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Measuring inequality

Rochester Business Journal
March 21, 2014

Talk about “two Rochesters” and the plight of the city’s poor can mask an important fact: Poverty and income inequality are not the same. So Rochester’s high poverty does not necessarily mean the city also is one of the most unequal.

Indeed, a study by the real estate firm Trulia suggests that is not the case. It examined data for the nation’s 100 largest metro areas and measured the ratio of household incomes for the 90th (richest) and 10th (poorest) percentiles. A higher ratio reflects greater inequality.

In Trulia’s analysis of 2012 data, Rochester ranks 44th, slightly better than the midpoint. In 1990, the city was 41st. So Rochester is only marginally more unequal and in the middle of the pack.

Don’t take too much comfort, however, in knowing that. Both Albany (12th) and Syracuse (38th) have less inequality, while the gap is a bit larger in Buffalo (46th). But all three upstate cities’ rankings improved substantially from 1990 to 2012, while Rochester slid a few places.

Trulia points to a pair of factors that seem particularly correlated to local income inequality. One is housing affordability. “Expensive housing pushes out many low- and middle-income households, and, in turn, richer residents bid up home prices and rents,” the report notes.

Another is growth, measured either by employment change or construction activity. In communities with slower growth, income inequality tends to be greater.

Rochester has struggled with sluggish growth for many years, hurt by relentless downsizing by Eastman Kodak Co. and other big manufacturing employers. But housing affordability has long been a strength.

As noted here recently, though, that might be changing. Census Bureau data for 2010-12 show that among more than 300 U.S. cities with at least 100,000 residents, Rochester now is one of the 30 least-affordable communities for renters, measured by median gross rent as a percentage of household income.

Drawing conclusions from all these numbers is no simple task, but it seems safe to say this much: Rochester is not a city where the paramount problem is the outsize incomes of a wealthy few. Rather, growth in jobs is the surest route to reducing poverty and income inequality.

3/21/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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