widening inequality in minnesota: a county...

WIDENING INEQUALITY IN MINNESOTA: A COUNTY-BY-COUNTY ANALYSISBy Tom Legg & Ngoc (Jenny) Nguyen

WIDENING INEQUALITY IN MINNESOTA: A COUNTY-BY-COUNTY ANALYSIS Published May 2015 by Growth & Justice

WRITTEN BY: Tom Legg is retired from the finance faculty at the University of Minnesota’s Carlson School of Management. He has returned in retirement to his roots in northern Minnesota. He has a B.S. from UMD and a Ph.D. in Applied Economics from the University of Minnesota.

Ngoc (Jenny) Nguyen was a research assistant and student at the Carlson School of Management while working on this report. She is currently a graduate student in the Department of Applied Economics at the University of Minnesota.

ACKNOWLEDGEMENTS FROM TOM LEGG:

I wish to thank Jay Coggins and Dane Smith, my co-authors on the August 2013 inequality report, for assistance in writing the introduction and conclusions. Thanks also to Jennifer Weddell at Growth & Justice for excellent editing.

DESIGNED BY: Mark Tundel Communications Manager, Growth & Justice

Growth & Justice is a nonprofit research and advocacy organization that develops innovative public policy proposals based on independent research and civic engagement. We believe when Minnesota makes smart investments in practical solutions it leads to broader prosperity for all.

2 FOREWORD 3 INTRODUCTION AND SUMMARY 6 MEDIAN HOUSEHOLD INCOME IN MINNESOTA COUNTIES9 POVERTY IN MINNESOTA COUNTIES13 OVERALL INEQUALITY: THE GINI COEFFICIENT IN MINNESOTA COUNTIES15 CONCLUSION

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This research by Growth & Justice Policy Fellow Tom Legg, with assistance from University of Minnesota graduate student Ngoc (Jenny) Nguyen, provides important factual context for understanding the widening economic inequality in Minnesota, particularly as it varies across the Twin Cities urban core, its suburbs and exurbs, and rural and Greater Minnesota. Understanding these regional disparities is critical, for policymakers and for all Minnesotans concerned about the immediate and long-term damage that growing disparity might do to our state.

Legg’s work builds on an August 2013 Growth & Justice report (Widening Economic Inequality in Minnesota: Causes, Effects, and a Proposal for Estimating Its Impact in Policymaking) which showed that Minnesota is indeed suffering from growing inequality that tracks with national trends. That report examined how inequality had worsened in Minnesota over time and how our level of inequality compared to other states.

This new report explores how inequality differs across the state, county-by-county.

While it’s well-known that Twin Cities area income levels are higher than in Greater Minnesota, this report shows that poverty and inequality are highest in the two urban core counties of Hennepin and Ramsey, and in the most rural counties of northern and southern Minnesota. In contrast, many outer suburban and exurban counties enjoy high income levels, low rates of poverty and relatively low measures of inequality.

This research challenges the notion that the inequality divide in Minnesota is essentially between the Twin Cities metropolitan area and Greater Minnesota. Rather, the inequality divide is better understood as a chasm between relatively a prosperous suburban/exurban ring, and the spaces within and outside that ring.

Growth & Justice is committed to maintaining a strong focus in our research and advocacy work on reducing economic inequality. By shining a light on patterns of disparity, we can advance better solutions that foster economic growth while investing in human potential and eliminating racial and other disparities. We are convinced that equity is the superior growth model for Minnesota and all its residents.

Dane Smith President, Growth & Justice

A COUNTY-BY-COUNTY ANALYSIS

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INTRODUCTION AND SUMMARYThe gap between rich and poor in Minnesota and the United States is wide and growing. The share of all income going to the richest one percent, at 22.5% in 2012, is higher than it has been since the Roaring Twenties1. Wealth inequality is much higher still. The richest one percent own more than 40% of the nation’s wealth2. The issue of economic inequality has become more prominent in recent years, with President Obama recently calling it the defining issue of our time. Conservative politicians have joined with their more liberal counterparts in acknowledging the increase in inequality.

In a 2013 report, we explained the data behind inequality in Minnesota and the United States, telling the story of how it has dramatically increased. That report demonstrated that inequality had indeed worsened in Minnesota in recent decades, though still ranking among the less unequal and more prosperous states. This report updates that status, showing Minnesota’s 2012 median household income at 21% higher than the U.S median, and Minnesota’s 2012 poverty rate at 11.4% compared to 15.4% for the United States.

