Carnegie Mellon University


June 28, 2018

Air Pollution Widens Gap of Income Inequality in the U.S.

By Nicholas Muller, associate professor of economics, engineering, and public policy; Lester and Judith Lave Development Chair in Economics, Engineering, and Public Policy of the Tepper School of Business, Carnegie Mellon University and Peter Hans Matthews, professor of economics of Middlebury College

In recent years, the public and political conversation about income inequality – and what factors drive it – has picked up steam, forcing us to re-think the reasons behind our growing identity as a nation of haves and have-nots.

As we consider some of the sources of this widening gap, one that might surprise the casual observer is air pollution. In our research, which examined 2 million households across the United States, we determined that air pollution functions as a virtual regressive tax on people with low incomes, particularly in African American communities.

To calculate the monetary value of air pollution impacts, we used measures of income from the U.S. Census Bureau and measures of pollution from the Environmental Protection Agency. Our data included just about every household reported in a publicly available database, the American Community Survey – a product of the Census Bureau.

The Census already reports income inequality through the Gini coefficient. By subtracting the impacts of air pollution, we were able to see a startling effect on lower income groups. While it is true that people with lower incomes are generally exposed to more pollution, that’s not the primary driver of the higher impact. Our research found that even if all communities faced the same pollution exposure levels, low income communities would still suffer more because even without factoring in dirty air, their residents also face a much higher risk of mortality.

A host of other factors – from the challenges of work and the incidence of alcohol and tobacco use to educational access and achievement – contribute to higher baseline death rates in these communities. Because residents are already more likely to die young, adding pollutants on top of that elevated baseline affects their lives more dramatically than their affluent counterparts, whose general health is more likely to be good.

The symmetry of the impact paints a picture of stark contrast. When pollution impact is factored in, the bottom 20 percent of households lose roughly 10 percent of the share of income, while the top 20 percent of households gain 10 percent. (The middle percentages see little to no change in income.)

What this means is that environmental policy may be an especially effective tool to address income inequality. Reducing pollution benefits everyone, but it most significantly improves the lives of the very poor. Conversely, loosening environmental regulations will only contribute to widening the income gap in our country.

To the extent that widening inequalities reflect differences in opportunities, we should remember that the air we breathe is integral to the pursuit of life, liberty and the pursuit of happiness.