Income and Inequality in Houston

Exploring how economic prosperity and disparity affect our region

While the Houston region is rich in economic opportunity, striking inequalities still affect our three main counties.

Why income and wealth matter to Houston

Strong and stable incomes help our communities thrive. Without sufficient wages, people struggle to afford housing, food, utilities or medical care, much less invest in their education, business or future. In fact, income and wealth shape some of the most important factors of everyday life, including marriage, overall health, residential location, homeownership, job type and more.1 Despite Houston’s diverse and dynamic nature, severe income inequalities exist across gender and race/ethnicity categories. The more we engage and discuss these problems, the more we can do as a community to solve them.

By exploring the facts and taking the steps to better understand our communities, Houstonians can do more to ensure all families throughout the three-county area can contribute to and benefit from our region’s growing prosperity.

The data

Household incomes are rising but disparities persist

Median household incomes are growing very modestly across the nation, state and three-county area, but inequalities remain between racial and ethnic groups. While income growth since 1990 has been slow and inconsistent across the nation and state, GDP (gross domestic product)  has risen sharply within the same time period.

In 2017, median household income for the three-county area was $63,302, with Fort Bend County having the highest median household income ($90,845), followed by Montgomery County ($76,811) and Harris County ($58,645). 

While the region overall has a higher median income than both the state and the nation, its growth has been slower. Between 2010 and 2017, median household income across the three-county area grew by just 4.3% ($2,596), significantly less than the national (7%, $3,193) and state growth (8%, $4,396).

Over this time period for the three-county area, the median household income gap between White and Black households and between the White and Hispanic households shrunk by only 1% and 3% respectively.

$38,605

The median income gap between White and Black households was $38,605 in 2017 across the 3-county area.

Breaking down income inequality — the Gini index

Developed by the Italian statistician Corrado Gini in 1912, the Gini index is the most commonly used measurement of inequality used by economists and sociologists. A Gini index of zero indicates perfect equality, where everyone earns the same amount, while 1 represents total inequality, which would mean only one person earns all the income.

From 2010 and 2017, the Gini index increased across the nation, the state of Texas and Houston’s three-county area, highlighting growing income inequality.

As of 2017, Harris County has the highest Gini index (0.50) followed by Montgomery (0.48) and Fort Bend (0.44) counties.

Across the three counties, income inequality is increasing, meaning high-income individuals are receiving larger percentages of the population’s total income.

Growing wealth contributes to greater disparities

Wealth includes all of a person or family’s assets including a home, savings, stocks, property and income. These assets can help families endure economic shocks like layoffs, natural disasters or health emergencies.2 Homeownership is the most common vehicle for wealth-building, yet disparities exist along racial and ethnic lines in homeownership. Further, people of color tend to receive a lower return-on-investment in college and in incomes compared to the White population, meaning Black and Hispanic families are less able to turn each dollar of income or amount of education into wealth as White families.3

Wealth distribution

Average wealth has increased over the past five decades, but this has not led to a decrease in income inequality. For lower-income households, debt has increased right alongside income. For example, families in the bottom 10% have gone from having no accumulated wealth to being about $1,000 in debt. On the other hand, families at the top of the income spectrum (90th percentile) have seen their wealth grow by five times. For the top 1% of earners, wealth has multiplied by seven times since 1960.

Income distribution

Due to data limitations related to wealth at the regional level, we show income distribution here which indicates how wealth might be distributed. In Harris County, the top 20% of households received 53.5% of total income in 2017, compared to just 3% of income going to the bottom 20% of households. The same pattern holds in Fort Bend and Montgomery, where households in the bottom 20% receive just 4% and 3.3% of total income, respectively.

About ½ of all income

Went to just 20% of the highest-income households in 2017 across the three-county area.

Pay gaps in the Houston area

Despite growing median income and employment rates, pay inequalities continue between men and women, and between members of different racial and ethnic groups across the three-county area. And while some communities are experiencing promising improvements that exceed national averages, others are facing growing inequality.

It’s important to note that this data does not look specifically at men and women with the same jobs or qualifications. Research shows that women are less likely to hold or grow into higher-level, high-paying jobs compared to men, which affects this gender gap.5

– $20,555/yr.

The median earnings for women in Montgomery County are $20,555 less than men; a gap that has widened by 63% since 2010.

