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York and Boston, it is a pleasant, green, and almost European- looking state. Americans like to call it quaint, which I understand means over 200 years old in American. He is also rich, very rich. Connecticut has one of the highest concentrations of millionaire families in the country, and towns like Greenwich have become symbols of "old money," private beaches, and hedge fund estates. Overall, it looks like a pretty comfortable place to live. While this all sounds great, there is one caveat. According to one of the most widely used measures of inequality, Connecticut is the second most unequal state in America, behind only New York. And unlike New York, Connecticut doesn't have one huge financial center to, most people would n't even call it the
largest city. I'll be honest, I couldn't get to work on this video either. Even more surprising is that on paper, Connecticut doesn't look like a poor state at all. Its official poverty rate is lower than most other parts of the country, and yet , by some estimates, nearly four in 10 families there still cannot afford basic living expenses. Some of America's wealthiest communities are located just a few miles from some of its most needy cities, and for some reason, these two worlds almost never intersect. So how did one of America's wealthiest regions simultaneously become one of its most unequal? And does it matter if most of it still looks perfectly decent from the window of a passing train? Well, to find out, as always, we need to answer a few
important questions. How unequal is Connecticut really? Why did he reach this state? And, ultimately, does all this inequality make it an unstable place to live? With inflation spiraling out of control these days, controlling your spending has never been more important. That's why I use Chime, the sponsor of this video. Chime is America's number one choice for banking, and it's easy to see why. They offer fee-free banking services, which helps you keep more of your hard- earned money. But Chime not only offers fee-free banking, it also provides easy access to a high-yield savings account. This account offers 4% annual interest, which is 10 times higher than the national average. And unlike some other high-yield accounts, they have no monthly fees or
minimum balance requirements. A high-yield savings account is great, but forming the habit of consistently saving money is where most people really fail. That's why Chime offers tools for automatic savings. You can set up a fixed percentage of your salary to be deducted directly into a savings account. Right now you can get a $200 bonus by opening a new checking account with Chime. This is real money, not points. And it's only available through my link in the description. Economists typically measure inequality using what is known as the Gini coefficient-a scale from zero to one. A score of zero means that everyone earns exactly the same amount.
A score of one means that one person gets everything, and no one else gets a cent. Most developed countries have a rate between 0.25 and 0.40. The US as a whole has a rate of around 0.42, which is already high for rich countries. The Gini coefficient for the state of Connecticut is about 0.50. I understand that this is not a completely correct comparison, but on a country-by-country basis, this number is closer to Brazil than to any Western European country. And compared to other states, New York, with a rate of about 0.52, is the only one that consistently outperforms this result. In the case of New York, this is logical to a certain extent.
There, one of the largest financial centers on the planet is attached to a much larger and much poorer state. Only Manhattan itself drastically distorts the numbers, but that's not the case in Connecticut. Its largest city, Bridgeport, has a population of about 150,000, the size of a typical regional town. There is no giant metropolis there that would push up the average figures. So where does all this inequality really come from? If you look at the top of the income distribution, the picture quickly becomes clear. Connecticut consistently ranks in the top five in terms of the income gap between the top 1% and the remaining 99%. The richest 1% of the population receives approximately 28% of all state income. In other words, the average
representative of this group earns about 37 times more than everyone else. And this gap only continues to grow. After the Great Recession, incomes at the top recovered rapidly, while incomes for everyone else actually declined. So, the recovery was real. It simply bypassed about 99% of the population. Connecticut also consistently ranks in the top five states for the number of millionaires per capita, along with New Jersey, Maryland, and Massachusetts. But here's what makes Connecticut unusual. According to official poverty indicators, things look pretty good here. This is not a case where half the population is rich and the other half is poor. It is the relatively small group of extremely wealthy households is pushing the entire distribution
upward. But that doesn't mean everyone else feels comfortable. For a family of four in the United States, the official poverty line is $33,000 per year. That may be enough to live in parts of the country where rent and childcare are cheap, but Connecticut is one of the most expensive states. The United Way estimates that a family of four there needs about $116,000 a year to cover basic needs: rent, food, transportation and medical care. And by these standards, nearly four in ten Connecticut households fall short of that level. So, although poverty appears moderate according to official figures, a huge number of families are barely making ends meet, given the real cost of living. Connecticut also suffers from racial inequality. The
