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Rising Income Inequality Revealed, State by State

by Clyde Weiss  |  November 15, 2012

That the rich are getting richer is no surprise, but a new report out today from the Center on Budget and Policy Priorities and the Economic Policy Institute reveals the depth of the growing chasm between the wealthiest Americans and the rest of us.

It’s a wage inequality gap that “not only raises basic issues of fairness but also adversely affects our economy and political system,” says the report, titled Pulling Apart: A State-By-State Analysis of Income Trends. The report (and accompanying state-based infographics) offers a sobering picture of a nation growing in two directions:

  • Between the late 1990s and the mid-2000s, incomes fell by close to 6 percent among the poorest households, on average. During the same period, incomes rose 8.6 percent among the richest households.
  • Among the top 5 percent, incomes grew a staggering 14 percent.
  • Across all states, the average income of the richest households was eight times that of the poorest as of the late 2000s. 

The report also presents a stark state-by-state picture of income inequality. In order of disparity, the largest gaps are in New Mexico, Arizona, California, Georgia, New York, Louisiana, Texas, Massachusetts, Illinois, and Mississippi.

States face wide income gaps

The causes of income inequality are numerous, and include long periods of high unemployment, increased foreign competition, a decline in high-paying manufacturing jobs, an increase in lower-paying service jobs, technology advances and – significantly – a decline in union strength.

“Unions have historically succeeded in both raising wages and benefits and in lowering wage inequality by standardizing compensation across competing employers,” the report notes. “Non-unionized workers typically are paid lower wages, have less job security, receive fewer benefits, and are more likely to work part time than union members.” (To read The Main Street Moment: Fighting Back to Save the American Dream, the book AFSCME Pres. Lee Saunders co-authored on this subject, visit Powells.com.)

Union membership, however, has declined precipitously.

“Between 1979 and 2011, the percentage of workers belonging to unions dropped from 23.4 percent to 11.8 percent, the report states,” the report states. So-called “right to work (for less) laws” common in the South have contributed to this decline in union strength. Not surprisingly, the report notes that income inequality is greatest in the Southeast and Southwest states.

Doug Hall, co-author of the report and Director of the Economic Analysis and Research Network (EARN) at the Economic Policy Institute, said during a news briefing on the report’s release that unions can help close the wage inequality gap.

“I think it’s all about organizing and highlighting for folks that organized labor is one way you can shift the pendulum of power back to working families,” he said. “And only then will we achieve greater worker prosperity.”

Hall and report co-author Elizabeth McNichol, senior fellow at the Center on Budget and Policy Priorities, conclude that states can help mitigate the negative consequences of this growing income inequality by taking action on several fronts. For instance, they suggested these state options: 

  • Raising and indexing the state’s minimum wage. The purchasing power of the federal minimum wage is 13 percent lower than at the end of the 1970s – far short of what’s necessary for a family’s needs.
  • Ensuring that state tax systems are less regressive. Currently, states rely more heavily on sales taxes and user fees that hurt low-income households especially hard. They suggested relying more on progressive income taxes.
  • Strengthening support for low-income workers, such as services for child care, transportation and health insurance.
  • Restoring unemployment insurance benefits that have been cut during the recession, and fixing outmoded rules that bar many unemployed workers from accessing benefits.
  • Protecting workers’ rights to bargain collectively and strengthening and enforcing laws and regulations to prevent abusive employer practices that deprive workers of wages that they are legally owed.

For more on wage inequality and how collective bargaining can close the gap for union and non-union workers, click here. Also, read more about how rising inequality experienced in this country during the past 30 plus years is the direct result of congressional policy choices.

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