Income Inequality in the Rio Grande Valley: Our Collective Challenge

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Texas Border Business

By Dr. Kevin Peek

Income inequality in the RGV can be remediated. It’s just a matter of public and private sector leaders understanding how it affects all of us and coming together to make a change.

The Rio Grande Valley, home to a population of more than 1.3 million and growing, has undergone unprecedented and continuous economic growth and development over the last 10 years, and it doesn’t appear to be slowing down.

According to a recent study by the Perryman Group, the Metropolitan Statistical Area (MSA) composed of McAllen, Edinburg and Mission will lead the state in job creation over the next ten years at an annual rate of 2.19 percent, the equivalent of 31,800 jobs.

Output for the RGV is projected to grow by $3.8 billion over the next five years, and in 2018, the city of McAllen was included in Magnify Money’s list of top-Ten U.S. Cities for wage growth, with median earnings increasing by a whopping 18.4 percent between 2011 and 2016.  When compared with most MSAs throughout the state, there is little doubt that the RGV has become a somewhat unexpected, but highly welcomed engine of economic growth and development.

With all of this good news, it’s no surprise that economists, investors, and local political figures are optimistic about current and future economic prospects for our region –

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So, why do we keep hearing voices of dissent that seem intent on raining on our collective parade?

Since 2011, two years after the Great Recession officially ended, wages have increased, unemployment has fallen, and poverty levels have dropped.  The problem is that underlying this undeniable economic progress is a level of income inequality that is not only unacceptable from a humanitarian perspective, but if left unaddressed will ultimately undermine the aforementioned long-term economic growth and development.

The science of economics is, by nature, replete with differing views and theories on just about everything.  Nevertheless, you would be hard-pressed to find an economist who disputes the negative impact of prolonged systemic income inequality on long-term economic growth and development.

An economy based on concentrating wealth in the hands of a small percentage of the population can only work under very unique circumstances and for a relatively short period of time before reduced aggregate demand, insufficient human capital, and diminishing opportunities bring it to a standstill.

To this day, very little is being done in our area to correct rampant income inequality.

According to the U.S. Census Bureau, the McAllen-Edinburg-Mission and the Brownsville-Harlingen MSAs rank second and third respectively in the list of MSAs in the United States with the highest levels of income inequality. McAllen ranks 5th overall among cities.

To make matters worse, this income inequality disproportionately affects children.  Currently, 42.2 percent of children in McAllen, 37 percent in Laredo, and 39.2 percent in Brownsville-Harlingen live below the poverty line, and many of them live in a chronic state of food, health, and housing insecurity.

The ongoing prosperity of any region is dependent upon the living conditions and resources available to each new generation.  When one-third to half of the youth population lives in poverty, with limited resources and educational opportunities, long-term economic growth and development is unlikely to occur.

There can be no doubt that the systemic income inequality in the RGV affects all of us.  It reduces aggregate demand, restricts socio-economic mobility, suppresses investment (both internal and external sources), inefficiently allocates public sector funds, and hampers the development of human capital.

We have all the tools at our disposal in the public and private sectors to create a more equitable distribution of wealth and income. Updating wage and benefits structures, implementing tax incentives to promote small-scale investment, innovating apprenticeships and other employee training opportunities, making education more affordable and accessible, and providing more resources for households living below the poverty line are just a few examples of these tools.

If we don’t all take steps to seriously redress this problem, the much-celebrated economic boom that our region is experiencing will eventually come to a screeching halt. It’s not a question of if, but of when.

Dr. Kevin Peek is an Economics Professor at South Texas College and a Texas Border Business Guest Writer.

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