Income Equality Rallied in 62 of 100 Largest Metros as Pandemic Was Underway — Metros Where It Improved, Worsened the Most

Despite the destructive impact the COVID-19 pandemic has had on the economy, the latest MagnifyMoney study reveals one silver lining: Income equality improved across the majority of the 100 largest U.S. metros. According to LendingTree senior economist Jacob Channel, it’s likely due to the pandemic.

“Two of the biggest factors that positively impacted income equality in the U.S. were the government stimulus programs and the changes to the labor market,” Channel says. “The government had a very robust response to COVID-19. Outside of the direct government intervention, shifts in the labor market helped push up wages for many people.”

MagnifyMoney researchers analyzed U.S. Census Bureau Gini coefficient data to show where income equality improved — or worsened — between 2019 and 2020 in the 100 largest metros. In addition to reviewing our findings, stick around for tips on building wealth.

Key findings

• In the majority of the 100 largest U.S. metros, income equality improved from 2019 to 2020. The Gini coefficient — which measures income equality (and inequality) — rallied in 62 of the 100 metros in the period examined.
• Boise, Idaho, saw the biggest improvement in income equality. Its Gini coefficient decreased by 0.0096 between 2019 and 2020. (More on this soon, but a Gini coefficient of 0 represents that everyone in a metro has the same income. That means a decrease moves the needle toward equality.) However, the median household income in Boise is still 5.7 times lower than that among the top 5% of earners. Boise households earn a median of $64,717, versus $370,815 among the top earners.
• Metros in the South saw the biggest decrease in income equality. The five metros where income equality shrunk the most are in the South. The Gini coefficient increased by 0.0133 in Richmond, Va. — the most of any metro.
• Inequality remains prevalent in some of the metros with significant progress. For example, New York ranked 13th for the biggest income equality improvements between 2019 and 2020, but it has the fourth-highest income gap between median households and the top 5% of earners in the 100 metros examined. In New York, households earn a median of $81,951 a year, versus $603,922 a year among the top 5%.
• Ogden, Utah, has the narrowest income gap among the 100 metros examined. The median household income in Ogden is $78,680, while the top 5% in Ogden make a median of $341,117. That means the top earners make 4.3 times more than the median household — making Ogden the only metro where the top 5% make less than 5 times more than the median earner. This is a sign that even the metro with the best income equality has a lot of room for growth.

In majority of largest metros, income equality improved between 2019 and 2020

Despite the COVID-19 pandemic’s devastating impact on the U.S. economy, the newest MagnifyMoney study indicates that income equality rallied in 62 of the 100 largest metros between 2019 and 2020. This is particularly notable because the income gap has been steadily growing since the 1970s. Generally, that’s been more evident in urban areas like large metros, where income inequality has historically been higher than in rural America.

However, just as the pandemic disrupted the U.S. economy, Channel believes it may have contributed to widespread income equality improvements in two major ways: government and labor.

“Not only were there three rounds of economic impact payments sent out to households, but extra unemployment benefits guaranteed by the government also meant that, for the most part, even those who lost their jobs still brought in enough money to make ends meet,” he says. “In many instances, those on unemployment during the height of the pandemic were making more money than they were at their jobs.”

Meanwhile, the economy’s quick rebound after a wave of layoffs left businesses struggling to fill job openings, particularly as so few former employees were willing to return to work. Wages subsequently climbed as unemployment continued to drop. With lower-wage workers holding more leverage, many Americans could find better jobs — a shift likely felt among consumers, according to Channel.

“While inflation has unfortunately eaten away at many of these wage gains, the labor market still remains relatively strong,” he says. “And because the labor force participation rate — or the share of people who have or are actively looking for a job — is still depressed, employees still need to compete for a limited supply of workers, and those who have jobs have been able to keep some of their wage increases.”

Income equality improved the most in Boise, Idaho

Of the 62 metros that saw their income equality improve between 2019 and 2020, Boise, Idaho, ranked highest, with its Gini coefficient decreasing by 0.0096. As a reminder, decreases in the Gini coefficient mean a metro’s rating is getting closer to 0, indicating perfect equality. Put another way, a reduction in the Gini coefficient is good for equality.

Here’s a look at the metros with the largest equality growth between 2019 and 2020:

Source: MagnifyMoney analysis of U.S. Census Bureau data

Despite the improvement in Boise, there’s still a significant equality gap. The median household income in Boise is $64,717, while the top 5% earn a median of $370,815 — 5.7 times higher. When ranking metros by the gap between these two figures, Boise is tied for 31st.

Notably, Des Moines, Iowa, the metro with the second-largest improvement in income equality, ranks among the 10 metros with the best equality outlook. The median household salary in Des Moines is $71,734, while the top 5% earn a median of $370,946 — giving it the seventh-smallest gap between the two.

Income equality decreased the most in Southern metros

The five metros where income equality worsened the most are in the South, with Richmond, Va., ranking highest. Between 2019 and 2020, the Gini coefficient in Richmond grew by 0.0133, meaning the income gap widened. Additionally, Richmond is among the top 20 metros with the largest income gap. The median household earns $71,223 a year, while the top 5% earn a median of $469,942 a year — 6.6 times more.

Take a look at how the worst-ranked metros compare:

Source: MagnifyMoney analysis of U.S. Census Bureau data

One possible explanation for this could be because Southern states generally had fewer policies to protect employees from the impacts of COVID-19, particularly in the early days of the pandemic. Therefore, Southerners with low incomes were likely more vulnerable to the long-term impacts of lost wages than those who lived in metros with more statewide protections.