Minnesotans might, with some justification, look upon these figures with a certain complacency. We must be doing something right. But the story of inequality in Minnesota is quite a bit more complicated than the headline statistics suggest. Income and inequality vary widely within the state, by county and region, in ways that give cause for concern. In this report, we explore these differences within the state.

Minnesota’s richest county is Scott, where median income stands at $84,571. That figure places Scott County at 37th highest in median income of the more than 3,100 counties in the U.S. Minnesota’s poorest county is Wadena, where median income is $35,767. Wadena ranks 2,586th in the country, well within the poorest 20% of counties.

Meanwhile, inequality is very high within some of our counties where average incomes are high to moderate. The Gini coefficient is a century-old statistical measure that represents the level of disparity across the entire income spectrum. It ranges from zero (perfect equality) to one (perfect inequality). A high Gini reflects high inequality. Hennepin County’s Gini is above 0.48, which is above (more unequal than) the U.S. Gini of 0.46. Sherburne County, in the growing exurban area between the Twin Cities and St. Cloud, has a coefficient of only 0.35. That places it among the 30 most equal counties in the U.S.

A closer look at Minnesota, county-by-county across the state, reveals an intriguing picture of dramatically differing economic disparities. The data also indicate that some parts of our state suffered more from the Great Recession than others, and are generally recovering more slowly.

When one looks at the entire state, comparing all 87 counties to one another, a persistent pattern emerges. Economic inequality is high where income is low, and inequality is low where income is high. This is the same pattern that emerged from our analysis of state-level data in our 2013 report.

1 World Top Incomes Database at www.parisschoolofeconomics.eu/en/research/the-world-top-incomes-database/2 Saez, E. and G. Zucman, Wealth Inequality in the United States Since 1913, National Bureau of Economic Research

Working Paper 20625, October 2014

www.parisschoolofeconomics.eu/en/research/the-world-top-incomes-database/

WIDENING INEQUALITY IN MINNESOTA

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Figures 1 and 2 provide a preliminary indication of this relationship. The highest median incomes (Figure 1) are in the counties that comprise the exurban and suburban ring around the Twin Cities metropolitan area. No Minnesota counties inside or outside that ring have a median income as high as the median income in the poorest suburban county.

The counties with the lowest median incomes are concentrated in northern Minnesota, and the highest inequality, as measured by Gini coefficients, is also concentrated in northern Minnesota. Several of the suburban ring counties are among the least unequal, and all of the suburban counties are less unequal than Minnesota as a whole. As we will see, poverty rates, like inequality, are lowest in the suburban ring and generally highest in northern Minnesota.

In this report we will examine county level data on household incomes, poverty rates, and overall inequality (Gini coefficients). Our most affluent counties, comprising the suburban/exurban ring around Hennepin and Ramsey counties, are also among the most equal and exhibit relatively low poverty. We will examine that relationship more closely.

We will also consider the changes in Minnesota counties over the last 20 years. Minnesota has, as our 2013 report showed, seen increases in poverty and overall inequality both absolutely and relative to other states. Minnesota median income has rebounded since 2010 but remains below that of 1999-2004. We will see how Minnesota counties have fared over that same period.

We will consider county median income, poverty, and inequality across counties and over time, beginning with the individual measures. What patterns emerge? How do the absolute measures compare?

Once we have considered the individual measures we will turn to the overall story reflected in the data. How does income relate to poverty and inequality within the state? Are rural areas keeping up with metropolitan areas? And how are suburban areas faring relative to urban areas? We will also look at how these relationships have changed over the last several years.

< 0.37955

> 0.423270.41070 - 0.423270.39878 - 0.410700.37955 - 0.39878

FIGURE 2: 2012 GINI COEFFICIENT BY COUNTY

> $69,915

< $45,860$45,860 - $48,820$48,820 - $51,120$51,120 - $69,915

FIGURE 1: 2012 MEDIAN INCOME BY COUNTY


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We rely throughout on data for Minnesota counties provided by the U.S. Census Bureau. We have utilized data for 1995, 1999, 2004, 2009, and the five-year compilation (2008-2012) from the American Community Survey (ACS). The 1995 and 2004 data are drawn from the Small Area Income and Poverty Estimates (SAIPE) reflecting modeled estimates developed by the Census Bureau. The 1999 data is from the 2000 census. The 2010 census data for 2009 is used only for state-level data, as insufficient data was gathered to provide income, poverty and inequality estimates by county. The Census Bureau now gathers information annually through the ACS; however, only five-year compilations provide sufficient data to develop estimates for all counties. We refer to the 2008-2012 compilation as 2012 estimates.


