Seattle hits record high for income inequality, now rivals San Francisco

Some records you don’t want to break.

In 2016, Seattle hit an all-time high for a commonly used measure of income inequality, known as the Gini index. And if you’re worried about Seattle turning into the next San Francisco, this won’t set your mind at ease: Last year marks the first time Seattle has matched the City by the Bay for this particular statistic.

The U.S. Census Bureau has been calculating the Gini index for every place in the nation since 2006. The index is expressed as a number from 0 to 100, with a higher number indicating a more unequal distribution of household incomes.

For example, a place with perfect equality – if such a place existed – would score 0, meaning every household had the exact same income. Conversely, an index of 100 would mean total inequality – one household earned all the income.

Seattle’s Gini index had always been between 48 and 49, without much change from year to year. And, in fact, it had seemed to be trending slightly downward since 2011.

But in 2016, it shot up to 50.4, a jump of nearly 3 points from 2015. Among the 50 largest U.S. cities, that’s the second-biggest increase, slightly behind Fresno, California.

This also marks the first time Seattle had a Gini index higher than 50. Income inequality here is now on par with San Francisco, with an index of 50.3 last year.

What’s behind the hike in Seattle’s Gini index last year? The answer will surprise no one: The rich got richer.

The average income for the top 20 percent of Seattle households – that’s about 64,000 households – shot up by more than $40,000 last year, hitting $318,000. They took home 53 percent of all the income earned by city residents, up nearly 3 percentage points from 2015.

Meanwhile, the bottom 20 percent of households, along with households in the middle, saw their share of the total income decline.

This may sound like the poor got poorer – or, for that matter, that Seattle’s move toward a $15 minimum wage isn’t helping those households at the bottom. But that’s not what the data show. Household incomes at the bottom remained unchanged last year. There were also slight increases in income for middle-earning households.

The reason income inequality got worse is that the gains made by high-income households were so big that the gap between the rich and everyone else widened.

The situation is hardly unique to Seattle.

“What you’re seeing in Seattle is consistent with what we have seen in this country for virtually the entire period since the 1970s,” said Heidi Shierholz, policy director for the Washington, D.C.-based Economic Policy Institute, a pro-labor think tank.

In the post-World War II period, income inequality was declining. But at some point in the 1970s, wage stagnation set in for lower- and middle-income workers, while the top tier of earners began pulling away from everyone else.

Economists point to a variety of reasons for this. Shierholz believes none is more significant than the decline of unions, and not just because union jobs have higher pay and better benefits.

“When you have a high share of workers who are unionized, that also helps nonunion workers,” she said. “If an employer knows their workers could go to a union job and get better wages, they actually have to improve the wages in their own workplace.”

Shierholz said that improving labor laws and standards, and better enforcement of them, is key to reducing income inequality nationally. Seattle, she noted, has taken one such step at the municipal level by increasing the minimum wage.

She also applauds the city’s ongoing attempt to institute an income tax on high earners. “We’ve seen this rising inequality in pretax income,” Shierholz said, “but as the tax code has become less progressive, it’s increased even further the post-tax inequality.”

Legislation creating the tax was passed by the City Council in July, but several lawsuits have been filed to block its enactment.

With last year’s big increase in its Gini index, Seattle now ranks 18th for income inequality among the 50 largest U.S. cities. That’s a big jump from 2015, when it ranked 31st.

Even so, it’s still far behind the city with the worst income inequality, and a Gini index of 57.5: Miami.