Thursday, January 26, 2006

State-by-State Analysis of Income Inequality

The Center on Budget and Policy Priorities and the Economic Policy Institute have released a study called "Pulling Apart: A State-by-State Analysis of Income Trends." The study examines income inequality and finds that the gap between the highest-income families and poor and middle-income families grew significantly between the early 1980s and the early 2000s. The study finds that during this time, the incomes of the bottom fifth of families grew more slowly than the incomes of the top fifth of families in 38 states. The incomes of the rich grew by an average of 62 percent, while the incomes of the poor grew by an average of 21 percent. Additionally, in 39 states the incomes of the middle fifth of families grew more slowly than the incomes of the top fifth of families.

Jared Bernstein, Senior Economist at the Economic Policy Institute, noted:

When income growth is concentrated at the top of the income scale, the people at the bottom have a much harder time lifting themselves out of poverty and giving their children a decent start in life. A fundamental principle of our economic system is that the benefits of economic growth will flow to those responsible for their creation. When how fast your income grows depends on your position in the income scale, this principle is violated. In that sense, today’s unprecedented gap between the growth of the typical family’s income and productivity is our most pressing economic problem.

A synopsis of the study can be read here.

Additionally, even though the economy expanded for the fourth consecutive year (which President Bush will no doubt mention ten or twelve times during his State of the Union next week), the state of jobs and wages is another story. Real hourly wages fell for most low- and middle-wage workers by 1 - 2 percent last year. See the Economic Policy Institute's JobWatch bulletin for more information.