Wage Inequality in St. Louis Is Growing

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Wage inequality in the St. Louis area is below the national average. However, it has grown in recent years, according to a recent Economic Synopses essay.

Regional Economist Charles Gascon and former Research Intern Rebecca Cowin noted that the average hourly wage in the St. Louis metropolitan statistical area (MSA) was $23.19 in May 2016, while the median hourly wage was $17.83. Nationally, average and median hourly wages were $23.86 and $17.81, respectively.

The authors noted that one way to gauge inequality is to compare the wages of the top 10 percent of workers with the bottom 10 percent (called the 90-10 ratio). They looked at the evolution of the two groups over a 15-year period.

“If all incomes increased proportionally over the period, the ratio would remain unchanged,” the authors wrote. “However, if incomes in the 90th percentile grow faster (slower) than those in the 10th, the ratio would increase (decrease).”

In 2001, the top 10 percent of workers in the St. Louis MSA earned on average 4.3 times as much as the bottom 10 percent. While the ratio declined around the Great Recession, it has since increased and stood at 4.75 in 2016.

“This ratio is still lower than the national average, however, indicating less wage inequality than for the nation as a whole,” Gascon and Cowin wrote. (To see the trends for both St. Louis and the U.S., see the essay “The Evolution of St. Louis’s Wage Distribution.”)

The authors then examined which was the bigger factor for wage inequality in the St. Louis MSA: higher wages at the top or lower wages at the bottom. They compared two other income ratios:

• The 90-50 ratio, which compared the top 10 percent of hourly wages to the median hourly wage
• The 50-10 ratio, which compared the median to the bottom 10 percent of hourly wages

Gascon and Cowin found that wages for the top 10 percent rose faster than for those earning the median wage, while wages for the median worker rose slightly before the Great Recession, then fell after 2007. Thus, the 90-50 ratio has an upward trend, and the overall trend for the 50-10 ratio is flat. (To see how these measures have trended, see the essay “The Evolution of St. Louis’s Wage Distribution.”)

“The divergence of these ratios indicates two key points: First, increased inequality in the St. Louis MSA is primarily due to gains at the very top of the distribution,” the authors noted. “Second, the lowest-wage workers have gained on the median worker since 2007.”

• Economic Synopses: The Evolution of St. Louis’s Wage Distribution
• On the Economy: Long-Term Household Income and Wealth Gains Favor Older Americans
• On the Economy: Wealth Inequality Grows within Races and Ethnicities