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U.S. income inequality: A tale of two cities

A man crosses the street in front of abandoned houses near Main Street in Bridgeport, Conn.

NEVILLE ELDER/The Globe and Mail

This story is part of The Globe's Wealth Paradox series, a two-week examination into how the income divide is shaping Canada.

The thing that attracted Joanne Davis to Connecticut was a road. One autumn day, she took a drive up the state's Merritt Parkway for the first time. The highway wound through a canopy of woods and sloped under ornamented bridges, passing through wealthy towns like Greenwich, New Canaan and Westport. She fell in love with the scenery and the fresh air and resolved to move.

Near the northern end of the highway sits Bridgeport, the gritty post-industrial city where Ms. Davis ended up. There her two children attend an elementary school that is ranked No. 502 out of 510 in the state based on test scores. Seven months ago, she lost her job, and the bank is about to foreclose on her apartment. She just started a new position as a paralegal, but it doesn't include benefits and pays a third less than she was earning before.

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"The gap is just really huge between the rich and the working class," said Ms. Davis, 38, standing outside her children's school. "I don't even know if there's a middle class any more. We're just working to make ends meet."

To travel the chasm between rich and poor in the United States takes about 30 minutes, or the drive between Greenwich and Bridgeport. By the numbers, this slice of coastal Connecticut is the most unequal urban area in the country, boasting a degree of income inequality that resembles Thailand or Bolivia.

The extremes can be disorienting. On a recent Sunday in Bridgeport, the pastor of a local Baptist church talked in an interview about his fears of a "permanent underclass" and his worries that some of the city's children don't have access to decent-quality produce, let alone decent education. Half an hour down the road, there was an open house underway in Greenwich. Modest in comparison to its much larger neighbours, the home was selling for $4.5-million (U.S.) and featured a climate-controlled indoor pool area. A nearby forest preserve was excellent for walking or horseback riding, the real estate agent told me.

A NEW GILDED AGE

The U.S. has always had income disparities, but over the last three decades the country has entered a new gilded age. In 2012, the top 10 per cent of earners took home half of the nation's total income, the highest share since modern records began in 1917, according to research by economists Emmanuel Saez and Thomas Piketty. Since the 1980s, the income of the top 1 per cent of earners, adjusted for inflation, has nearly tripled.

For Canada – grappling with a more moderate but increasing wealth gap – the U.S. represents one vision of the future. According to a commonly used measure of income inequality, the U.S. is the most unequal major industrialized nation on Earth. Among a broader group of 34 developed countries, it is fourth, surpassed only by Turkey, Mexico and Chile. (Canada, by contrast, is 12th.)

The same dynamics that are driving the growth of income inequality in Canada are also at work in the U.S., only in more extreme form: the disappearance of manufacturing jobs in a more globalized world, the decline of labour unions, the increase in pay for executives and bankers, the mismatch between the skills employers need and the ones workers have.

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Experts disagree about whether today's income gap is a drag on U.S. economic growth, but there's little question that it coincides with other undesirable trends – such as lower upward mobility between generations and neighbourhoods increasingly segregated by income.

More broadly, Michael Sandel, a Harvard philosophy professor, has drawn attention to what he calls the "skyboxification of American life," a reference to the distinct, higher-priced boxes now common in sports stadiums. "People of influence and people of modest means lead increasingly separate lives," he wrote last year. "It's not good for democracy, nor is it a satisfying way to live."

In Bridgeport and Greenwich, the status quo appears entrenched. The income gap saturating the area is a fact of life, as likely to inspire indifference as anguish. In conversations, there was little anger and even less sense that substantial change was likely any time soon.

CONNECTICUT AS POSTER CHILD

Every day, Juan Terron travels back and forth between the two extremes. He drives from his home in Bridgeport to Greenwich, where he works as a maintenance worker at a private school that sits on 20 acres of land and charges kindergarten tuition of $32,150.

"It's like entering a different world," said Mr. Terron, 57. "You see it in the houses and cars. Everything is owned, nothing is rented. You will never see any homeless people or drug addicts walking on the streets."

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Within the U.S., Connecticut is the "poster child" for the growing income divide, said Stephen Adair, a sociology professor at Central Connecticut State University. "No other state compares in terms of the rate of growth in inequality" over the last four decades.

The most common measure of income inequality is the Gini coefficient, which is named after an Italian statistician. A perfectly equal distribution of income results in a score of 0 and a totally lopsided distribution – where one person gets everything – produces a score of 1.

The metropolitan area that is home to Bridgeport, Greenwich, Stamford and Norwalk – a string of cities and towns hugging the ocean with 927,000 residents – had a Gini coefficient of .54 over the three-year period between 2010 and 2012, according to the latest figures from the U.S. census. That's the highest of any urban centre in the nation.

In Bridgeport, 35 per cent of households earned less than $25,000 a year and just 2 per cent earned more than $200,000. In Greenwich, the picture is nearly the opposite: 35 per cent of families earned more than $200,000 a year, while 9.8 per cent earned less than $25,000. The disparities also reflect the still-considerable economic gaps between races in the U.S.: the residents of Greenwich are predominantly white, while the majority of Bridgeport's population identifies as black or Hispanic.

Mr. Terron immigrated to the U.S. from Mexico. His wife Maria works cleaning rooms at the local Holiday Inn. His two daughters, now 24 and 18, went to public schools in Bridgeport. The education they received bears no resemblance to what he sees each day at work: concerts, swimming lessons, holiday events, the latest teaching technologies, opportunities to study abroad during the summer.

