The Economic Policy Institute has published its third annual report on income inequality. In the past two reports, the focus was on the top 1 percent at the national level. The latest edition takes a look at how that cohort fared in the years 1917 to 2013 (the last year for which complete data are available) at the state level. It also does the same for the 99 percent. Top incomes are also evaluated by metropolitan area and county. An interactive gadget allows readers to check out income inequality in their own state. A pdf version of the 48-page report is available here.
There are no great new revelations in the report. The overall picture depicts what anybody who has even cursorily paid attention to the issue already knows. But it’s always good to learn the details.
Critics will say that there’s been some improvement since the data in the EPI report were collected. That’s true, but it’s trends that matter. The trend line for Texas in the chart above is replicated in all the states, though many are not quite so steep.
Income, of course, is not the only—nor the most important—gauge of inequality. Wealth tells more. But measuring wealth is a good deal more difficult, particularly since, as we know from the Panama Papers, stashing riches away in compliant havens to avoid the tax collector and stiff fellow citizens is far from uncommon among the world’s elite. Income is nevertheless still an important marker.
The authors of the report, Estelle Sommeiller, Mark Price, and Ellis Wazeter, summarize:
What this report finds: Income inequality has risen in every state since the 1970s and in many states is up in the post–Great Recession era. In 24 states, the top 1 percent captured at least half of all income growth between 2009 and 2013, and in 15 of those states, the top 1 percent captured all income growth. In another 10 states, top 1 percent incomes grew in the double digits, while bottom 99 percent incomes fell. For the United States overall, the top 1 percent captured 85.1 percent of total income growth between 2009 and 2013. In 2013 the top 1 percent of families nationally made 25.3 times as much as the bottom 99 percent. [...]
What we can do to fix the problem: The rise of top incomes relative to the bottom 99 percent represents a sharp reversal of the trend that prevailed in the mid-20th century. Between 1928 and 1979, the share of income held by the top 1 percent declined in every state except Alaska (where the top 1 percent held a relatively low share of income throughout the period). This earlier era was characterized by a rising minimum wage, low levels of unemployment after the 1930s, widespread collective bargaining in private industries (manufacturing, transportation [trucking, airlines, and railroads], telecommunications, and construction), and a cultural and political environment in which it was outrageous for executives to receive outsized bonuses while laying off workers. We need policies that return the economy to full employment, return bargaining power to U.S. workers, and reinstate the cultural taboo on allowing CEOs and financial-sector executives at the commanding heights of the private economy to appropriate more than their fair share of the nation’s expanding economic pie.
Those prescriptions certainly would make some difference. But additional policies are needed, including encouraging worker ownership of enterprises, electing workers to serve on corporate boards of directors similar to codetermination arrangements in Germany, and other alternative approaches to business governance. In addition, serious attention must be given universal income proposals, debt forgiveness, and more education assistance.
Here are some selected findings from the report:
- In 2013 the top 1 percent of families nationally made 25.3 times as much as the bottom 99 percent. But income inequality was much higher than that in some states. In the three most unequal states—New York, Connecticut, and Wyoming—the top 1 percent had average incomes more than 40 times those of the bottom 99 percent.
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There are big differences in the incomes of the top 1 percent by state, metro area, and county. Nationally, a family needs an income of $389,436 to be in top 1 percent. Twelve states, 109 metro areas, and 339 counties have thresholds above that level. The states with the highest thresholds are Connecticut ($659,979), the District of Columbia ($554,719), New Jersey ($547,737), Massachusetts ($539,055), and New York ($517,557).
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The Great Recession reduced incomes at all levels. But from mid-2009, when the recovery began, through 2013, the top 1 percent captured 85.1 percent of total income growth in the United States. The average income of the top 1 percent during this period grew 17.4 percent. The average for the bottom 99 percent grew 0.7 percent.
- In 10 states, the top 1 percent saw double-digit rises in their incomes, while the bottom 99 percent saw their incomes fall. Those states were Wyoming, Nevada, Washington, New York Connecticut, New Jersey, Florida, Missouri, Georgia, and South Carolina.
- Lopsided income growth started long before the Great Recession began in 2007. From 1979 to 2007, the top 1 percent took 53.9 percent of the total increase in income. The average income of the bottom 99 percent of U.S. families during this period grew by 18.9 percent while the average income of the top 1 percent grew by 200.5 percent.
- This skewed growth reversed a half-century trend. The average income of the top 1 percent in every state but one fell between 1928 and 1979. But from 1979 to 2007 the 1 percent’s share of income rose in every state as well as the District of Columbia.
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Between 1979 and 2013, the nation’s top 1 percent doubled their share of income, from 10 percent to 20.1 percent. The share in the peak year of 1928 was less than 4 points higher, at 24 percent.