When It Comes to Income Inequality, These Amazon Finalists Suffer the Most

Image credit: Amazon

Amazon’s second headquarters threatens to exacerbate inequality wherever it locates. Soon after the tech giant begins its billion-dollar construction and massive hiring efforts, local residents could face steeper housing prices and overall costs of living. But not all cities would endure the same impact. Of the twenty finalist cities, an even smaller group suffers from unparalleled levels of income inequality.

In a recent report, the Brookings Institution’s Alan Berube examined income inequality across the 100 largest metros in the U.S. To determine inequality, Berube used the 95–20 ratio, which compares the incomes of the top five percent of household earners to the incomes of the bottom 20 percent. Metros with higher 95–20 ratios have the greatest disparity between their high- and low-income earners.

The following table looks at income inequality within the surrounding metros of the Amazon finalist cities. (The table does not include data for Newark, which is located in the New York metro, or Northern Virginia and Montgomery County, Maryland, which are located in the Washington, D.C. metro. Toronto is also excluded from the list, though it suffers from severe income inequality.) Of the 100 metros studied in the report, four Amazon finalists — Los Angeles, Miami, Boston, and New York — make the top ten, while two more — Philadelphia and Chicago — crack the top twenty. Unsurprisingly, these are some of the most talent-laden, innovative, and economically productive metros in the country — and some of the strongest contenders for the Amazon bid.

But what about metros whose household incomes are more evenly distributed?

According to the Brookings report, the Amazon finalist with the lowest 95–20 ratio is Raleigh, North Carolina, which ranks 80th among large metros according to its income inequality. Close behind is Nashville, which ranks 78th among large metros, and Washington, D.C., which ranks 70th. The remaining metros on the Amazon list — Atlanta, Austin, and Pittsburgh — have relatively moderate levels of income inequality.

Based on this data, Berube concludes that metros with less income inequality tend to be geographically expansive with higher shares of middle-class residents. As a result, they also stand to benefit most from larger shares of high-tech workers. In places like Raleigh and Nashville, Amazon could promote a much-needed sense of innovation and connectivity — both key ingredients of a successful urban economy.

NYU Schack Institute of Real Estate Urban Lab Director Steven Pedigo recently joined The Real Estate Hour on SiriusXM to discuss Amazon H2Q’s potential impact on inequality in the finalist cities.

Meanwhile, a new Amazon headquarters portends to widen income gaps in places like New York and Los Angeles. While superstar metros continue to rely on high-tech jobs for their economic prowess, they must now focus on creating sustainable service and blue-collar careers. This becomes difficult when more high-paid workers are introduced to the metro, driving up housing prices and encouraging displacement. To top it off, the massive incentives being offered by cities like Chicago, Newark, and Philadelphia threaten to further exaggerate local inequality. If Amazon is at all compelled to alleviate divides in its new home city, it would do well to choose a location with a more solid middle class.

STEVEN PEDIGO is the Director of the NYU SPS Schack Institute of Real Estate Urban Lab and a Clinical Assistant Professor for Economic Development at the NYU School of Professional Studies. He is also the Director of the Research and Advising for the Creative Class Group, an Associate Partner at Resonance Consultancy (Vancouver/ NYC), and a Senior Advisor for Leland Consulting (Portland). Follow him on twitter @iamstevenpedigo.

ARIA BENDIX is a writer for the NYU SPS Schack Institute of Real Estate Urban Lab. Her work has appeared in The Atlantic, CityLab, Bustle, and The Harvard Crimson, among other publications. Follow her on twitter @ariabendix.