"In all of the years that my daughters attended schools in Bridgeport, they never had any of that," he said. Instead, they came home with stories of fights between students or pupils who brought a weapon to school. "It's just not fair because not everyone has the same opportunities."

In Bridgeport, nearly 40 per cent of children live in poverty. According to a report from the Bridgeport Child Advocacy Coalition, 99 per cent of the students in the city's public schools are what it terms "economically disadvantaged" – or come from families earning less than 185 per cent of the poverty level.

Research indicates that educational outcomes are increasingly linked to family incomes. Sean Reardon, an education professor at Stanford University, found that the gap on standardized tests between rich and poor U.S. students is about 40-per-cent larger than it was 30 years ago. What's more, he has noted, students from affluent families are outperforming not just their peers from poor families, but those from middle-class families as well.

ONCE THRIVING, NOW STRUGGLING

Pastor Anthony Bennett has spent nearly two decades in Bridgeport leading Mount Aery Baptist Church, a 90-year-old institution in a neighbourhood known as "the Hollow." The older members of his church remember when the city was a thriving manufacturing hub, home to factories making sewing machines, electrical components, trucks and turbines.

"There is almost an envy I have of them, because they grew up in an era, in the 40s, 50s and 60s, when Bridgeport was a strong city," said Mr. Bennett, who is engaged in numerous initiatives to tackle the city's problems.

The manufacturers have nearly all fled, decimating Bridgeport's tax base. In recent years, efforts to rejuvenate the dilapidated downtown area have gained some traction. Locals proudly note that Elton John recently performed at the city's arena, built to draw economic activity – and residents from prosperous neighbouring towns – into Bridgeport.

It remains a long slog. Ms. Davis, the mother of two, lives on the east side of town. A main intersection features a pawn shop, a cheque-cashing outlet, a small convenience store and a Subway sandwich shop with a sign advertising that it accepts food stamps, the nutritional assistance program for poorer Americans.

Willie Roy Edwards, a retiree who lives in subsidized housing, was pushing a shopping cart filled with assorted pieces of metal toward a nearby scrap yard on Knowlton Street. He makes the ten-kilometre round trip from his home two or three times a week. His haul this time: $47.

Mr. Edwards has lived in Bridgeport for nearly 50 years, working at car dealerships, though he almost never went to the wealthier precincts beyond the city. "I've been out there, but just passing through," he said. "They have their own standards of who they want to associate with."

AMONG THE SUPER ZIPS

Upon leaving Bridgeport, a different landscape emerges. Just outside the city marks the start of a string of what social scientist Charles Murray has called "Super Zips": American postal codes full of the nation's best-educated and best-compensated workers. Other such large clusters of "Super Zips" can be found near Washington, D.C., in Silicon Valley, and on the east side of Manhattan, for instance.

One such postal code in this area belongs to Greenwich, a town of 62,000 residents where the median household income is $134,000. The main shopping thoroughfare is home to Hermès, Tiffany, Saks Fifth Avenue and an Apple store. Along a side street, there is a boutique called Splurge. On another major avenue is a series of car showrooms: Porsche, Mercedes-Benz, Aston Martin, Maserati.

It's a place long associated with the barons of the financial industry, whether in banking, insurance, or, more recently, hedge funds. Roughly a quarter of the increase in the share of income going to the top 1 per cent of Americans since 1979 can be traced to rising pay in finance, according to a recent report from Capital Economics.

Changes in the tax code have also helped the wealthy: Starting in the 1980s, the U.S. began reducing the income-tax rate for the highest earners from 70 per cent to 35 per cent. Hedge fund managers and private-equity investors also benefit from a particular loophole, which allows their income to be taxed at the same rate as capital gains – or 20 per cent for those in the highest tax bracket.

On a recent evening, the Chamber Players of the Greenwich Symphony held a concert at the Bruce Museum, an imposing building on a hill high above town. The museum's honorary trustees include Richard Fuld, the former chief executive of Lehman Brothers, and Steven Cohen, the hedge-fund billionaire whose firm, SAC Capital Advisors, recently pleaded guilty to criminal charges of insider trading (both Mr. Fuld and Mr. Cohen own homes in Greenwich).

The program for the concert lists the pieces to be played, but also a series of suggestions on tax-efficient ways to donate to the chamber music group. Giving securities rather than cash avoids all capital gains taxes and allows the donor to claim a deduction, it notes, concluding with a reminder to consult with a tax adviser before making any decisions.

At a wine-and-cheese reception during intermission, I ask Reba Beeson, a lawyer and longtime Greenwich resident, what locals gripe about. She thinks for a moment. "The weather," she answers. There are storms and, rarely, hurricanes that can knock out power lines. She pauses, then adds: "There's really not much to complain about."

Back in Bridgeport, Ms. Davis finished dropping her children off from school and began preparing for her first day of work at her new job in nearby Norwalk. She fears that the recession has permanently altered the economy, together with the earning potential of people like her.

As for her eight-year-old daughter and six-year-old son, she wants them to become decent, compassionate human beings and hopes for them to go to college like she did. But she's uneasy. "I do worry about them and what kind of opportunities they're going to have."

Editor's Note: An earlier version of this story incorrectly stated the location of Joanne Davis's new job as Stamford, Conn. In fact, she works in Norwalk, Conn.

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About the Author
U.S. Correspondent

Joanna Slater is an award-winning foreign correspondent for The Globe based in the United States, where her focus is business and economic news and New York City.Her career includes reporting assignments in the U.S., Europe and Asia. In 2015, she was posted in Berlin, Germany, where she covered Europe’s refugee crisis. More

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