A DIVIDE GROWS

Top tier gets richer; middle class shrinks

Few places in the country better illustrate the phenomenon of income inequality than Fairfield County, with its stark contrast between Gold Coast glitter and inner-city squalor.

In 2016, Fairfield County ranked as the ninth-most unequal county in the country, as measured by a widely accepted index of income inequality cited in recent U.S. Census figures. Connecticut was the thirdmost unequal state in the country.

These rankings hadn’t changed much from those a decade earlier. But beneath the surface a clear trend is emerging: The middle class in Fairfield County is shrinking, while the upper crust — households making $200,000 or more a year — is rapidly growing.

“It’s the same here as it is in the U.S.,” said Fred Carstensen, director of the University of Connecticut’s Center for Economic Analysis. “All part of the subtle erosion, the hollowing-out of the middle class.”

Defining “middle class” is not easy, because the income required to provide a given standard of living is much greater in some parts of the country — notably Fairfield County — than in others.

But if incomes between $50,000 and $149,999 a year can be considered middle-class, the county’s share of such households fell noticeably from 2006 to 2016, from 45.6 percent of the total to 41.7 percent, according to the census.

Over the same period, the share of upper-income households grew sharply, from 22.1 percent to 28.4 percent. The highest-earning households — those making more than $200,000 a year — now represent the single largest group in Fairfield County, the census shows.

The trend is particularly marked in Norwalk and Stamford, where the share of households earning $200,000 or more soared from 2006 to 2016, topping 17 percent of the total in each city, according to the census.

Connecticut as a whole showed a similar trend, as did the nation.

Why it matters

Not all experts agree that inequality is a bad thing. Some argue that if more households are moving into the upper crust, that’s a good thing, and that if all incomes are rising — and there is evidence that median income is on the rise nationally — it doesn’t matter much that upper-crust incomes are rising fastest of all.

But other experts argue that consumption by the middle class is a major driver of economic growth and job creation, and that a shrunken middle class is one reason the recovery from the Great Recession has not been more robust. The international Organization for Economic Cooperation and Development concluded in 2015 that “income inequality has a sizeable and statistically significant negative impact on growth.”

It has also been argued that income inequality leads to other inequalities, in access to health and education, for example, and creates resentments that can have political implications, such as the rise of populism in the U.S. and Europe.

Thomas Hayes, assistant professor of political science at the University of Connecticut, said there is little doubt that social capital — a community’s ability to work together and coexist — suffers when there is a large divide between rich and poor.

“Society is much worse off where there is a lot of inequality,” he said. “On the whole, research for the past 10, 20 years shows people are finding the drawbacks are greater than they thought before.”

Michael Wallace, a sociology professor at UConn, said inequality allows the upper classes to wall themselves off — in gated communities for themselves and private schools for their children. Outside the walls, a declining middle class finds itself unable to support the tax base and public services deteriorate.

“You start to see the defunding of schools, parks, libraries for example,” Wallace said. “But if you have a gated community, you think, ‘What do I need to go to the park for?’ You have one in your residence.”

The health effects of inequality are evident as well, he added. Life expectancy, for example.

White American middleaged men, often those displaced by middle-class job loss, have seen their mortality rate increase by a 0.5 percent a year from 1998 to 2013, Wallace said, citing a 2015 study. From 1978 to 1998 that rate had been falling by an average 2 percent annually.

“As inequality increases, the basic indicators of health care tend to decline,” Wallace said.

Finally, he said, inequality tends to worsen over time.

“The class structure, the income structure, tends to perpetuate itself,” Wallace said. “And now you’re knocking out a lot of the middle-class jobs, the rungs on the ladder.”

How it happened

The reasons for growing inequality are complex, but experts said the uneven nature of recovery from the Great Recession is a key factor. One often-cited 2015 study concluded that 52 percent of U.S. income growth since the recession has gone to the top 1 percent of earners.

The recovery has also been uneven among various sectors of the economy.

One sector that has done well is financial services, the “hedge fund/Wall Street contingent,” as Hayes calls it, that is a major employer in southwest Connecticut.

UConn’s Wallace said sector rebounded fairly quickly from the recession, and that its employees are making more money than ever.

“We’re creating jobs at the higher end,” Wallace said, “but there are not enough of them to go around.”

Job growth has also occurred at the other end of the income spectrum, but a large share of that growth took place in the leisure and hospitality sector, where earnings tend to be low.

“A lot of the jobs being created pay less than $35,000,” Carstensen said. “It’s worrisome that we’re doing such a bad job in creating quality jobs in Connecticut.”

Employment sectors that used to support middleclass lifestyles, meanwhile, have been shrinking — for decades, in some cases, and several of these have yet to recover from the recession.

In the Bridgeport-Stamford-Norwalk metro area, for example, the overall number of jobs has grown 3 percent since 1990, but manufacturing employment — once a mainstay of the middle class — has fallen 59 percent, according to the federal Bureau of Labor Statistics.

Over the same time period, employment in trade, transportation and utilities is down 10 percent and in mining, logging and construction a collective 14 percent, the bureau reports.

The Great Recession was the last straw for many trade workers — plumbers and electricians, for example — who saw work shrivel when the housing industry went bust and who eventually retired or moved away, Carstensen said.

“If you call a plumber in Connecticut, they’ll be there before you hang up the phone,” he said.

Employment in the highpaying financial sector, by contrast, has grown 21 percent in the region since 1990, the bureau reports, while the the leisure and hospitality sector was increasing by 52 percent.

Further exacerbating the decline of the state’s middle class is that the public sector has yet to bounce back after recession-era layoffs, Carstensen said. Many such government jobs paid enough to put families in the middle class.

Lyle Scruggs, a UConn professor of political science, said growing regional inequality is part of a larger national trend: the “financialization” of the economy in recent years.

“If you go back to the ‘60s and ‘70s, Connecticut was a relatively equal state,” he said. “Many of the trends that created inequality in the nation — it’s like that on steroids (here).”

“Where’s all the money going?” he asked. “It’s going to all the people doing stuff in New York. It’s going to the Gold Coast.”