Virginia, for example, was among the states that enacted the fewest laws and policies to protect its unemployed population between Feb. 15, 2020, and July 1, 2020 — a period in which the coronavirus began spreading quickly across the U.S — according to an Oxfam America study. Notably, according to the study, Virginia didn’t pass legislation preventing employers from forcing sick workers to return to work or retaliating against employees who caught the coronavirus. It also didn’t enact any statewide personal protective equipment (PPE) requirements, putting employees at an increased risk of illness.

Similarly, Florida, South Carolina and Mississippi passed minimal legislation to protect workers during the same time frame, according to Oxfam America, with none preventing employers from forcing workers to return to work after an illness. Of these three, Florida was the only state that protected employees from workplace retaliation and placed a statewide moratorium on evictions (in addition to the federal moratorium).

In addition to a lackluster response to the pandemic, Channel also attributes the South’s historical struggle with income inequality and poverty to its widening income gap.

“Generally, Southern states have more lax labor laws, meaning that it’s sometimes easier for companies to take advantage of employees,” Channel says. “The so-called pro-business mentality that many Southern states adopt can make it much harder for workers to negotiate raises or take actions that could help ease income inequality. Beyond that, the long-term legacies of policies like the Jim Crow laws and redlining also hurt many Southerners — namely those from communities of color — and doubtlessly exacerbates inequality.”

Full rankings

Source: MagnifyMoney analysis of U.S. Census Bureau data. Note: A negative change indicates that income equality improved (equality got closer to 0), while a positive change shows that income equality worsened.

Inequality remains prevalent in some metros with significant progress

While some metros have made significant progress in closing the income gap, inequality is still prevalent. New York City, for example, ranked in the top 15 for where income equality improved the most, but it remains one of the metros with the highest income gaps. In New York, the median household earns $81,951 a year, while the top 5% earn a median of $603,922 a year — the fourth-highest gap between the two data points.

Six of the 10 metros with the highest income gap between median households and top earners saw their equality improve between 2019 and 2020. That includes Bridgeport, Conn., the metro that ranks highest for income inequality. In Bridgeport, the top 5% earn 9.1 times what the median earners take home annually ($97,539 versus $883,321). Despite its wide income gap, however, Bridgeport’s Gini coefficient shrank by 0.0019 between 2019 and 2020. Some of the additional metros with the highest gaps that saw their Gini coefficients shrink include:

• Miami, where the median household earns $59,030 and the top 5% earns $472,715, saw its Gini coefficient shrink by 0.0020.
• Cape Coral, Fla., where the median household earns $59,608 and the top 5% earns $417,622, saw its Gini coefficient shrink by 0.0021.
• New Orleans, where the median household earns $54,388 and the top 5% earns $375,918, saw its Gini coefficient shrink by 0.0017.
• Los Angeles, where the median household earns $76,399 and the top 5% earns $521,348, saw its Gini coefficient shrink by 0.0018.

That leaves four of the 10 metros with the highest income gap where equality worsened. Notably, North Port, Fla., the metro with the third widest-growing income gap, ranked second for worsening income inequality.

Full rankings

Source: MagnifyMoney analysis of U.S. Census Bureau data.

Ogden, Utah, has the smallest income gap

Across all metros analyzed, Ogden, Utah, has the smallest income gap between median earners and the top 5% of earners. The top 5% in Ogden make 4.3 times what the median household makes — $341,117 versus $88,680. While that’s a considerably higher income, it’s the only metro where the top 5% earns less than five times what the median earner makes.

Following that, Honolulu has the second lowest income gap. The median household earns $87,722, while the top 5% bring in a median of $437,875 — 5.0 times more. Some of the other highlights, each with differences of 5.1, include:

• Provo, Utah: The median household earns $76,864, while the top 5% earn $388,322
• Colorado Springs: The median household earns $71,171, while the top 5% earn $363,026
• Albany, N.Y.: The median household earns $72,810, while the top 5% earn $372,438

Tips to increase your income

While the shrinking income gap is generally good news for consumers, Channel says it’s important to note that recent economic changes could potentially impact the income gap.

“High inflation and aggressive action from the Federal Reserve means the probability of a recession is high — if we’re not in one already,” Channel says. “If or when the labor market finally does cool and the impacts of the recession become more noticeable, it’s likely that lower income workers will be hardest hit and, as a result, income and wealth inequality could very well grow again.”

While consumers can’t control income inequality, they can take some steps to increase their income level. Specifically, Channel recommends the following:

• Learn how to negotiate. “One of the best ways to increase your earnings is to know your worth and negotiate with your employer,” Channel says. “Talk about what you specifically bring to the table. The more you’re able to prove your invaluableness, the better your chances of being able to negotiate a raise. Remember that without employees, no company could survive and as a result, you should always be willing to fight to get what you’re worth from your employer.”
• Consider investing extra cash in a high-yield savings account. “With rates rising so dramatically and the stock market behaving so erratically, now can be a good time to park your money in a low-risk savings account,” Channel says. Alternatively, he suggests exploring other low-risk investments such as government-backed bonds.

Methodology

To rank the states where income equality is improving the most, MagnifyMoney researchers analyzed U.S. Census Bureau American Community Survey data to explore the change in the Gini coefficient between 2019 and 2020. The Gini coefficient is a measure of income inequality. The coefficient ranges from 0 to 1. A coefficient of 1 represents perfect inequality, meaning that all income goes to one person. A coefficient of 0 represents perfect equality, meaning everyone has the same income.

Researchers ranked metros based on this change. We also ranked metros according to the difference between the median income and income needed to be considered in the top 5%.