The D.C. Office of the Chief Financial Officer revealed that the level of income inequality in Washington, D.C., is higher than that of every state in the country and 66 other countries according to a report released on Oct. 29.
The report, entitled “The District of Columbia Economic and Revenue Trends,” issued by the CFO at the end of every month, investigated income inequality in the District in October, using individual income tax data from 2001 to 2012. The study also looked at neighborhood inequality, tax revenue, property values, economic forecasts and general economic growth.
“The District’s economy has outperformed other parts of the country and led to economic prosperity for many of those at the top of the income distribution,” the study said. “However, the prosperity is not evenly shared, as the district’s bottom quintile is far more modest compared to other cities.”
The CFO measured income inequality with the Gini coefficient, which assigns countries or regions a number between 0 and 100 from most equal to most unequal. The Gini index for the District was 61.4. Since 2001, the troughs in the Gini coefficient have occurred in 2002 and 2009, corresponding with the last two national recessions.
According to a March 2014 study by the Fiscal Policy Institute, the average income for the District’s top 5 percent of households is the highest out of large U.S. cities at over half a million dollars. Meanwhile, the average income of the bottom fifth of households is $9,900.
Government professor Eric Langenbacher criticized the CFO study, as it compares D.C., a city, to both states and nations without accounting for the potential differences that this highlights.
“As interesting as this article is, it compares apples and oranges,” Langenbacher said. “Rising inequality in these [cities] is a symptom of very positive developments, resulting in strong local budgetary positions.”
Langenbacher pointed instead to a study conducted by the Brookings Institution entitled “Income Inequality in America’s 50 Largest Cities,” which compared the levels of income inequality in cities from 2007 to 2012.
“According to [the] Brookings study, Atlanta, San Francisco, Miami and Boston are all more unequal,” Langenbacher said. “D.C. is essentially tied with New York City.”
Economics professor Garance Genicot noted that, despite its faults, the study by the CFO is more telling of the nation as a whole than just of D.C.
“Given the large difference in inequality between the U.S. and all other developed countries, it should be clear that there is a lot that can be done nationwide [in the U.S.], in particular in terms of [a] safety net,” Genicot said.
This study raises questions on how D.C. and other regions with high levels of income inequality will deal with this issue, particularly in light of Tuesday’s election of D.C. Councilmember Muriel Bowser (D-Ward 4) and her platform’s focus on addressing affordable housing issues.
“Income equality is a real problem in the region, nation and world, but one with no easy, short-term fix,” Langenbacher said. “D.C., like other jurisdictions, is trying to address the problem. Increased minimum wages, plans to increase the stock of affordable housing and on-going, comprehensive educational reforms are steps in the right direction.”
Genicot agreed, pointing to changes like the minimum wage increase as essential to fixing the problem of inequality in the District.
“The District could do much more to address its high level of inequality and high rate of poverty,” Genicot said. “The scheduled increases in the minimum wage in the summers of 2015 and 2016 should help. Also, the high rates of violence and incarceration among the poor in D.C. make it likely that some judicial reforms could help.”