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MEDIAN HOUSEHOLD INCOME IN MINNESOTA COUNTIESMinnesota median household income has been on a roller coaster for more than 20 years. Household income rose dramatically (by 35%) from 1990 to $72,3353 in 2000, the highest ever. From 2000 to 2010, Minnesota median income then dropped 24% to $55,099. From 2010 to 2012, Minnesota median income rose 12.2%, even while U.S. median household income continued to fall. Perhaps surprisingly, Minnesota’s median income rose faster than that of any other state in the 1990s, dropped proportionally more than that of any state from 2000 to 2010, and again rose fastest from 2010 to 2012. Although Minnesota’s household income has been more volatile than that of other states, it also has exceeded the national median in all those years. In 2012, it climbed back to 9th highest in the nation. Table 1 provides median household income for selected years.

How variable are median household incomes across Minnesota? Which areas are improving, and which are struggling? Have these relationships changed?

First, we compare median incomes by county in 1999 and 2012 with two maps of the state. Later, we will look

more carefully at the results for some specific counties. Figure 1 (repeated here to ease comparison with Figure 3) depicts 2012 median household income by county. Figure 3 does the same for 1999 in 2012 dollars. Note that the median income ranges are the same on each map.

3 All past incomes are adjusted to 2012 dollars using the consumer price index.

YEAR MN MEDIAN INCOME AS A % OF 2012 NOTE1990 $53,586 87%1999 $64,819 105%2000 $72,335 117% all time high2010 $55,099 89% recent low2012 $61,795

TABLE 1: MINNESOTA MEDIAN HOUSEHOLD INCOME IN 2012 DOLLARS

> $69,915

< $45,860$45,860 - $48,820$48,820 - $51,120$51,120 - $69,915


> $69,915

< $45,860$45,860 - $48,820$48,820 - $51,120$51,120 - $69,915



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A comparison of median incomes in 1999 and 2012 is striking. Median household income in most counties declined from 1999 to 2012. Three of ten counties with median income above $70,000 in 1999 dropped below $70,000 by 2012. In 2012, only suburban and exurban Twin Cities counties were in the highest income category. No urban core or rural counties were in the highest income category by 2012. The counties with median incomes above $50,000 became concentrated around the Twin Cities from 1999 to 2012, though two western agricultural counties increased their median income levels during that span. Fifteen widely dispersed rural counties had median incomes below $46,000 in 1999. By 2012, 19 counties, representing a wider swath of Greater Minnesota, had median incomes below $46,000.

Before considering poverty and income inequality across the state, it is useful to take a closer look at the most and least prosperous counties. Table 2 shows the highest and lowest median income by county over time.

Scott County, in the southwestern Twin Cities metro area, was highest in all years shown except 1995. Washington County, in the east metro area adjacent to the Wisconsin border, had the highest median income in 1995. Mahnomen County, a rural northern county, had the lowest median income in all reported years except 2012. Wadena, also northern and rural, had the lowest median income in 2012. Table 2 vividly demonstrates the glaring inequality in the geographical distribution of Minnesota’s prosperity. The highest county median income has been roughly $50,000 higher than—and more than twice as high as—that of the poorest county since at least 1995.

Tables 3 and 4 provide another comparison of top and bottom median income counties. Table 3 lists the ten counties with the highest and lowest median incomes in 1999. Table 4 does the same for 2012.

The nine counties with the highest incomes in 1999 (Table 3) are all urban, suburban, or exurban counties. The top five are suburban counties of the seven county Twin Cities metropolitan area. The next three are exurban counties just outside the seven-county area.

MEDIAN INCOME % OF MN MEDIAN INCOME

Year Highest Lowest Difference Highest/Lowest Highest Lowest1995 $89,446 $35,191 $54,255 254% 158% 62%1999 $91,792 $41,413 $50,379 222% 142% 64%2004 $92,471 $36,036 $56,435 257% 136% 53%2009 $90,057 $36,218 $53,839 249% 150% 60%2012 $84,571 $35,767 $48,804 236% 137% 58%

TABLE 2: RANGE OF MEDIAN INCOMES IN MINNESOTA (2012 DOLLARS)

HIGHEST INCOMES MEDIAN LOWEST INCOMES MEDIANScott $91,792 Mahnomen $41,413

Washington $91,369 Clearwater $42,053Carver $90,315 Traverse $42,191Dakota $85,248 Wadena $42,238Anoka $79,586 Big Stone $42,334

Sherburne $78,566 Aitkin $42,910Wright $74,337 Lincoln $43,555Chisago $71,673 Pipestone $43,971

Hennepin $71,258 Cottonwood $44,018Olmsted $70,714 Red Lake $44,168

TABLE 3: 1999 MEDIAN INCOME BY COUNTY (2012 DOLLARS)


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Hennepin County includes Minneapolis as well as some of the more affluent inner-ring suburbs. The tenth highest on the list, Olmsted County, includes the city of Rochester and was the only high-income county not in the greater Twin Cities area. The only Twin Cities metropolitan county not listed in the top ten is Ramsey County, which includes the city of St. Paul and its inner ring suburbs. Ramsey County’s 1999 median household income was $63,000, about $2,000 less than the Minnesota median.

