Critical Socio-Economic Regions and Dogmatic Capitalism: An Analysis of Inequality and Poverty in Texas
There has been a chasm in the U.S. as to how income inequality and poverty in the market economy must be understood and, consequently, acted on. A dogmatic camp views these as an abnormality or necessary in an otherwise healthy system. This view promotes free markets and non-intervention and vouches that markets have an inherent tendency to correct themselves. A post-progressive camp recognizes that markets have innate tendencies that benefit an elite class and advocates for balanced intervention. As the debate continues, income inequality has reached one of its worst points, with the gap in average wages between Latinos and whites narrowing by only $0.02 in the past 25 years. In the last 50 years, the poverty rate has decreased by only 1.6 percentage points, as the rate for Latinos and Blacks has, for the most part, exceeded 20%, while that of whites has remained below 10%. This study views income inequality and poverty as arising from one single process, that of the labor exchange. For that purpose, the main research questions begin with: How is the space where the labor exchange occurs defined? As the labor exchange produces inequality, the study proceeds with: What type of a bi-directional relationship do income inequality and jobs have? Lastly, the study focuses on the lower tail of the income distribution and asks: How do income inequality, sectoral employment, and segregation influence poverty? Several data sources are used to analyze these questions, including the American Community Survey, Longitudinal Employer-Household Dynamics, IPUMS USA, the Bureau of Labor Statistics, and cross-walks from the Missouri Census Data Center. The study fills a gap in the literature, addresses a bias in how labor markets are traditionally defined, and proposes an alternative theoretically-based empirical methodology to produce consistently defined "critical socio-economic regions." The research develops an industry typology that aligns with a dual economy and identifies the presence of a self-feeding mechanism in the bi-directional relationship between sectoral employment and inequality as mainly driven by the Dynamic sector and which primarily impacts the share of employment of Latinos. Using micro-data, workers' experience of poverty is also influenced by the Dynamic sector, income inequality at both a PUMA and a sectoral level, and segregation. As the share of Latino workers in their prime working ages (25-54) already surpassed the percentage of white workers in this age group in Texas in 2019, and the Latino workforce is projected to be the largest in the state in the next 14 years, the research appropriately focuses on Texas.