhoods in the Chicago metro area dropped by 12 percentage points — from 56 percent to 44 percent, according to a New York Times analysis published last month.
The Times defines a middle-income neighborhood as one where the “neighborhood income level is within 25 percent of the regional median.”
The Times does not spell out what it considers the Chicago metro region to be, but we can get a rough idea of our regional median income using U.S. Department of Housing and Urban Development (HUD) data.
According to HUD, the Area Median Income (AMI) for a one-person household in the Chicago-Naperville-Joliet metro region for 2022 is $73,000, so a person would need to make at least $54,000 to be within 25 percent of that median. For a household of four, the AMI in the Chicago metro region is $104,200, so a family of four would need to pull in at least $78,000 to be within 25 percent of that median.
The Times’ data showing the rapid disintegration of middle-income households is particularly striking.
The “population of families making more than $100,000 has grown much faster than other groups, even after adjusting for inflation, and the number of families earning less than $40,000 has increased at twice the rate of families in the middle,” the Times reports.
This dynamic seems to be resulting in a pattern of economic segregation across space as “Americans are less likely to live in neighborhoods with people from other socioeconomic classes,” exacerbating the many problems related to economic inequality.
The Times’ analysis jibes with data in the World Inequality Report 2022, which is arguably the world’s most comprehensive analysis of global wealth, income, gender and ecological inequality. The global report concludes that wealth inequality is growing within countries, even as inequality between rich and developing countries is declining.
I’ve listed some of the highlights from the report below:
- “The richest 10% of the global population currently takes 52% of global income, whereas the poorest half of the population earns 8.5% of it. […] Global wealth inequalities are even more pronounced than income inequalities. The poorest half of the global population barely owns any wealth at all, possessing just 2% of the total. In contrast, the richest 10% of the global population own 76% of all wealth.”
- The “gap between the average incomes of the richest 10% of countries and the average incomes of the poorest 50% of countries dropped from around 50x to a little less than 40x. […] The gap between the average incomes of the top 10% and the bottom 50% of individuals within countries has almost doubled, from 8.5x to 15x.”
- Nations have become richer, but governments are poorer. “The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands. […] In high-income countries, we find that in 1970, private wealth [to] national income ratios ranged between 200% and 400%. By 2008, when the global financial crisis began, these ratios averaged 550% in the countries observed, peaking at 800% in the extreme case of Spain.”
- “Overall, women’s share of total incomes from work (labor income) neared 30% in 1990 and stands at less than 35% today” (in North America, it’s just under 40 percent). “Current gender earnings inequality remains very high: In a gender-equal world, women would earn 50% of all labor income.”
- “On average, humans emit 6.6 tonnes of carbon dioxide equivalent (CO2) per capita, per year. Our novel data set on carbon emissions inequalities reveals important inequalities in CO2 emissions at the world level: the top 10% of emitters are responsible for close to 50% of all emissions, while the bottom 50% produce 12% of the total.”
The many researchers who compiled the World Inequality Reporter offer a rather straightforward systemic recommendation to help mitigate these inequalities.
“In a nutshell, given the enormous increase in the aggregate value and concentration of private wealth in recent decades, it would be completely unreasonable not to ask more [of] top wealth-holders in the future, especially in light of the social, developmental and environmental challenges ahead,” they write (italics mine).
And current solutions, namely the Inflation Reduction Act’s 15 percent minimum tax for companies that earned at least $1 billion in operating profits over the last three years, don’t quite meet the task of ensuring that more of this enormous concentration of private wealth is leveraged to benefit the public.
Take it from the business publication Barron’s, which writes that, although the new minimum tax “might sound scary,” it really isn’t.
“According to Citigroup, a slight majority of companies in the S&P 500 have had a high enough average operating income to pay the 15% tax, but all but about 50% of them are already paying an effective tax rate of 15% or more.
“Those 50 companies have recently been contributing about 15% of the S&P 500’s aggregate earnings per share. Taking them at 15% would shave about 0.4% off the index’s aggregate per share profits, Citi estimates.”
Despite the tough talk by politicians about raising corporate taxes, “the new tax policies so far look to be small beans,” Barron’s notes. “The market agrees.”
There are more radical and localized measures to be had, such as systematically making property taxes more progressive, so that they don’t come down hardest on the backs of senior citizens on fixed incomes, Black and Brown households in low-income neighborhoods, and young couples looking to make a life for themselves in their own homes.
Here’s a principle of mine: If a progressive tax scheme doesn’t scare the s— out of the wealthiest private entities in the world, it ain’t progressive enough.
Cook County Assessor Fritz Kaegi’s fight to make the property tax system a little more equitable is telling, in this regard. The property tax appeal attorneys, machine politicians, and real estate developers have assumed a defensive crouch ever since he took office. They hate the guy, which means he must be doing something right.