median income of a white family is about $43,000 higher than that of the average black or Hispanic family. And, of course, this income gap almost completely coincides with geography. If you're black or Latino in Connecticut, there's about a 50-50 chance that you live in one of the few poor neighborhoods that make up only 2% of the state's land area. If you're white, that chance drops to about one in 11. So inequality is n't just about income. It depends on where people live, what services they have access to, and how much of it is related to race. But how did these divisions become so deep in such a wealthy state? Where did all this come from? To understand how Connecticut got to this point, we have to go back to the late 1800s. In the 1870s, Hartford
was considered the richest city in the United States per capita. Mark Twain, who lived there at the time, supposedly called it the most beautiful of cities, although historians have never been able to confirm this quote. Whatever the case, there was ample evidence that the city was incredibly wealthy. Aetna and The Hartford, major banks, railroads, and the Colt arms factory were based there. By the standards of the time, it was a thriving industrial city, and the rest of the state was not far behind. Danbury was known as the hat capital of the world, Waterbury produced most of the brass for the United States, and Bridgeport was
nicknamed the "arsenal of democracy." Thanks to employers like Remington Arms. But over the following decades, many of these cities lost the industries that had provided their prosperity. Manufacturers increasingly moved factories south, west, and eventually overseas, seeking cheaper labor and lower operating costs. Others faced increasing competition, while automation allowed factories to produce more with fewer workers. This was not a sudden outflow, but a sustained erosion of the jobs that supported these cities. Remington, for example, began moving ammunition production from Bridgeport to a new plant in Arkansas around 1970, years before its remaining Bridgeport facilities closed in the late 1980s.
Along with this industrial decline, many middle- class families, mostly white, moved to the suburbs. Discrimination in housing accelerated this process. Redlining, the practice of denying loans and services to residents of certain neighborhoods, limited access to mortgages, and racial restrictions prohibited nonwhite families from buying homes in many suburban communities. Industrial decline and unequal access to suburbs have together changed the economic geography of Connecticut's cities and surrounding towns. In 1910, Hartford had the highest home prices in the region, averaging about $5,000, compared to about $1,200 in the
nearby farming town of Avon. A century later, the average home in Avon sold for about three times as much as the average home in Hartford, a direct opposite of the figures from a century ago. By 2000, Hartford had one of the highest poverty rates among mid-sized cities in the country, while the greater Hartford metropolitan area, which includes all the suburbs to which these families moved, was one of the wealthiest in the United States. So, wealth hasn't disappeared from Connecticut. It simply left the cities and settled in the surrounding towns, taking the tax base with it.
Meanwhile, while the old industrial towns were emptying, something different was happening in another part of the state. Fairfield County, in the southwestern corner of Connecticut, has been a vacation spot for wealthy New Yorkers for over a century. The Rockefellers built estates there in Greenwich back in the late 1800s. Then in the 1990s, the Hedge funds began to gather in Greenwich and Stamford, and this process accelerated dramatically after the September 11 attacks, when a number of
Wall Street firms moved their operations to Fairfield County rather than rebuild in Lower Manhattan. The attraction was obvious. It's a 45- minute train ride to Midtown, and it has large homes, private beaches, and a place to park your boat. And Connecticut's income tax rates have always been significantly lower than New York's. Even today, the highest rate in the state is 6.99%, compared to 10.9% in New York. But the tax story goes deeper. Until 1991, Connecticut did not tax payroll at all, which helped lure large corporate headquarters out of Manhattan in the 60s, 70s and 80s. However, the situation was different with investment income. Interest and dividends were taxed at some of the highest
rates in the country. Then, in 1991, everything changed. The state has implemented a payroll tax but lowered the tax on investment income to 4.5%, which, I'm sure, coincidentally, is almost exactly the same as how hedge funds make money. Lower taxes gave fund managers a financial reason to move. And with the arrival of new funds, a network of financial talent and services has developed in the region, making it even more attractive to others. By the mid- 2010s, Connecticut was second only to New York in total hedge fund assets. At its peak, the world's largest hedge fund, Bridgewater Associates, managed about $150 billion from an office in Westport, a town of about 27,000 people. In fact, it's the financial equivalent of running NASA from a country pub. So
, over the course of a few decades, Connecticut effectively replaced factory jobs that paid decent wages for many with financial positions with huge profits for a few. If you combine these two stories: the decline of industrial cities and the arrival of hedge funds, you get a state where the richest people in America live next to the poorest communities. Nowhere is this more evident than in the southwestern corner of Connecticut. In the Bridgeport-Stamford metropolitan area, the richest 1% earn an average of about $6.3 million per year, while the bottom 99% earn about $101,000, a ratio of about 62:1. Stamford and Bridgeport are only 20 miles apart. From an economic point of view, they seem to be in different countries. Of course, the neighborhood of