The ten counties with the lowest median incomes in 1999 are all rural counties, none of which has a city with more than 10,000 people. Four are agricultural counties that border South Dakota, while another, Cottonwood County, is in the southwestern part of the state, 30 miles north of the Iowa border. The remaining five counties in the lowest income list are scattered across the northern half of Minnesota.

By 2012 (see Table 4), after two recessions and the slow recovery of 2009-12, median incomes in Minnesota’s richest and poorest counties had deteriorated. Scott County, top-ranked in both 1999 and 2012, saw an 8% decline. Wadena County, which fell from fourth lowest in 1999 to lowest in 2012, saw a 15% decline. In 2012, Wadena County had a median income about $1,000 lower than that of Mississippi, the poorest state in the nation. Freeborn County, a southern border county containing Albert Lea, suffered a 13.7% decline in median income from 1999 to 2012, dropping from 47th to 79th (of 87 counties) in the state. Koochiching County, a northern border county including International Falls, suffered the largest reduction in median income from 1999 to 2012, declining 20% to move from 53rd to 85th in the state.

Nine of the top ten counties in 2012 were also in the 1999 top ten. Dodge County, adjacent to Olmsted County in the Rochester metropolitan area, moved into the top ten, while Hennepin County dropped out. Five of the poorest 10 counties in 1999 remained on that list in 2012. While the list of poorest counties may continue to change over time, the common thread remains the same: they are all rural. In agricultural areas, fluctuations in crop and commodity prices can cause short-term swings in incomes and geographical shifts in rankings. Small median income changes in the poorer counties can result in larger changes in rankings, as rural county median incomes fall in a narrow range.

HIGHEST INCOMES MEDIAN LOWEST INCOMES MEDIANScott $84,571 Wadena $35,767

Carver $83,275 Mahnomen $39,442Washington $80,747 Koochiching $40,167

Dakota $73,288 Aitkin $41,191Sherburne $72,041 Clearwater $41,896

Wright $70,930 Lake of the Woods $41,979Anoka $69,916 Cottonwood $43,225Dodge $66,959 Faribault $43,835

Olmsted $66,667 Freeborn $43,962Chisago $66,592 Cass $43,992

TABLE 4: 2012 MEDIAN INCOME BY COUNTY


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The Twin Cities metropolitan counties are the most heavily populated and growing, while the poorer rural counties have declining populations, both as a percent of the state’s total and in actual numbers. About half of all Minnesotans lived in the ten highest median income counties in 1999, while just 1.7% lived in the ten counties with the lowest median incomes. As might be expected, the population in 1999’s top ten counties grew from 1999 to 2012 by 14.6% in aggregate, while 1999’s poorest counties lost a combined total of about 2.3% of their population.4

Between 1999 and 2012, Hennepin County was replaced in the top ten by Dodge County. As a result, the top ten median-income list is now dominated by high growth suburban and exurban areas. While only 31% of Minnesotans reside in the top ten counties as of 2012, those same counties’ populations grew by 22% from 1999 to 2012.

The proportion of Minnesotans living in the ten poorest counties in 2012 is 2.7% of the state’s population, an increase of more than 50% over the 1.7% in 1999. This reflects a change in the county demographics of the poorest counties. In 1999, seven had populations below 10,000, with none higher than 16,000. In 2012, only three of the poorest counties had fewer than 10,000 people, while two counties on the list had more than 28,000 people. The additions to this list include counties with regional hubs such as Albert Lea (Freeborn County) and International Falls (Koochiching County). The poorest areas of Minnesota now include more than farms and forests.

In summary, 76% of Minnesota counties (66 of 87) experienced declining median household incomes from the boom peak year of 1999 to 2012. More troubling, though, is that in the early years of the economic recovery, from 2010 to 2012, 58 counties (67%) continued to experience declining median incomes, even as the state median income grew by 12.2%.

Twenty-one counties did experience increases in median income from 1999 to 2012. These were primarily agricultural counties in the western part of the state. As stated earlier, agricultural income is generally dependent upon commodity prices and is more volatile than income from other sources. Hence, changes in median income in agricultural counties are less indicative of long-term trends than in non-agricultural areas.

