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WIDENING INEQUALITY IN MINNESOTA: A COUNTY-BY-COUNTY ANALYSIS By Tom Legg & Ngoc (Jenny) Nguyen WIDENING INEQUALITY IN MINNESOTA: A COUNTY-BY-COUNTY ANALYSIS Published May 2015 by Growth & Justice WRITTEN BY: Tom Legg is retired from the finance faculty at the University of Minnesota’s Carlson School of Management. He has returned in retirement to his roots in northern Minnesota. He has a B.S. from UMD and a Ph.D. in Applied Economics from the UniversityNgoc (Jenny) of Minnesota. Nguyen was a research assistant and student at the Carlson School of Management while working on this report. She is currently a graduate student in the DepartmentACKNOWLEDGEMENTS of Applied FROM Economics TOM LEGG: at the University of Minnesota. I wish to thank Jay Coggins and Dane Smith, my co-authors on the August 2013 inequality report, for assistance in writing the introduction and conclusions. Thanks also to Jennifer Weddell at Growth & Justice for excellent editing. DESIGNED BY: Mark Tundel Communications Manager, Growth & Justice Growth & Justice is a nonprofit research and advocacy organization that develops innovative public policy proposals based on independent research and civic engagement. We believe when Minnesota makes smart investments in practical solutions it leads to broader prosperity for all. 2 FOREWORD 3 INTRODUCTION AND SUMMARY 6 MEDIAN HOUSEHOLD INCOME IN MINNESOTA COUNTIES 9 POVERTY IN MINNESOTA COUNTIES 13 OVERALL INEQUALITY: THE GINI COEFFICIENT IN MINNESOTA COUNTIES 15 CONCLUSION This research by Growth & Justice Policy Fellow Tom Legg, with assistance from University of Minnesota graduate student Ngoc (Jenny) Nguyen, provides important factual context for understanding the widening economic inequality in Minnesota, particularly as it varies across the Twin Cities urban core, its suburbs and exurbs, and rural and Greater Minnesota. Understanding these regional disparities is critical, for policymakers and for all Minnesotans concerned about the immediate and long-term damage that growing disparity might doWidening to our state.Economic Inequality in Minnesota: Causes, Effects, and a Proposal for Estimating Its Impact in Policymaking Legg’s work builds on an August 2013 Growth & Justice report ( ) which showed that Minnesota is indeed suffering from growing inequality that tracks with national trends. That report examined how inequality had worsened in Minnesota over time and how our level of inequality compared to other states. This new report explores how inequality differs across the state, county-by-county. While it’s well-known that Twin Cities area income levels are higher than in Greater Minnesota, this report shows that poverty and inequality are highest in the two urban core counties of Hennepin and Ramsey, and in the most rural counties of northern and southern Minnesota. In contrast, many outer suburban and exurban counties enjoy high income levels, low rates of poverty and relatively low measures of inequality. This research challenges the notion that the inequality divide in Minnesota is essentially between the Twin Cities metropolitan area and Greater Minnesota. Rather, the inequality divide is better understood as a chasm between relatively a prosperous suburban/exurban ring, and the spaces within and outside that ring. Growth & Justice is committed to maintaining a strong focus in our research and advocacy work on reducing economic inequality. By shining a light on patterns of disparity, we can advance better solutions that foster economic growth while investing in human potential and eliminating racial and other disparities. We are convinced that equity is the superior growth model for Minnesota and all its residents. Dane Smith President, Growth & Justice 2 GROWTH & JUSTICE A COUNTY-BY-COUNTY ANALYSIS INTRODUCTION AND SUMMARY The gap between rich1 and poor in Minnesota and the United States is wide and growing. The share of all income going to the richest2 one percent, at 22.5% in 2012, is higher than it has been since the Roaring Twenties . Wealth inequality is much higher still. The richest one percent own more than 40% of the nation’s wealth . The issue of economic inequality has become more prominent in recent years, with President Obama recently calling it the defining issue of our time. Conservative politicians have joined with their more liberal counterparts in acknowledging the increase in inequality. In a 2013 report, we explained the data behind inequality in Minnesota and the United States, telling the story of how it has dramatically increased. That report demonstrated that inequality had indeed worsened in Minnesota in recent decades, though still ranking among the less unequal and more prosperous states. This report updates that status, showing Minnesota’s 2012 median household income at 21% higher than the U.S median, and Minnesota’s 2012 poverty rate at 11.4% compared to 15.4% for the United States. Minnesotans might, with some justification, look upon these figures with a certain complacency. We must be doing something right. But