rich and poor areas is not unique to Connecticut. This can be seen in many places, including Australia. What 's different about Connecticut is that the local government structure is specifically designed so that these two worlds never intersect. Connecticut abolished county government back in 1960. This means that almost everything-zoning, police, schools, local services- is managed by 169 individual cities, all funded through property taxes. About 60% of local government revenue in Connecticut comes from property taxes, which is about twice the This creates a self-perpetuating cycle. Rich cities have expensive housing, which creates a large tax base that pays for great schools and services. These schools attract more affluent residents,
which increases property values, generating even more income. Poor cities get the opposite result. Lower property values mean a smaller tax base, which means worse schools and fewer services. At the same time, these cities face higher demand for things like public housing support and emergency services, all of which must be funded from the same. But the real mechanism that perpetuates this divide is zoning. Approximately 91% of Connecticut's residential land is zoned exclusively for single-family homes. Only 2% allow the construction of buildings with four or more apartments without holding public hearings. And some cities have made these rules extremely strict
. In Monroe, by some estimates, aggregate zoning regulations could require up to 70 acres for certain types of multifamily housing, while only 1 acre is required for a single-family home. For comparison, 70 acres is more than 28 rugby fields just to build one apartment building. At this point, it's not so much a zoning rule as a fairly polite way of saying "no." And more than three dozen cities have not allowed the construction of a single private duplex or apartment building in the last 20 years. To be fair, the state has tried to solve this problem. In 1989, Connecticut passed an affordable housing law known as 8-30 g, which allows developers to bypass local zoning in cities where the affordable housing share is less than 10%. But after more than three
decades, only 28 out of 169 cities have achieved this goal. So, no one needs to build a physical wall. If you can't afford a house on a two-acre lot, you simply can't live in this city and you can't send your kids to local schools. This brings us to the final question: If a state is generally wealthy and the official poverty rate is low, does all of this create any instability? In many American cities, inequality is usually quite visible. Take Miami, where wealthy newcomers began buying up properties in working-class neighborhoods like Little Haiti, and rents reportedly jumped 50% in just a few years, crowding out local residents. In Connecticut, the inequality is less obvious. Money-both the fortunes of old Greenwich estates and the new capital of hedge
funds-mostly stays within the boundaries of their cities. And thanks to the zoning we just talked about, no one needs to be displaced, because those who can't afford it were At first glance, it looks almost harmless. The official poverty rate is low. There is no mass eviction. Most of the state looks quite prosperous. But the consequences beneath that surface are very real, and they only accumulate over time. The most obvious of these is segregation. More than half of Connecticut's non-white residents live in just 10 of the state's 169 cities. Meanwhile, in almost 30 cities, over 90% of the population is white. And since schools are funded largely by local property taxes, the city you live in has a
decisive influence on how much money will be spent on your child's education. Bridgeport spends about $18,900 per student, and more than 90% of its students need extra support. Greenwich spends about $27,800 per student with a much smaller proportion of such students, meaning the district that struggles the most receives the least funding. And you can see this in the results. In Greenwich, nearly 80% of third-graders meet state reading standards. In Bridgeport, only one in six. Moving to a better school district is also not a realistic option for most families, because living near a successful school can cost many times more than living near one that is struggling. On top of everything, the state's finances are based on an
extremely narrow base. As of 2020, only 1.1% of Connecticut taxpayers, or fewer than 20,000 people, paid 40% of the state's total income tax. This is a real vulnerability because these people are mobile and some of them have already left. Eddie Lampert moved out on his own and moved his hedge fund to Florida in 2012. Paul Tudor Jones became a Florida resident in 2016. And GE headquarters out of state that same year. The number of finance and insurance jobs in Connecticut has declined from about 120,000 in 2008 to about 95,000 today. So, is Connecticut an unstable place to live? Not in a dramatic sense. There are no riots or mass evictions here. In everyday life, most cities look quite normal. But it is fragile and stuck in place.
Connecticut's budget depends on a small number of very wealthy residents who can move to Florida whenever they want, while a significant portion of the population has little real chance of social mobility. Because where you were born determines your school, and school determines a lot of what comes next. This second part is a bigger problem. Moving rich people to Florida is a budget issue, but a system that decides a child's future based on their zip code is much harder to fix. Now, as we saw in Connecticut, inequality is not just a single number. It depends on whether you measure income, wealth, or where people live. And this turns out to be very important when you ask the broader question of whether We already made a whole video about this, so
if you're interested, you can click on it on your screen right now. Thanks for watching. Goodbye.
