Growing income inequality is the result of educational disparities, stagnant wage growth in middle and lower class jobs, and a higher emphasis on creating a skilled workforce. Economists are divided on whether the implications of income inequality are positive or negative. Income inequality is the ratio of the average income of the top 20% of the population to the average income of the bottom 20% of the population.
Louisville ranks 9th among its peer cities in income inequality. The average income of the top 20% of Louisville residents is 15.7 times greater than the average income of the bottom 20%.
Louisville ranks among the middle tier on this metric according to a natural breaks algorithm. Cities in green are those that outperform their peers, cities in yellow represent the middle cluster, and those in red are a group that lags behind its peers on this indicator.
Income inequality in Louisville has been decreasing since 2013, returning to the same level as measured in 2007. Income inequality in Louisville has decreased from the peer mean and is approaching the 25th percentile.
The average peer city saw a slight increase in the income inequality ratio between 2007 and 2016. Columbus, the most improved city, saw a small decrease. Indianapolis, the least improved city, saw its income inequality ratio increase from 13.6 to 17.1.
For each indicator, Greater Louisville Project assigns cities into one of three groups (high-performing, middle-of-the-pack, and low-performing) based on how they compare to other cities. The assignment is based on how cities naturally cluster on that indicator. Sometimes, the differences between cities are very small, and the difference between a city ranked 5th and 6th could simply be a matter of the sampling error that arises from using survey data. Thus, rather than always make a division that declares the top 5 to be the top tier, we use a natural breaks algorithm to look for a cluster of cities that is outperforming the rest, a cluster that is about average, and a cluster that is lagging. This clustering gives us a better indication of where Louisville is thriving and where Louisville has room to learn from cities that are doing better.
Z-scores (or standardization) is a way to combine data with different units of measurement into a single index. The z-score is a measure of how far away a city (or census tract, etc.) is from the average city. In order to be comparable across different units of measurement, the z-score is the distance from the mean measured in standard deviations (e.g. if Louisville has a z-score of 1 it means Louisville is 1 standard deviation above the mean of its peer cities).
Data from the Robert Wood Johnson Foundation's County Health Rankings use z-scores and all z-scores are relative to the mean of Louisville's peer cities. (On the County Health Rankings site z-scores are relative to all the counties in each state - thus z-scores reported by GLP will be different, because we are using a different reference group). The Greater Louisville Project also uses z-scores in our multidimensional poverty index, which compares each census tract to the mean of all census tracts in Louisville.
