Ag economy cited in study showing growth in rich-poor gap

The gap between rich and poor isn't easily noticed in rural Iowa, where ostentatious displays of wealth are typically shunned, but that doesn't mean the gap isn't there, Iowa State University sociologist David Peters said.

Peters released a study Monday showing that three Iowa counties were among the top 10 counties in the nation in the growth of income inequality from 2000 to 2012.

All are agriculture-based counties in rural Iowa — Emmet (fifth), O'Brien (seventh) and Worth (ninth).

"That's shocking. It's really a phenomenal jump," Peters said. "It's strongly affected by farm income."

The growth of the biofuels industry and rise in farm commodity prices through 2012 drove up farm incomes, Peters said. Given the low population base in rural counties, higher incomes for a relatively small number of farm households served to widen the income gap.

Income inequality has become a more prominent national issue in recent years, but Iowa has always fared well compared with the rest of the nation. It remains below the national rate of income inequality, but in the 2000s, Iowa inequality has grown faster than the U.S. rate.

Of the top 10 Iowa counties that were most unequal in 2012, eight are predominately rural and the two others — Johnson and Story — are dominated by major universities and their large population of comparatively low-income college students.

During a similar rise in farm commodity prices before the farm crisis of the 1980s, the income was split among more farmers. Today, the number of farmers has dwindled, and lower-income groups have not benefited from the more concentrated wealth. At the same time, some middle-skill jobs in manufacturing disappeared, and workers migrated to service and leisure industry jobs.

In Emmet County, the lowest-earning households saw their share of income shrink 26.9 percent from 2000 to 2012, while the highest-earning ones saw theirs grow by 17 percent.

"Iowa has never had a wealthy class and a poverty class, but we are getting more like the rest of the nation," he said.

The wealth created by the farm economy didn't necessarily trickle down to those in the lower-income ranks, a common assumption, he said. Public and private policies that favor shareholders over jobs are partly to blame, he said.

The thinking has been, "If (farmers) do well, everybody does well," said Jamey Whitney, executive director of Upper Des Moines Opportunity, which serves the poor in 12 counties in northern Iowa, including Emmet and O'Brien. "That's not necessarily the case. That money hasn't trickled down at all. We are not benefiting from the ag boom."

In Emmet County, nearly 15 percent of the population sought government assistance for heating, food or other needs in 2013, and more than half of the students at the Estherville-Lincoln Central Community School District qualify for free or reduced-price lunches.

"Those are working families we are seeing, which is amazing to me," he said. "The amount of income they bring in doesn't cover the cost of a household."

Estherville is the largest town in Emmet County and is home to three food-processing plants. The town has seen a growth in Latino population, today at 11 percent.

Others continue to believe that a robust farm economy helps everyone.

"How the ag industry goes, so goes Main Street, so goes building and construction, and so goes housing and wages," said Rodd Holtkamp of the O'Brien County Economic Development Corp. board and a Primghar banker. O'Brien County holds some of the highest-priced farmland in Iowa.

"If 40 years ago you had three guys farming and now there is one, that guy still covers the same amount of ground and still comes into town and buys the same amount of seed and chemical fertilizer. Those raw inputs are still purchased," he said.

He was asked why the lower-income classes have lost ground.

"If you are able-bodied and have a little bit of a work ethic, there is work to be done," he said. "You can better yourself. You can improve those conditions if you think they are not where they should be."

Commodity prices fluctuate and have already decreased since the 2012 statistics cited by Peters. Already, Holtkamp said, the "ag sector has started to sour," leading to lower incomes for farmers.

Others took issue with Peters' use of the Gini index, a commonly used measure of income inequality. The higher the number on the 0-to-1 scale, the greater the disparity in the amount of income held in five income levels. Iowa has a Gini score of .424 vs. .464 nationally.

Colin Gordon, a senior research consultant with the Iowa Policy Project, said the Gini index as a whole is not a good measure of the gap between rich and poor but simply a measure of how income is distributed. In rural counties, it can be easily skewed by a few people because of the lack of economic diversity, he said, but the trajectory of the upper incomes in the index is worth watching.

Peters said the growth in upper incomes and inequality is important to gauge. Previous research has shown that areas with more inequality have more physical and mental health problems, lower educational attainment, more crime and drug use, and less social cohesion and mobility.

"When you have that, you have social unrest. And it affects the work ethic," he said. "You are told, 'If I work hard, the economy will reward me.' In contrast, if you work hard and you only rise up to the bottom 30 percent," it can diminish the desire to work harder, and a life in the lower economic rung can become self-perpetuating.

The next phase of his project will be case studies in areas with higher growth in income inequality.