By Todd Vachon
Economic inequality is at record high levels and it’s tearing us apart.
According to the Federal Reserve, the top 1% of earners now take home 22% of all income in the U.S., the top 10% own 70% of all wealth, and real wages for American workers have been stagnant for decades. Rising inequality has been associated with increased social and health problems, lower life expectancies, decreased child well-being, a decline in trust in public institutions — including schools and governments— and an erosion of support for democracy itself.
It’s not just a national problem. New Jersey is among the richest states in the union but ranks 10th highest for income inequality. Economic disparities are amplified along the lines of race, gender, and citizenship status and can be even more pronounced at the local level. For example, Hudson County has one of the highest per capita incomes in the state, but its level of income inequality is 28% higher than the U.S. as a whole, leading the New Jersey Department of Health to label it a “reason for concern.”
So, what is driving the rise in inequality and what can be done about it?
In my previous research, I have found some of the major drivers of rising inequality to be declining unionization; tax cuts for the super-rich; labor market deregulation; the replacement of full-time, permanent jobs with part-time and temporary work; a weak social safety net for working families; and the increased role of finance, insurance and real estate in the economy.
At the local level, my current research on Hudson County, and Jersey City in particular, shows that while personal income has increased by nearly 600% since 1980, the gains have been very uneven. For example, the share of income taken home by the credit intermediation industry has risen 343% in the past 20 years while the share of income for repair and maintenance workers has actually declined by 26%. The ratio of income for the top 20% of earners to the lowest 20% of earners has increased from 17:1 in 2011 to 21:1 in 2021, an 18% increase in inequality in the past decade.
Much of the growth of inequality in Jersey City can be attributed to the massive redevelopment of the city, especially the explosive growth of luxury housing. The building boom of the past decade has seen more than 50,000 new multi-family building permits, the construction of 25 high-rises, and an increase in overall apartment values by 55% between 2018 and 2022. Unfortunately, the workers who build, maintain, and clean these buildings and provide valuable services for their residents are not fully sharing in the rewards of development and many can no longer afford to live where they work.
Despite promises that the construction of large residential buildings would “bring new life and new opportunities,” the rising towers have instead brought rising housing costs and rising inequality. Construction companies like Lefrak have paid non-prevailing wages and created unsafe working conditions on building projects while simultaneously accepting tax breaks and other government aid.
Thankfully, we still have an opportunity to correct course and make a real impact on inequality at the local level.
To be sure, addressing runaway inequality requires major reforms, but bringing all stakeholders to the table as Jersey City Councilwoman Joyce Waterman has called for can go a long way toward righting the course locally.
From construction tradespeople to maintenance and cleaning workers at residential properties, the hard-working New Jersey residents whose labor drives local economic growth must be included in conversations about future development, including negotiating industry wage and benefit standards that reflect the value of their labor and their contributions to the growing economy.
The most recent State of Labor in New Jersey report from Rutgers University shows that unionized workers bring home 20% more in wages than their non-union counterparts. The benefit is even greater for Black and Latino workers, who see a 25% and 27% bump in pay, respectively, when having a union. However, just 3% of workers in service industries currently have union representation.
Ensuring prevailing wages and embedding strong labor protections in future development plans either through union contracts, community benefit agreements, or as terms for development, including for the workers who service and clean the new buildings after they are built, can go a long way toward lifting the floor for New Jersey workers and reducing inequality.
Already the 10th “tallest” city in the 10th most unequal state, Jersey City is looking to build a dozen more high-rises in the coming years. Our elected leaders need to ensure that these new projects, which are valued at more than $5 billion, center the interests of workers and local residents, not just the profits of wealthy developers. This is one major way we can short-circuit rising inequality in Jersey City and Hudson County to ensure shared prosperity, improve health outcomes, and protect democracy. Our collective well-being depends on it.
Todd Vachon is an assistant professor in the School of Management and Labor Relations at Rutgers University. He is also the director of the school’s Labor Education Action Research Network (LEARN).
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