By Angie Rodgers and Ed Lazere
PDF of this report
Across the nation, income inequality ‘ the gap between high-income and low-income households ‘ is substantial and has widened significantly over the past two decades. While this phenomenon is national in scope, an analysis of data from the 2000 census shows that income inequality is particularly serious in the District of Columbia.
- The average income of the top fifth of the District’s households ‘$186,830 in 1999 ‘ was 31 times higher than the average income of the bottom fifth of households ‘$6,126.
- The gap between high-income and low-income households in the District is as wide or wider than in any of the central cities of the nation’s 40 largest metro areas. Two other cities ‘ Atlanta and Miami ‘ have similar income gaps, but in most cities the gap is much smaller than in DC. In the typical large city, the income of the top fifth of households is 18 times the income of the bottom fifth.
- Income inequality widened in the District in the 1990s, as the benefits of its economic expansion went almost exclusively to its highest-income residents. The average income for the top fifth of DC households grew 36 percent during this period, adjusting for inflation, while the average income of the bottom fifth of households rose just three percent.
- The stagnant income for the District’s lowest-income residents reflects a variety of factors, including weak wage growth at the bottom of the earnings scale and a significant reduction in the value of public assistance benefits.
- The wide income gap in the District of Columbia also reflects the fact that low-income households in the Washington metropolitan area are highly concentrated in the city of DC. At the same time, the Washington metro area is home to a substantial high-income population, and these households are more likely to live in DC than are high-income households in many other metro areas.
These findings suggest that continued economic expansion alone cannot be expected to reduce income inequality. Instead, it is likely that future income growth will continue to accrue primarily to higher-income residents ‘ and that income inequality will widen further ‘ without efforts to reverse the trend of falling or stagnant incomes for the poorest residents.
While the District has taken some steps to boost the incomes of its lowest-income residents ‘ such as establishing a DC Earned Income Tax Credit ‘ there are other policies that could be adopted to reduce income inequality. These include:
- increasing the minimum wage;
- adopting a “living wage” requirement;
- using economic development programs to promote creation of good-paying jobs;
- expanding child care and other supports for low-wage workers; and
- increasing public assistance benefits for families that are not able to work or are preparing to enter the work force.