Article

An Economy of Opportunity

Income Inequality Less of a Problem in Utah

By Natalie Gochnour

March 12, 2014

“Some people are born on third base and go through life thinking they hit a triple.”

That classic line was made famous by Barry Switzer, the well-known Oklahoma football coach who was raised poor and went on to win a college football championship and the Super Bowl. And while I don’t hold him up as a role model, his famous quote about inequality and hubris hit a chord with me. We are all born into different economic circumstances and income inequality is a problem.

What’s interesting is that as income inequality and social mobility have garnered increasingly more attention, Utah has gained national notoriety for our performance in these areas. People are asking: Why is income inequality less of a problem in Utah?

I’m not aware of any studies that comprehensively answer this question, but we can gain insight by looking at recent research.

Opportunity Abounds

This past summer a group of Harvard and U.C. Berkley economists published some studies as part of The Equality of Opportunity Project. They examined upward mobility across metropolitan areas in the United States and found that Salt Lake City ranked best in absolute upward mobility. Said another way, children born in low-income families in the Salt Lake metro area are more likely to achieve the American dream than anywhere else in the country. The authors found that areas with greater mobility tended to have “less segregation, less income inequality, better schools, greater social capital and more stable families.”

Another study published by the Census Bureau examined income inequality among states. They used a statistical measure known as the Gini coefficient, a measure of statistical dispersion that is commonly used as a summary measure of income distribution.

Utah has relatively low Gini coefficients at the state and sub-state level. In the most recent data, Utah tallied the third-lowest income inequality among states. Salt Lake City scored the lowest income inequality among the 51 metropolitan areas with more than one million in population, and West Jordan City scored the lowest income inequality among the 267 cities over 100,000 in population. These are impressive rankings, but it gets even crazier. A neighborhood in Kearns (census tract 1135.26) measured the third-lowest income inequality among 65,000 census tracts nationwide.

Bootstraps—and Safety Nets

What’s going on? Why does Utah have more income equality?

I won’t pretend to know the answer, but I will offer a few observations.

First, Utahns are hard workers. We participate in the labor force at high rates and have a high number of workers per household. Both of these measures reflect Utah’s young age structure, but the incomes received still fortify household incomes. In 2012, Utah’s median household income ranked 11th among states.

Second, Utah’s economy is diverse and growing. We currently have the sixth most economically diverse industrial structure in the nation and are typically in the top tier of states for the rate of job creation. Ours is an economy of opportunity, a characteristic that likely helps with our income equality.

Third, educational attainment may be an important factor. While not determinative, a Census Bureau analysis found that lower income inequality correlates with higher levels of education. Utah ranks 19th among states for the percent of the adult population with a college degree.

Finally, Utah’s extensive social capital may contribute to greater income equality. Well-developed social networks such as United Way of Salt Lake, Catholic Community Services, Jewish Family Services and LDS Community Services, to name just a few, make important contributions in our community.

A journalist appearing on CNN’s Global Public Square recently praised what she called Utah’s “private welfare system.” She said, “[Utahns] are extremely good at investing in people. If you are in a Mormon parish, call it, and something’s going wrong in your life, you’re going to have intensive, kind of tag-team efforts by people in your community to get you back on track.”

It’s been my experience that Utahns of all faiths and circumstances do a darn good job at taking care of one another.

I have no illusions about the economic hardship that exists in this state. An estimated 360,000 Utahns live in poverty, an alarming 12.8 percent of our population. Nevertheless, my reading of the economic data is that we do far better than most states on the income inequality scale. We need to understand why we perform well and continue to cultivate it. That way, no matter what base you are born on, our community will hit a home run.

 


Natalie Gochnour is an associate dean in the David Eccles School of Business at the University of Utah and chief economist for the Salt Lake Chamber.

 

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