“Pulling Apart: A State-by-State Analysis of Income Trends,” released jointly by the Center on Budget Policy and Priorities and the Economic Policy Institute (EPI) April 23, documents the growing gap between those in the top fifth of the income pyramid and those at the bottom.
“Despite the tremendous overall economic growth of the 1980s and 1990s and the low unemployment rates of the late 1990s, the gaps between high-income and low- and middle-income families are historically wide,” the report’s authors say, pointing to the fact that in all but five states, income inequality has increased over the past 20 years.
Among the report’s most shocking findings: In five states high-income families got richer while the poor got poorer. For example, in North Carolina, the incomes of the poorest families grew by only $730, while the incomes of the richest families grew by $42,400, as measured in 1999 dollars.
The increase in income inequality was even sharper in New York, where the average real income of the bottom fifth declined by $800 while the average income of the top fifth increased by $56,800 (1999 dollars). The report also compared the average income levels of the top fifth and bottom fifth in each state to arrive at a top-to-bottom income ratio. It found that in 11 states, the average income at the top was at least 10 times greater than the average income at the bottom.
New York, where the richest families had average incomes nearly 13 times those of the bottom fifth, once again earned the dishonor of being number one. But even in states where inequality was not so pronounced, the top fifth of families had incomes that were nearly eight times that of families in the bottom fifth.
The study also found that over the past two decades, the gap between high-income families and families in the middle fifth of income distribution also grew.
Because census data do not capture income from capital gains, executive bonuses and other non-wage sources, the report, using generous language, said, “It is likely that the growth in incomes of top earners, and hence the growth in income inequality, may be even greater than reflected in the study, especially considering the sharp run-up in stock market wealth in the late 1990s.”
Jared Bernstein, an EPI economist and co-author of the report, said that even though “fairly broad-based wage growth” in the last few years of the 1990s brought gains to low-wage workers, high-income families gained the most in the 1990s and inequality grew over the decade.
“Even the recent wage gains had only begun to offset two decades of eroding real wages and are now placed in great jeopardy” by higher unemployment, he added.
The income gap between the top and the middle also grew. While average income of families in the middle fifth of families remained about the same or rose slightly over the 20-year period covered by the report, it did not keep pace with the increases in the average income of families in the top 20 percent.
Between the late 1970s and the late 1990s, the gap between the average income of middle-income families and the average income of high-income families grew significantly in 44 states.
The increase in income inequality has resulted from a number of factors, including both economic trends and government policy. The report in question says that, since federal and state polices – especially tax-policy – have contributed to the increasing income gap, government policy could help reduce the gap.
Its authors call for increasing the minimum wage, strengthening unemployment insurance, implementing income supports for low-income working families, removing barriers to unionization and reforming regressive state tax systems, saying these would help reverse the trend that has seen the income gap grow over the last two decades.
The author can be reached at fgab708@aol.com
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