In 1999, counties with median incomes greater than $70,000 included suburban and exurban counties as well as one urban county and one Greater Minnesota county. By 2012, counties with median incomes greater than $70,000 were limited to the suburban and exurban ring of the Twin Cities.

In 1999, counties with median incomes below $46,000 were scattered throughout the state. By 2012, a larger proportion of our poorest counties were in northern Minnesota and increasingly included regional population centers. The effects of the Great Recession in these not predominantly agricultural areas are likely to be persistent. Only two of the ten poorest counties saw increases in median income from 2010 to 2012, and then the total increase was less than 2%.

POVERTY IN MINNESOTA COUNTIESThe poverty rates in the United States and in Minnesota were lower in 1999 than in 1995. But by 2012, poverty rates in both the country and the state had risen higher than they had been in both 1995 and 1999. The last decade has not gone well for those living in poverty.

4 An implication of these population patterns is that most county medians fall below the State median income. The County with a 2012 median closest to the State median is ranked 13th of 87.


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What do we mean by poverty? Each year, the Census Bureau publishes income thresholds based on household size and makeup. A household with income that falls below the threshold is one that lives in poverty. For example, an individual under age 65 living alone has a 2013 poverty threshold of $12,119. For a household with two adults and two children, the 2013 threshold is $23,624.

Table 5 provides poverty rates for the U.S. and Minnesota, as well as Minnesota’s rank among the states for selected years. Roughly one in eight Americans lived in poverty in 1999 and 2004. After the Great Recession that proportion grew to nearly one in six.

Minnesota’s poverty rates are lower than the overall national rate in all the reported years. At the same time, however, Minnesota’s enviably low ranking among the states fell from 2nd to 10th lowest between 2004 and 2010. By 2012, our rank improved to 7th among the states, primarily because our poverty rate stabilized while the national poverty rate continued to climb.

It is tempting to think of these percentages as relatively small and comparatively very close—but a one percentage point reduction in the state poverty rate translates to 54,000 people moving out of poverty. Had we maintained our 2004 poverty rate, 178,000 Minnesotans now in poverty would be better off.

As with median income, we will examine poverty within Minnesota using county level data from the Census Bureau. Maps will illustrate patterns and changes since 1999. Figure 4 depicts 1999 poverty rates by county, and Figure 5 does the same for 2012. (Note that the poverty rate ranges are the same for each map.)

POVERTY RATE (%)

Year United States Minnesota Rank Among States1995 13.8 8.7 31999 12.4 7.9 32004 12.7 8.1 22010 15.3 11.5 102012 15.9 11.4 7

TABLE 5: POVERTY RATES - U.S. & MINNESOTA (SELECTED YEARS)

A lower rank means lower poverty Source: U.S. Census Bureau

< 7.1

> 14.011.5 - 14.0 9.8 - 11.57.1 - 9.8

FIGURE 4: 1999 POVERTY RATE BY COUNTY

< 7.1

> 14.011.5 - 14.0 9.8 - 11.57.1 - 9.8

FIGURE 5: 2012 POVERTY RATE BY COUNTY


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In 1999, the lowest poverty rates were concentrated in 20 counties surrounding the Twin Cities. Three Greater Minnesota counties also had poverty rates below 7.1%. Only four counties, all in the northwest/north central area of the state, had poverty rates greater than 14%.

In some cases, neighboring counties have starkly different poverty rates. For example, Hubbard County, with a 1999 poverty rate of 9.7%, adjoins three counties with poverty rates greater than 14%. One of these three, Beltrami County, had a 1999 poverty rate of 17.6%. Roseau County, which also borders Beltrami County to the north, fell into the lowest category with a poverty rate of 6.6%.

By 2012, the statewide poverty rate had risen to 11.4% from 7.9%. Figure 5, the 2012 map, looks dramatically different from that of 1999. By 2012, only eight counties had poverty rates below 7.1%, compared to 23 counties in 1999. The three low-poverty counties unconnected from the Twin Cities metro area in 1999 were replaced by two different Greater Minnesota counties. The other six lowest-poverty counties in 2012 make up the first ring of counties surrounding Hennepin and Ramsey counties. This suburban/exurban ring, which has the highest median incomes, also has the lowest poverty rates.

