Friday, January 20, 2012

Consumption Inequality in Ward 6

In an earlier post, I talked about the fact that DC, along with similarly disenfranchised Puerto Rico, has some of the highest levels of income inequality in the world. During the recession, as a Pew Research Center report showed, wealth inequality -- measured as assets (houses, cars, banking accounts, etc) minus debts (mortgages, auto loans, credit cards, etc) -- has continued to increase across the United States. Gentrification is often seen positively because it brings new resources into communities and thus decreases inequalities. But what if more wealthy people are, in fact, taking away resources from the less wealthy? What if consumption inequality seriously affects people's life chances?

Here are four trends in inequality:
  1. Most American households make much less than $100,000. According to the Census, in 2008, nearly 80% of American households made under $100,000. Only 8.3% of American households made $150,000 or more (Census).
  2. Wealthy people spend much more money. From the Bureau of Labor Statistics data below, we can see that those with the lowest incomes spend on average about $21,000 per year, while those with the highest incomes spend on average about $94,000 per year. The Bureau of Labor Statistics surveys consumers about how much they make and how much they spend on various items, like housing, clothing, tobacco, reading material, and so on. They divide the population into five groups of equal size (about 24 million people in each, which each represent 20% of the population), from those making the least income (see Lowest 20%) to those making the most income (see Highest 20%). In this table, I chose only three of these five groups (Lowest, Mid, and Highest). I show how much money they spent in 2009 in each category and the percentage this represents of their overall expenses, such as the lowest 20% spends more of their income (16.2%) on food than the highest 20% (11.4%). The differences in consumption are enormous.
Bureau of Labor Statistics, Consumer Expenditure Survey, 2009

Lowest 20%
Mid 20%
Highest 20%
Avg Expenditures
Food $3,501
16.2% $5,483 13.3% $10,78011.4%
Housing $8,961 41.5%
$14,805 36%
$2,238 10.4%
$3,574 8.7%
Apparel $873 4%
$1,402 3.4%
Transportation $2,855
$6,717 16.3%
Healthcare $1,628 7.5%
$3,069 7.5%
Personal Care
Personal pension/ins.

As we know, more money spent on healthcare and on education has real consequences for people's lives. More money spent on all these items has real consequences for life chances.

3. Markets are much more responsive to the wealthy, as can be seen in Ward 6 with the expansion of expensive restaurants and expensive housing
. Often these restaurants and housing replace older, less expensive establishments, leaving those with lower incomes with fewer or no options. In Ward 6, the Hawk and Dove is being replaced by "a locally-sourced, seasonal bistro menu prepared in an open kitchen," (translation: a more expensive restaurant); the fish place on Barracks Row was replaced by "vintage hot dog joint" DC-3; and the KFC on Pennsylvania Ave will be replaced by a new residential-retail building that won't likely be selling low-cost food or housing low-income families (at best, there might be one or two low-income elderly singles). With increasing demand by more wealthy people, who are generally less price sensitive, inflation results (Forbes magazine wrote about this trend in 2009), so housing, restaurant, and food prices are likely to continue to rise in the area.

4. Wealthy residents can purchase homes that provide them access to better schools and other benefits. Renters may have access to good schools, but, if their homes are sold as expensive condos or as private houses, the wealthy are often able to offer more money to buy these homes than many renters can, so the wealthy can also gain access to schools and other community benefits. Those displaced must move to areas that often do not have these good schools. The wealthy are practicing a form of opportunity hoarding.

1 comment:

  1. How many rich people move to Ward 6 for great schools there? Is anyone seriously considering hoarding the opportunity to send their children to Eastern High? Some of the public elementary schools have improved over the last 20 years, but it's been a long slog with a lot of effort by the community, including the gentrifiers.