Income inequality adds to growing divide in Milwaukee

A 2014 national report found that the city of Milwaukee had the 6th largest increase in income inequality among the 50 largest U.S. cities. That finding is particularly troublesome when considered in the context of the substantial increase in income inequality across the nation.

The study by the Brookings Institute examined the change in income inequality in major cities from 2007 to 2012. Their analysis found that Milwaukeeans at the 95th percentile of the income scale had a $237 increase in income over that five-year period, whereas those at the 20th percentile lost $3,481 in annual income over those five years.

Closer by, a report by researchers at UW-Milwaukee examines income inequality within Milwaukee County and sheds light on some of the causes of the widening income divide. The report by Lois Quinn and John Pawasarat at the UW-Milwaukee Employment and Training Institute (ETI) found that the average family income in the lowest income zip codes within the county was less than one-twelfth of the average in the highest income “North Shore” zip code ($20,260 vs. $253,082).

One of the factors in the growing divide is the cut to the Wisconsin earned income tax credit (EITC) in the 2011-13 budget bill, which the report concluded cost Milwaukee County families $9.5 million in tax year 2012, on top of $7.7 million the previous year. From 2010 to 2012, single parent filers in Milwaukee County lost 30% of their credits, and the number of single parents receiving the credits dropped by 5%.

Another worrisome finding is that the number of Milwaukee County single tax filers with dependents fell by 5% from 2011 to 2012. That change is a result of the job market, not demographics. The report’s authors suggest that, “in the aftermath of the recession, single parents appear to be unsuccessfully competing for low-wage jobs with other unemployed and underemployed workers.”

Another factor in the loss of jobs for low-income parents and the increase in inequality is a sharp reduction in spending for the Wisconsin Shares child care subsidy program. The report found that spending within the county for that program “dropped by 36% — from $199.9 million in 2009 to $127.6 million in 2013, with the cumulative loss of child care funds over the last four years totaling $228.5 million.” That drop stems in part from some needed anti-fraud measures, but in my opinion much of the cutting has gone too far. Some of it results from the long freeze in reimbursement rates, which has steadily eroded child care funding, and it also stems from policy changes like no longer reimbursing for absent children, which is hurting hard-working, law-abiding child care providers, many of whom are low-income parents.

A couple of the other noteworthy findings of the ETI study include the following:

• 56% of working-age tax filers with dependents in Milwaukee County are single filers rather than married couples.
• Almost three-fifths (59%) of the county’s single tax filers with dependents had income of less than $25,000 in 2012, “suggesting low wages, part-time jobs, high job turnover, and less than year-round employment.”

The Wisconsin Legislature has a golden opportunity now to use the state surplus to undo the harmful changes made in the 2011-13 budget that have increased taxes for low-income working families. Reversing those tax increases and raising the minimum wage would be two positive measures to halt or at least slow the growth in income inequality between the wealthiest and lowest-paid Wisconsin workers.