Minnesota went from four counties with high poverty rates (greater than 14%) in 1999 to having 16 high-poverty counties by 2012. Benton County, one of three counties that surround the St. Cloud metropolitan area in central Minnesota, saw its 1999 poverty rate of 7.1% rise to 14.6% in 2012. By 2012, most of northern Minnesota fell into the two highest poverty brackets, with rates of more than 11.5%. The counties in the northern half of the state, which have the lowest median incomes, also have some of the highest poverty rates.

Table 6 shows the dramatic differences between the counties with the highest poverty rates and those with the lowest. In all years reported, the county with the lowest poverty rate was a Twin Cities metro area suburban county. In all years reported, either Mahnomen or Beltrami counties in the northwestern part of the state had the highest poverty rate. Beltrami County, with a population of about 45,000, includes the city of Bemidji. Mahnomen County is a rural county with a population of 5,500.

The range of poverty rates across the counties is large, and nearly doubled between 2004 and 2012. Each year, the poverty rate in the poorest county is between 4 and 6 times larger than that of the county with the lowest rate. As shown earlier, the highest median income by county was consistently about 2.5 times larger than the lowest ranked county’s median income.

RATE

Year Highest Lowest Difference Highest/Lowest1995 18.9 3.5 15.4 540%1999 17.6 2.9 14.7 607%2004 15.8 3.9 11.9 405%2009 20.9 4.8 16.1 435%2012 27.2 5.2 22 523%

TABLE 6: RANGE OF POVERTY RATES IN MINNESOTA COUNTIES


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We might wish to look beyond the extremes. Tables 7 and 8 list the ten counties with the lowest and highest poverty rates in 1999 and 2012.

The counties with the lowest poverty rates in 1999 are all suburban/exurban counties near the Twin Cities. No Greater Minnesota counties are on that list. In fact, eight of the ten were also on the list of the counties with the highest median income in 1999. Hennepin County, the urban county with high median income in 1999, had a poverty rate of 8.3% that year. The counties with highest poverty rates are all in northwestern or north central Minnesota with two exceptions, Blue Earth in the south and Stevens, which is west of the Twin Cities.

Perhaps surprisingly, in 2012 only six of the ten counties with the lowest poverty rates are in the Twin Cities area. Four exurban counties were replaced by agricultural counties. Three of these new inclusions actually reduced their poverty rates from 1999 to 2012. This may reflect the fact that the agricultural economy was very strong in 2012.

The big change in the list of counties with the highest poverty rates is the addition of St. Louis and Ramsey counties. St. Louis County, which includes Duluth and much of the Iron Range and is home to 200,000 people, saw an increase of 4 percentage points in its poverty rate between 1999 and 2012. Ramsey County, which includes St. Paul and has a population of about 500,000, saw an increase of 6.2% percentage points. About 32,000 people in St. Louis County and 84,000 people in Ramsey County were living in poverty in 2012.

Tables 7 and 8 clearly illustrate the large increase in poverty in Minnesota from 1999 to 2012. In 1999, nine counties had lower poverty rates than the lowest rate in 2012 (Carver County). Five of the counties on the 2012 high poverty list had poverty rates in excess of the highest rate in 1999 (Beltrami County).

Koochiching County (International Falls) has the unfortunate distinction of suffering the largest 1999-2012 decline in median income, falling by 20%. By 2012, that county’s median income was 3rd lowest of the 87 counties. However, its poverty rate remained constant at 12% from 1999 to 2012.

LOWEST POVERTY HIGHEST POVERTY

County Rate County RateWashington 2.9 Beltrami 17.6

Scott 3.4 Mahnomen 16.7Carver 3.5 Clearwater 15.1Dakota 3.6 Wadena 14.1Anoka 4.2 Stevens 13.6

Sherburne 4.4 Cass 13.6Wright 4.7 Clay 13.2McLeod 4.8 Todd 12.9Chisago 5.1 Blue Earth 12.9

Goodhue 5.7 Becker 12.2

TABLE 7: 1999 POVERTY RATES BY COUNTY

LOWEST POVERTY HIGHEST POVERTY

County Rate County RateCarver 5.2 Mahnomen 27.2Scott 5.2 Beltrami 20.7

Washington 5.6 Blue Earth 19.4Wright 6.1 Wadena 18.4Dakota 6.4 Lake of the Woods 17.7Wilkin 7 Nobles 17.2Anoka 7.1 Ramsey 16.8

Lac qui Parle 7.1 Cass 16.5Dodge 7.3 St. Louis 16.1

Lincoln 7.4 Todd 15.9

TABLE 8: 2012 POVERTY RATES BY COUNTY


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Given the state’s overall increase in poverty over this time period, holding the poverty rate constant improved Koochiching’s relative ranking among counties from 76th to 51st. While the poverty rate focuses on those at the very bottom of the income ladder, the median income identifies the household in the middle of the income distribution. In Koochiching County, a worsening economy has unfortunately hurt those in the economic middle dramatically; however, relatively few were pushed into poverty.