the story of inequality in Minnesota is quite a bit more complicated than the headline statistics suggest. Income and inequality vary widely within the state, by county and region, in ways that give cause for concern. In this report, we explore these differences within the state. th Minnesota’s richest county is Scott, where median income stands at $84,571. That figure placesth Scott County at 37 highest in median income of the more than 3,100 counties in the U.S. Minnesota’s poorest county is Wadena, where median income is $35,767. Wadena ranks 2,586 in the country, well within the poorest 20% of counties. Meanwhile, inequality is very high within some of our counties where average incomes are high to moderate. The Gini coefficient is a century-old statistical measure that represents the level of disparity across the entire income spectrum. It ranges from zero (perfect equality) to one (perfect inequality). A high Gini reflects high inequality. Hennepin County’s Gini is above 0.48, which is above (more unequal than) the U.S. Gini of 0.46. Sherburne County, in the growing exurban area between the Twin Cities and St. Cloud, has a coefficient of only 0.35. That places it among the 30 most equal counties in the U.S. A closer look at Minnesota, county-by-county across the state, reveals an intriguing picture of dramatically differing economic disparities. The data also indicate that some parts of our state suffered more from the Great Recession than others, and are generally recovering more slowly. When one looks at the entire state, comparing all 87 counties to one another, a persistent pattern emerges. Economic inequality is high where income is low, and inequality is low where income is high. This is the same pattern that emerged from our analysis of state-level data in our 2013 report. Wealth Inequality in the United States Since 1913 1 World Top Incomes Database at www.parisschoolofeconomics.eu/en/research/the-world-top-incomes-database/ 2 Saez, E. and G. Zucman, , National Bureau of Economic Research Working Paper 20625, October 2014 GROWTH & JUSTICE 3 WIDENING INEQUALITY IN MINNESOTA Figures 1 and 2 provide a preliminary indication of this relationship. The highest median incomes (Figure 1) are in the counties that comprise the exurban and suburban ring around the Twin Cities metropolitan area. No Minnesota counties inside or outside that ring have a median income as high as the median income in the poorest suburban county. The counties with the lowest median incomes are concentrated in northern Minnesota, and the highest inequality, as measured by Gini coefficients, is also concentrated in northern Minnesota. Several of the suburban ring counties are among the least unequal, and all of the suburban counties are less unequal than Minnesota as a whole. As we will see, poverty rates, like inequality, are lowest inFIGURE the suburban 1: 2012 MEDIAN ring and INCOME generally BY highestCOUNTY in northernFIGURE Minnesota. 2: 2012 GINI COEFFICIENT BY COUNTY > $69,915 < 0.37955 $51,120 - $69,915 0.37955 - 0.39878 $48,820 - $51,120 0.39878 - 0.41070 $45,860 - $48,820 0.41070 - 0.42327 < $45,860 > 0.42327 In this report we will examine county level data on household incomes, poverty rates, and overall inequality (Gini coefficients). Our most affluent counties, comprising the suburban/exurban ring around Hennepin and Ramsey counties, are also among the most equal and exhibit relatively low poverty. We will examine that relationship more closely. We will also consider the changes in Minnesota counties over the last 20 years. Minnesota has, as our 2013 report showed, seen increases in poverty and overall inequality both absolutely and relative to other states. Minnesota median income has rebounded since 2010 but remains below that of 1999-2004. We will see how Minnesota counties have fared over that same period. We will consider county median income, poverty, and inequality across counties and over time, beginning with the individual measures. What patterns emerge? How do the absolute measures compare? Once we have considered the individual measures we will turn to the overall story reflected in the data. How does income relate to poverty and inequality within the state? Are rural areas keeping up with metropolitan areas? And how are suburban areas faring relative to urban areas? We will also 4 lookGROWTH at how & JUSTICE these relationships have changed over the last several years. A COUNTY-BY-COUNTY ANALYSIS We rely throughout on data for Minnesota counties provided by the U.S. Census Bureau. We have utilized data for 1995, 1999, 2004, 2009, and the five-year compilation (2008-2012) from the American Community Survey (ACS). The 1995 and 2004 data are drawn from the Small Area Income and Poverty Estimates (SAIPE) reflecting modeled estimates developed by the Census Bureau. The 1999 data is from the 2000 census. The 2010 census data for 2009 is used only for state-level data, as insufficient data was gathered to provide income, poverty and inequality estimates by county.

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