The gender pay gap in median earnings

On average, male full-time, year-round workers earned about $10,000 more than female workers in 2017 across the nation and state.

At the regional level, Montgomery and Fort Bend counties have far more troubling gender gaps, with women earning $20,555 and $15,137 less than men in these counties in 2017, respectively. Harris County has a smaller, more stable gender gap with women earning $7,500 less than men on average.

Improvements are being made — just not consistently. Fort Bend County has seen the most improvement since 2010, with a 26% decrease in the gender pay gap. The gender pay gap in Montgomery County, however, has actually increased by 63%.

Female-to-male earnings ratios

Female-to-male earnings ratios represent the earnings of women compared to the earnings of men measured by cents on the dollar.  The higher the earnings ratio, the smaller the pay gap. In 2017, across the nation and state, women earned 81 cents for every dollar men were paid.

Although Texas’ earning ratio is higher than the national average, its rate of growth is slightly slower than the national average. In the three-county area, changes in earnings ratios paint a more complicated picture. On average, for every $1 earned by men, women earned 85 cents in Harris County, 77 cents in Fort Bend County and just 68 cents in Montgomery County, the only county in which the earnings ratio worsened.

The female-to-male earnings ratios within racial/ethnic groups

Within racial and ethnic groups, earning ratios between men and women increased from 2010 to 2017 among Whites and Blacks at both the national and state levels, indicating a shrinking pay gap. However, the pay gap increased between Hispanic men and women in all three counties. Interestingly, the pay gap between Black men and women in Montgomery County not only decreased but reversed from 2010 to 2017, meaning Black women are earning 7.5% more than Black men.

Pay gaps by race/ethnicity in Houston

In Houston, income inequality exists both between and within racial and ethnic groups, consistent with the patterns of growing U.S. inequality since 1970.6

Data shows Asian workers earned higher earnings on average ($41,321 in the U.S. and $43,217 in Texas) than all other racial/ethnic groups in 2017.

While Houston-area incomes are generally increasing across communities and ethnic groups, disparities between these groups have remained in place, and in some cases have worsened. In 2017, median earnings were highest for White workers in Fort Bend County ($60,302), followed by Harris County ($51,788), and Montgomery County ($46,409). Median earnings were lowest for Black workers in Harris County ($31,064), compared to those in Montgomery and Fort Bend counties ($37,313 and $37,584 respectively).

Across the nation, only Black workers experienced declining median earnings, down by $411 since 2010.

Racial and ethnic earnings ratio compared to Whites

The racial and ethnic earnings ratio measures median earnings for people of color relative to the earnings of White residents.

In the U.S., gaps between Whites and people of color have persisted since 1970, with the exception that Asians earned more than Whites in 2010 and 2017. The Black-White gap has widened in the U.S. but remains almost the same in Texas. Hispanics have the lowest earnings ratio across groups in Texas, with workers earning just 60 cents for every dollar earned by a White worker.

Regionally, we see slightly different trends. Asian workers in Montgomery County earned more than Whites, but significantly less in the other counties. The earnings ratio for Hispanic workers compared to Whites indicates workers earning about half as much as White workers with little change between 2010 and 2017. In 2017, Black workers in Harris County had the lowest earnings ratio among the three counties while Montgomery County had the highest, showing significant improvement since 2010. 

Resources

References:

  1. Killewald, Alexandra, Fabian T. Pfeffer, and Jared N. Schachner. “Wealth Inequality and Accumulation“. Annual Review of Sociology 43 (2017): 379-404.
  2. Hanks, Angela, Danyelle Solomon, and Christian E. Weller. “Systematic inequality: How America’s structural racism helped create the black-white wealth gap.” Washington: Center for American Progress, February 21, 2018
  3. Sullivan, Laura, Tatjana Meschede, Lars Dietrich, and Thomas Shapiro. “The Racial Wealth Gap.” Institute for Assets and Social Policy, Brandeis University. DEMOS (2015).
  4. “Nine Charts about Wealth Inequality in America (Updated)Urban Institute, last modified October 24, 2017.
  5. Graf, Nikki, Anna Brown and Eileen Patten. “The narrowing, but persistent, gender gap in pay.Pew Research Center (blog). March 22, 2019.
  6. Kochhar, Rakesh and Anthony Cilluffo. “Key findings on the rise in income inequality within America’s racial and ethnic groups.” Pew Research Center. July 12, 2018.