This post is part of a series on inequality in Philadelphia. Click here for more details and an index.
Wealth inequality is just as important to discuss as income inequality. It is important to distinguish wealth and income. Income is the production of wealth, whereas wealth is total net assets. Wealth could be your cash in the bank, your car, your house, or anything at all that has value.
When we talk about inequality, we are mostly talking about income inequality. For instance, I wrote about how the census tract with the highest median household income earns 12 times more than the tract with the lowest. Most discussion is limited to this because we simply don’t know much about the wealth of individuals. Unfortunately, the census tells us very little about the wealth of individuals or households, especially on a local level. From what I understand, this is due to privacy concerns and the immense difficulty in calculating wealth.
There is one census survey that collects wealth data—the Survey on Income and Program Participation, or SIPP. This survey was designed to gain a better understanding of the government services people use and who uses them so that the government can improve these programs in the future. It just so happens that it’s one of the only measures, if not the only measure, of the wealth of individuals and households in the United States.
Unfortunately, this data has some barriers. I only found one Excel/spreadsheet version of data, and it’s only for the whole country, and not any states or cities, let alone census tracts. For everything else, a data user must have specialized statistical software, and a very powerful version at that. The data comes in one, large file that would require an incredibly powerful computer and some serious coding knowledge to make it usable. If anybody reading this is able to help me with this, it would be greatly appreciated.
I even messaged somebody from my local census team, and they confirmed there are no measures of wealth like I’m describing that are easily accessible through the American FactFinder database. So, in the absence of a direct measure, I’m going to take a look at some indirect indicators of wealth and the nation-wide data. This will at least give us insight into the magnitude of wealth disparities.
According to the nation-wide data from SIPP, Americans hold the most wealth in the following.
Note that this doesn’t add up to the total median net assets. This may be because the median for each category can vary, or because the median total net assets is subtracting substantial median total net liabilities. So, these numbers can only be used as an indicator for the general ratio.
Since people’s own homes are their largest assets, let’s take a look at the homeownership rate and median home value of each census tract.
A couple important takeaways are immediately clear. First, while there is a trend of a lower homeownership rate where incomes are lowest, it is not as stark as I would have thought. There is still a remarkably high homeownership rate in almost every neighborhood. The only places that seem to have very low rates of homeownership are Center City, and areas around universities—Penn and Drexel in West Philadelphia, and Temple in North-Central Philadelphia.
The second biggest thing to notice is that the median home value maps out almost exactly to income. Those areas with the highest incomes clearly have far higher home values, and therefore far more wealth. This change is also very rapid between parts of Philadelphia. The highest median home value is 19 times larger than the lowest median home value.
A third thing to note is that, even though there is a high rate of homeownership in the areas with lower incomes, the rate is still about half that of the more prosperous neighborhoods. This translates directly to about half as many people having their home as an asset, and this is compounded by the fact that their asset is worth far less. Therefore, when we look at real estate as an indicator of wealth, it is clear that this is a huge form of wealth inequality.
It is important to also note that this would not show ownership or the value of real estate other than the home being occupied by the owner. If a person owns rental properties, this would really change the numbers when it comes to real estate wealth. Let’s take a look at the impact of this.
First, please note that this map shows the number of households, and not the percentage. This is because I could not find a percentage. Still, since each tract should have a similar number of inhabitants, this should more or less reflect the ratio of households. Also note that this map includes income from interest and dividends—so we can think of it as a map of the areas with the most people earning income from wealth. In this way, it shows us which areas have more wealth, and by what degree.
In what comes as no surprise, the areas with the highest incomes are clearly earning income from rent and other sources at a far higher rate than other neighborhoods. North-Central Philadelphia and West Philadelphia have almost no households earning wealth-based income, meaning of course that these households must not have any wealth.
Next, let’s look at retirement income.
Retirement is another major form of wealth that Americans have. Therefore, income from retirement could be a good indicator of retirement wealth. Unfortunately, the only data I could find on this is a bit too convoluted. Like the map above, it only lists the number of households, not percentages. Also, we have no way of knowing if a tract has a lower or higher number due simply to the fact that there are fewer or more elderly residents (okay, we do, but I’m not capable of this level of comparison!). This also does not tell us what type of retirement income households are earning, which has major implications for the level of wealth.
The only other indicator relating to forms of wealth shown in the chart above that I could find is the number of vehicles owned. The American FactFinder database can show households owning zero up to three vehicles.
As we can see from the map, there is a strong correlation with low income and owning no vehicle. However, I think this indicator is also a bit too convoluted to show anything definitively. Not owning a vehicle could also mean a household is simply located in a core neighborhood where it is not needed or impractical. Likewise, owning a vehicle, say, in Northeast Philadelphia, is probably necessary to get to work. And, since vehicles turn out to only account for $7,000 a wealth in the median household, this isn’t a hugely impactful indicator when compared to the others.
From all of these indicators taken together, we can get a baseline idea of how the amount of wealth varies by census tract. Overwhelmingly, this information comes from data on homeownership and home values.
Let’s say we use only this indicator to gauge wealth in Philadelphia neighborhoods. Let’s also generously assume that the homeownership rate is the same in each area, and that there are no other forms of wealth in households. Then, when looking at the median, we know that Philadelphia’s wealthiest neighborhood is 19 times richer than the least wealthy neighborhood. Remember that the median already smooths out the edges of extremes on either end, so the actual disparity is much larger. From all of this, we can conclude that Center City is by far the wealthiest area, followed by parts of South Philadelphia, the far end of Northeast Philadelphia, and Northwestern Philadelphia (Chestnut Hill, East Falls, etc.). Almost all of North Philadelphia, West Philadelphia, and the southwestern portion of South Philadelphia are by far the least wealthy areas.
In my next post, I will finally begin to get to the reasons why this is the case.