Minnesota, like the rest of the country, has seen a dramatic increase in poverty rates since 1999. Poverty has increased in almost all parts of the state. Differences in poverty rates between high and low poverty areas are stark and not converging. The lowest poverty rates are concentrated in the Twin Cities suburbs and exurbs, and most of northern Minnesota experiences poverty rates greater than the statewide rate of 11.4%. Two counties containing major cities now have poverty rates of more than 16%. Minnesota may, as a whole, look good relative to the nation, but the details are much more sobering.

OVERALL INEQUALITY: THE GINI COEFFICIENT IN MINNESOTA COUNTIESOur third indicator is the Gini coefficient, which measures inequality across an entire range of incomes. The Gini would be 0.0 if all household incomes were exactly equal, and would be 1.0 if all income went to a single household5. A higher Gini indicates higher inequality. Since the late 1970s, income inequality has been growing throughout the U.S. Minnesota has experienced the same trend. As with poverty and median income, Minnesota’s Ginis consistently look better than U.S. Ginis. Table 9 demonstrates this.

To put a bit more perspective on these numbers, state-level Ginis in 2012 ranged from 0.41 (Alaska) to 0.51 (New York). Minnesota, at 0.44, was 16th most equal among the states in 2012. The World Bank recently estimated national Ginis for Norway at 0.26, Canada at 0.33, and Brazil at 0.55. (The World Bank estimate of the U.S. Gini, 0.41, differs from recent Census Bureau estimates due to source data used.)

Income in the U.S. is substantially more unequally distributed than that in most other high-income countries, but generally more equally distributed than in many middle-income economies like Brazil. Income in Minnesota is more equally distributed than it is in most states, though our inequality is substantially higher than it is in our neighbor, Canada.

5 Relatively small changes or differences in Gini indicate relatively large differences in inequality. For example, from 1979 to 2009, the U.S. Gini increased from 0.42 to 0.47. During that same period, the share of income going to the top 1% roughly doubled from 10% to 20%, while the poverty rate rose from 12% to 14%.

GINI COEFFICIENT

Year United States Minnesota1979 0.42 0.391989 0.45 0.421999 0.46 0.422009 0.47 0.442012 0.47 0.44

TABLE 9: GINI COEFFICIENTS - U.S. & MINNESOTA(SELECTED YEARS)


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Figure 6 and Figure 2 (repeated here from page 4) and Figure 6 map county Gini coefficients in 1999 and 2012. Again, both maps use the same data ranges.

In 1999, 18 Minnesota counties, including all but one of the suburban counties, several exurban counties, and a smattering of rural counties had Gini coefficients below 0.38. Counties with the highest income inequality (Gini higher than 0.42) included the two Twin Cities urban counties and 15 Greater Minnesota counties. Between 1999 and 2012, 61 of 87 (70%) of counties saw increases in overall income inequality.

By 2012, only ten counties were in the lowest Gini category, including two suburban counties, four exurban counties, and four Greater Minnesota counties. The areas with the highest Ginis in 2012 include 14 counties in northern Minnesota, five rural western counties, the two urban Twin Cities counties, and ten counties in southern Minnesota. These 31 counties all have Ginis over 0.42. In 2012, Minneapolis, St. Paul, Rochester, and Duluth were all in counties with Gini coefficients in the highest (most unequal) category.

Sherburne County, an exurban county between the Twin Cities and St. Cloud, has the lowest 2012 Gini at 0.36. This is comparable to Canada’s national Gini of 0.33.

Our least equal county is Hennepin with a Gini of 0.48. Ramsey, Stevens, and Koochiching counties follow Hennepin closely with Ginis of 0.46 or more. These counties have inequality comparable to states with the highest Gini coefficients, most common in the southern U.S.

Income inequality is increasing throughout Minnesota. The range across counties is wide. The counties with the least inequality have Ginis comparable to Canada and continental Europe, while other counties experience inequality levels similar to states in the Deep South.

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15 GROWTH & JUSTICE

CONCLUSIONMinnesota enjoys higher median household income, lower poverty, and lower overall inequality than the country as a whole, and is recovering its relative advantage held prior to the Great Recession. While relative position among the states fell in all three measures from 1999 to 2012, as shown in our 2013 report, since 2010 our relative position has risen (median income and poverty) or held constant (Gini).

