San Francisco: Ground Zero for Widening Income Gap

We'd prefer that our city by the bay be known as the home of brilliant tech innovation, counterculture trends and culinary delights. But a recent report from the Brookings Institution confirms that San Francisco also is earning its other, less desirable reputation as a kind of ground zero for rising income inequality.

The findings: When it comes to income, San Francisco is the second-most-unequal among American cities, after Atlanta. And in no other city has the rich-poor divide widened more in recent years. (Oakland, meanwhile, is not so far behind, ranking seventh on the list nationally. But the gap has not widened appreciably in recent years. San Jose, in the heart of Silicon Valley, ranks far down the complete list, No. 36; the rich/poor gap also grew far slower there than in San Francisco.)

When the report's author, Alan Berube, senior fellow and deputy director in Brookings' Metropolitan Policy Program, decided to run the numbers on income inequality nationwide, he was inspired in part by coverage of the tech bus protests in the Mission District.

Berube tapped U.S. Census data for his analysis, and he chose a particular measure to compare the haves and have-nots: the "95/20 ratio." It's a comparison between the income that puts a household in the 95th percentile, or the top 5 percent, and the income that puts one in the bottom 20 percent. Berube explained that comparing those extremes helps us gauge the severity of the distance in between.

The picture he found was stark. In the most unequal cities -- Atlanta, San Francisco, Miami and Boston, in that order -- residents at the top earned at least 15 times the income of those at the bottom. In San Francisco, for instance, the top 5 percent of households earned more than $353,000 per year, whereas the bottom 20 percent of households mostly earned less than $21,000.

What's more, when Berube compared the income gap from 2007 (just before the recession) with 2012, he found that the disparity in this city has grown more dramatically than in any other.

“San Francisco stood out not only in being one of the most unequal cities -- and I think you might have guessed that even before you ran the data -- but the data also confirmed that San Francisco has experienced the most pronounced recent increase in disparity between its rich and poor households," Berube said. “There was no place that experienced that degree of pulling apart as much as San Francisco did.”

Not only did typical earnings drop by $4,000 for San Franciscans in the lowest income bracket during that time, but the gains among households at the top soared by $28,000.

Hidden in those numbers might be yet another distressing trend, Berube said. Even the bottom 20 percent in San Francisco earns more than the poorest people in most other cities, and that might, at first glance, appear encouraging. But Berube underscored that it may not mean that San Francisco's poor are paid better -- it may simply mean that the poorest of the poor are just leaving.

“If you're at an income of $15,000, there’s no longer any place to live in San Francisco,” he said.

Nationwide, Berube's number-crunching showed that big cities in general are more unequal than other places. In other words, compared with the national average, the urban rich are a little bit richer, and the urban poor are a little poorer. Why? Cities increasingly house the industries with the highest-paid knowledge workers, Berube said. Yet at the same time, the public housing, social services and public transportation found in urban centers also make them a likely home for low-income people. Thus, the extremes.

So which cities showed up on the more equal end of the spectrum? Most, Berube wrote, "are Southern and Western cities with expansive borders, and either include many 'suburban' neighborhoods alongside a traditional urban core, or are themselves overgrown suburbs like Mesa, Ariz., and Arlington, Texas."

One surprise: Seattle. Berube expected to see it neck-and-neck with San Francisco for income disparity. But it ranked only 31st of 50 cities. It turns out that “Seattle is a much less unequal place than San Francisco is," according to Berube. That may change as more Silicon Valley firms move to the northwest city, he added, but "one thing Seattle has managed to do better than San Francisco in recent years is build housing,” and that relieves pressure.

To be fair to San Francisco, he said, Seattle has 84 square miles to work with, compared to San Francisco's 47, and it's much harder to build new housing when your city is bounded on three sides by water.