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Air pollution affects our health, and it turns out, has a big impact on income inequality, according to a study published earlier this year.

One of its authors is Nicholas Muller, the Lester and Judith Lave Professor of Environmental Economics and Public Policy at Carnegie Mellon University.  He spoke with The Allegheny Front’s Kara Holsopple about his research that concludes that air pollution actually contributes to the widening gap between Pittsburgh’s haves and have-nots.

Kara Holsopple: So how do you come to that conclusion?

Nick Muller: It’s widely known that in the environmental justice movement exposure to pollution tends to be higher for folks of lower-income than for folks who are more well-to-do.

LISTEN to the interview:

KH: That’s because they live where industry is situated?

NM: Generally speaking, yes. What our work found, however, was when you looked at the health impacts, and then monetized those health impacts, and used those monetized damages to construct a new measure of income for people across the income distribution, that the inequality in the distribution of that measure of income was far worse than in regular old market income and wages.

KH: And there was a figure, the percentage?

NM: So the standard measure of income inequality comes in two forms. There’s a Gini coefficient which is just a number between 0 and 1 that represents how unequal the distribution of income is and in the U.S. in the year 2014, we reported market income Gini’s that were on the order of 0.5 which is very much what the federal government reports.

When we looked at the air pollution adjusted measure of income, it was much higher — on the order of 0.65.

“The share of income earned by folks below the 20th percentile was actually negative.”

Another measure of the income distribution are what are called shares. For the lowest 20 percent of market income, we found a share of something like three to five percent of market income whereas folks in the top 20 percent had over 50 percent of market income.

However, when we looked at the adjusted measure of income, the share of income earned by folks below the 20th percentile was actually negative. And that implied that the damages from air pollution health effects for those folks was very high.

And furthermore, the reallocation of income between the 20th and over 80th percentile households was bracingly symmetric implying that when you take into account exposure to environmental pollutants, it’s a near perfect swap between the lowest 20 percent and the highest 20 percent.

KH: You described it as a regressive tax.

NM:  I did and others have as well. And the basic idea is that there is monetary cost associated with firms and consumers choices specifically related to the production of air pollution. Those Costs can be thought of as an implicit tax on recipients welfare. And so the regressive piece of that is just the nature that it’s very concentrated. The magnitude of those external costs is very much concentrated in the lower-income quantiles of the distribution.

KH: What do you mean by costs? What are the costs?

NM: The costs are things like increased chances of death associated with exposure to fine particles. This has been known in the epidemiological and economic literature for decades.

There are also costs of illness associated with things like asthma and COPD emergency room visits lost work days kids lowered attendance at schools all of those are costly to individuals and households. Some of those are amenable to monetization and therefore we can represent them in dollar terms.

KH: Why is there that relationship between what happens to people in the lower 20 percent income and you know people in the highest 20 percent. How do you explain that tradeoff?

“The lower income folks would have been disproportionately harmed because their baseline rates of disease and death were so much higher.”

NM: One piece of the research…was the baseline health status of people across the income distribution. In particular, we found that even if pollution had changed uniformly across households in the income distribution, that the lower-income folks would have been disproportionately harmed because their baseline rates of disease and death were so much higher.

So you add a little bit more pollution to their exposure to their daily lives, and it’s that much harder than, say, someone who is at the high-end of the income distribution and has a better baseline health status.

KH: What about the people in the middle?

NM: The people in the middle were actually not terribly affected in terms of their relative position. It’s not that there weren’t important exposures and mortality events and risks associated with exposure.

It was really that symmetric swap from the low-income to the high income when environmental pollution was taken into account.

KH: So what is the solution to narrowing this gap?

“Environmental policy helps all of us but it could help people in that lower 20 percent income bracket.”

NM: Well one solution is working on baseline health status increasing efforts to lower rates of smoking to increase improved diets to improve access to healthcare and so there’s a variety of policy and educational levers that could certainly do that.

Another important point is just to keep reducing levels of fine particles. PM2.5. We know these substances adversely affect a variety of metrics of health status, including premature death. We have relatively tough standards in the U.S. We need to maintain enforcement of those standards so that we continue to reduce exposures to dangerous pollution. So environmental policy helps all of us but it could help people in that lower 20 percent income bracket.

More an interesting way to think about what the study found is that environmental policy and in particular air pollution policy could act as a means to reduce income inequality which has been rising in the U.S.

Nicholas Muller is a professor of Economics, Engineering, and Public Policy at Carnegie Mellon University. Photo: CMU

KH: Was this a surprise to you?

NM: There were three surprises for us in this paper. One was the magnitude of the change in inequality the worsening of inequality when you took into account exposure to fine particles.

The second surprise was the trajectory in inequality while getting worse for market income in the adjusted measure was actually getting better. It was way worse but it was getting better over time and in part that’s because levels of particulate pollution in the U.S. have been falling over the last 10 years or so.

The third [surprise] was the role of baseline health status in driving this inequality.

KH: Why did you decide to write this opinion piece [in the Pittsburgh Post Gazette]?

NM:  Over the last I’d say five to seven years, the issue of inequality in the distribution of economic resources has risen in importance within the discipline of economics not environmental economics broadly economics. And it occurred two coauthors and I that this discussion was really focused only on market income salaries and wages capital and dividends and things like that.

That struck us as an incomplete measure of not only income of course but also of the measure of inequality. We know there are lots of other things that go into a virtual measure of income that’s more comprehensive than just income from salary and wages and a place to start where we had the modeling tools and the data set up to do this exercise was the context of air pollution.

The message is really simple here right. If we’re just measuring market income we get one story in terms of inequality. When we broaden that to recognize that other things go into people’s welfare, we get a very different story in terms of income inequality. It presents a set of alternatives for policymakers that they may not have been thinking about in terms of ways to affect the distribution of income.