Abstract
The distribution of pre-tax wages and salaries for employed individuals between the ages of 18-65 in the ten largest metropolitan areas of the USA are studied in this paper using the American Community Survey data from 2019. The included metropolitan areas are Atlanta-Sandy Springs-Roswell, Chicago–Naperville-Elgin, Dallas-Fort Worth-Arlington, Houston-The Woodlands-Sugar Land, Los Angeles-Long Beach-Anaheim, Miami-Fort Lauderdale-West Palm Beach, New York-Newark-Jersey City, Philadelphia-Camden-Wilmington, San Francisco-Oakland-Hayward, and Washington-Arlington-Alexandria. These ten metropolitan areas employed over 39 million individuals representing well over a quarter of the total employed labour force in the USA. Mean, median, standard error of the mean, 25th percentile, 50th percentile, and the Gini coefficient of pre-tax wages and salaries are presented for each metropolitan area. The metros differ significantly in terms of average pre-tax wages and salaries. They differ significantly in terms of the spread in the distribution of pre-tax wages and salaries measured both in terms of the inter-quartile range (the difference between 75th and 25th percentiles) and the Gini coefficient. San Francisco-Oakland-Hayward is found to have both the highest average pre-tax wages and salaries and widest inequality as measured by the Gini coefficient. The Smallest Gini coefficient is observed in Washington-Arlington-Alexandria metropolitan area. Inequality measured in terms of the Gini coefficient is nearly 15% higher in San Francisco-Oakland-Hayward as compared to Washington-Arlington-Alexandria. The average pre-tax wages and salaries are about 83% higher in San Francisco-Oakland-Hayward than Miami-Fort Lauderdale-West Palm Beach, the lowest in the nation. While aggregate nationwide inequalities attract intense attention, these regional variations point to significant and wide-ranging variations between different regions (metropolitan cities). By focusing on the pre-tax wages and salaries, this study allows us to tie inequalities that are most closely related to the labour market conditions, unlike other sources of income like capital gains, inheritance, government transfers, etc.
Highlights
Income inequality is one of the most widely discussed and pervasively used economic concepts in policy and business circles
It may be noted that the median pre-tax wages and salaries of New YorkNewark-Jersey City and Los Angeles-Long Beach-Anaheim are about 17% and 33% lower compared to San Francisco-Oakland-Hayward or Washington-Arlington-Alexandria
Inequality measured in terms of the Gini coefficient is nearly 15% higher in San Francisco-Oakland-Hayward than Washington-Arlington-Alexandria
Summary
Income inequality is one of the most widely discussed and pervasively used economic concepts in policy and business circles. Widening income distribution in recent decades has been blamed for increasing political unrest and demand for stronger re-distributive economic policies in many parts of the world. Many studies focus on the total income derived from various sources like wages and salaries, asset income, inheritance, government transfers, etc. Inheritance, government transfers, etc., many of them may have very weak or no relationship with one’s abilities and human capital or maybe only weakly related to the local labour market conditions. To keep the noise as low as possible, this paper focuses only on the pre-tax wages and salaries, which are most likely to correlate with labor market conditions and skill demand. A technological shift deepening the employment higher-skilled workers may end up increasing inequalities in the economy
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