A Spatial Perspective on Rising Inequality in the United States

Recent research on earnings inequality overlooks the importance of changing spatial dynamics within the United States. While many studies consider the effects of economic restructuring on spatial inequalities, this article reverses the causal arrow to ask whether spatial inequalities shape the effects of economic restructuring. Drawing on a case study of the General Electric (GE) Company's post-World War II restructuring strategies, it argues that instituting a new spatial division of labor within the United States was central to the firm's adaptation to a postindustrial economy, long before similar strategies were applied internationally. In response to a changing regulatory and competitive environment within the United States, firms such as GE opened branch plants in right-to-work states in the 1950s and 1960s so they could expand production and develop new product lines without contributing to the power of organized labor. In the short term this spatial restructuring of the U.S. economy narrowed historical inequalities between regions, but in the long term the growth of production facilities in Southern and Southwestern states undermined the power of organized labor elsewhere and contributed to increased earnings inequality after 1970. A descriptive decomposition of national earnings inequality into its within- and between-place components using U.S. Census data (IPUMS 1 percent) supports this causal narrative. Comparatively high levels of earnings inequality in the United States appear to be bolstered by a decentralized political economy that shapes firms' restructuring strategies and weakens inequality-reducing labor-market institutions.