INCOME INEQUALITY IN NEW ENGLAND
An Interview with Ross Gittell, Ph.D
Ross Gittell is James R. Carter Professor of Management at the University of New Hampshire and a Senior Fellow at the Carsey Institute. Gittell’s research focuses on social capital, urban renewal, business development and community economic development, and he is the author of two books and numerous articles. He is Vice President and Board member of the New England Economic Project.
And Jason Rudokas
Currently working towards a Master’s degree in Economics at the University of New Hampshire, Jason Rudokas works with Ross Gittell on studies of income inequality with support from the Carsey Institute.
Interviewed by Amy Seif on 5/9/06.
Amy Seif: Why do you study income inequality? What does income inequality mean for families and communities?
Ross Gittell: In New England and elsewhere it is very important to consider the economic position of people and families across the socio-economic spectrum and to understand how families’ economic status compare to the people they live near. This can have significant implications for economic and social policy and the work of non-profits.
Too often economic data is presented as averages of large populations. This can hide and distort our understanding of economic and social circumstances in regions, states and communities. In our work we assess how the incomes of low, middle and high income families in New Hampshire, the New England region and in the US compare and how they have changed over time. This allows us to analyze the circumstances of families and communities at a more detailed level and also enables us to assess how the circumstances of families in the different economic strata have changed over time.
Jason Rudokas: Economic development resulting from technological change and innovation has transformed the structure of the nation’s industries over the past half century. In particular, the erosion of the manufacturing base and the emergence of high-technology service industries have significantly altered employment opportunities both for those currently in the labor force and those who are entering. Understanding how the distribution of income in a region has changed over time provides insights into the welfare effects of economic growth.
AS: How does income inequality in New England compare to the rest of the country?
RG: Inequality in the region today is slightly above the US average and falls in the middle among the nine US Census regions. The Middle Atlantic region has the highest inequality and the West North Central has the lowest.
What is of most concern is that the region’s higher than average ranking is a break with its historical position. Over the last decade (1990 to 2000), inequality increased more in New England than in any other region of the nation. The region changed from being below the US average in inequality and the lowest ranked region in the nation to above the US average and fifth highest among the nine regions. If this trend continues over the next two decades, New England could have the greatest income inequality in the nation after a long period of having the lowest inequality.
AS: How does New Hampshire compare with other states in the New England region and the country overall?
RG: New Hampshire has the lowest income inequality in New England and ranks third lowest among the 50 US states (only Alaska and Utah have lower inequality). Connecticut has the highest inequality in the region and ranks fourth highest in the nation (after New York, Louisiana and Mississippi).
AS: Can you explain why New Hampshire has less income inequality than most other places?
RG: New Hampshire has low income inequality because it has a strong economy that is broad-based with relatively good employment opportunities in a range of industry sectors. The state also has low inequality because of its relatively small low-income minority and immigrant populations, low poverty rates, and high rates of educational attainment. New Hampshire has the lowest poverty rate in the nation and ranks eighth among the 50 states for residents with a 4-year college degree.
AS: Is income inequality a non-issue for New Hampshire, or does your research indicate otherwise?
RG: The main concern in New Hampshire and across the New England region relates to the current trajectory of income inequality. New Hampshire had the eighth highest percentage increase in income inequality in the nation over the last decade. All six of the New England states ranked among the top ten in percent increase in inequality.
There is significant evidence that in New England and in New Hampshire there has been a hollowing out of the middle class over the last decade. This hollowing out of the middle is a national phenomenon, but it is more pronounced in New England than in the nation as a whole. From 1990 to 2000 the average household income of families in the highest income group (top 20 percent of households) increased 4.5 percent in New England and 4.1 percent in New Hampshire, while declining in all other household income groups in the region and state. The most pronounced decline in New England and New Hampshire occurred in the middle income group, declining 1.6 in the region and 2 percent in New Hampshire. The decline of the middle was more pronounced in the region and in New Hampshire than in the nation overall and the rise in income in the top group was higher in the region and New Hampshire than in the nation.
AS: What happens to a place when the middle class is reduced? How does this impact people earning a low-income or living in poverty?
RG: The concern is about what will happen to the social fabric and culture of the region and our state. We in New England are changing from a relatively egalitarian society to an economically divided one compared to the national average. The differentials in economic status and economic opportunity are now increasingly bifurcated between those in the top quintile and those in the middle and lower quintiles. As household incomes diverge, so will social connections and the opportunities for families and family members to associate with members of different economic classes. The opportunities for lower income individuals to move up in social status can also be reduced as the social and economic gaps widen.
JR: The disappearance of the middle class represents a polarization that can significantly reduce the ability for low-income families to maintain and increase their standard of living. The result of a continued hollowing out of the middle class is geographically isolated and concentrated poverty. A particularly difficult issue related to the hollowing out of the middle class is that communities with a high concentration of poor working families will have a difficult time providing quality educational services to their residents.
AS: Is income inequality more prevalent in urban areas than rural areas?
RG: In the US and the New England region, and in all the states in the region except for New Hampshire, income inequality is greater in metropolitan (urban) areas than non-metro (rural) areas. This reflects the unique character of the metropolitan area in New Hampshire. In particular, the economy of New Hampshire’s cities is strong and broad-based, providing good employment and income earnings opportunities for individuals across income quintiles. New Hampshire —by a significant degree—has the lowest income inequality in metro areas in the region. The reason for the non-metro areas in NH having higher inequality than metro areas is not because of extraordinary high income inequality in non-metro areas in the state. Income inequality in the non-metro areas in NH is significantly below the regional and US average.
AS: How is global economic change impacting income inequality in New England and what are the implications?
RG: Changes in the global economy and in particular the loss of manufacturing industry competitiveness and employment in the region and in New Hampshire have contributed significantly to the hollowing out of the middle class in the region and state.
The state of New Hampshire led the nation in the late 1990s and early 2000s in the loss of manufacturing employment. . The state lost more than one of every five of its manufacturing jobs. Many of these jobs paid relatively well and provided a strong income base for middle income families.
The outlook for the recovery of manufacturing jobs in New Hampshire and elsewhere in the US is bleak. A key question of concern is what types of jobs and income earnings opportunities will replace the manufacturing jobs lost to foreign lower cost locations? The expectations are that the jobs that replace manufacturing in the region and the state will pay less than the jobs they replace. This would occur while the demand for the highest skilled workers in the highest income quintiles in the region and New Hampshire increases along with these workers’ incomes.
Note: To measure income inequality, Ross Gittell and Jason Rudokas used a standard and well accepted measure, the Gini Coefficient. The Gini is a statistic based on measuring the difference between an observed income distribution and a hypothetical distribution in which income is uniformly distributed across all persons. The primary data sources used were the 1990 and 2000 US Census. This research is funded by the Durum Fund of the New Hampshire Charitable Foundation.
Map of Household Income Inequality in the
Click here for a map of low income population in Northern New England