Within Minnesota, however, these measures vary greatly. Four general regions emerge: the urban core of the Twin Cities, including most of Ramsey and much of Hennepin counties; the relatively prosperous ring of Twin Cities suburbs and exurbs; northern Minnesota; and the primarily agricultural counties in the west and south. The first and last group are a mixed bag. The suburbs and the northern counties are worlds apart. The counties of Greater Minnesota’s largest cities share characteristics with the urban core.

Counties of the suburban and exurban Twin Cities metro area have consistently produced the highest incomes, the lowest poverty, and some of the lowest inequality in Minnesota. Even after the recession reduced median incomes in top counties by 8% to 10%, three counties have median incomes greater than $80,000. Those same suburban and exurban counties have the lowest poverty rates (5% to 7%). Most of these counties enjoy overall inequality well below that experienced by most Americans in their communities. The Twin Cities suburbs have some of the highest incomes, lowest poverty, and lowest inequality in the nation. Most of the residents of these communities are relatively affluent and see little evidence of either poverty or extremely high income and wealth in their communities

Much of northern Minnesota, by contrast, is struggling. Only two counties have median incomes above $50,000, and just barely. Most are in the mid-$40,000 range, well below the national median. Poverty rates are often shockingly high. Two northern counties have poverty rates above 20%. St. Louis County, home to the city of Duluth and often thought to be a relatively prosperous area of living wage jobs, has a poverty rate greater than 16%, a median income of $46,000 that continued to decline from 2010 to 2012, and a Gini coefficient greater than 79 other Minnesota counties. The fortunes of Koochiching County have already been noted. These are the stories of the north-central and northeastern regions of the state.

Hennepin County includes a typical urban core in Minneapolis and some high-income suburbs and exurbs to the west. Ramsey County includes an adjacent urban core in St. Paul and older, first-ring suburbs to the north. These counties are home to roughly 1.7 million people, or 31% of the 5.4 million state residents. Hennepin County has the 11th highest median income, thanks to its prosperous suburbs. Ramsey County’s median income is near the state median. In short, these counties have higher incomes than those outside the metro area, but lower than the suburban counties. In terms of poverty and inequality, these two counties look more like northern Minnesota than like their adjacent suburbs and exurban areas. Hennepin County has a poverty rate of 12.6%, which is held down by its prosperous suburbs. Ramsey County’s poverty rate is one of the highest in the state, at 16.8%. Hennepin County has the highest inequality measure, while Ramsey County has the 4th highest.

In land area, the largest region includes the L-shaped southern and western counties, an area in which farming and agribusiness dominates. The data from 1999 and 2012 shows that poverty and inequality generally rose and incomes generally fell in this broad region, yet on each measure, we can identify counties that improved on one or more measures, both absolutely and relatively speaking. This area has numerous examples of dramatic changes in some counties from 1999 to 2012, a possible result of the small populations of many of these counties.


16 GROWTH & JUSTICE

No section of the state is doing as well as it was at the end of the last century. Median incomes are lower. Poverty rates are higher. Even in better economic times like 1999, some parts of Minnesota were not doing well, and many of those areas are now doing far worse than they were in 1999.

It is no longer seriously disputed that income and wealth inequality in the U.S. has been rising dramatically since 1980 after falling just as dramatically from the 1930s through the 1970s. Income and wealth inequality in the U.S. is now similar to that of the Gilded Age in the late 19th and early 20th centuries.

The economist Thomas Piketty, among others, has argued that the drop in inequality during the 20th century was a result of policies developed as a response to the Great Depression and World War II. These policies that reduced inequality included progressive income and inheritance taxation, encouragement of collective bargaining, development of a social safety net, and more support for K-12 and higher education.

Policies that encourage economic growth can lead to increased wages and reduce or slow increases in poverty. The slow but steady economic recovery since 2009 appears to be having that effect on median income and poverty, if not on overall inequality.

But restoring historic levels of household real incomes, reducing inequality, and reducing poverty substantially will require more than economic growth. It will require a sustained public commitment to investing in education, economic security, human and workforce development, and transportation and infrastructure.

Documenting the substantial differences in inequality and poverty within Minnesota will help policymakers understand where they need to focus attention and resources for the benefit of the whole state. Consensus for reducing inequality in Minnesota is broad and comes from all corners of the state, geographically and politically. State policymakers and political leaders have expressed concern about rising inequality, particularly in regard to educational and workforce disparities that correlate strongly to poverty and race. Common sense suggests that policies that reverse inequality trends across all regions of the state will have a net benefit for all Minnesotans, moving us toward a broader and more inclusive prosperity.

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