Income Inequality at the State Level

In recent years, we've been exposed to more and more information about growing income inequality around the world and, in particular, the United States.  A recent study by the Economic Policy Institute looks at the  long-term income inequality data for the United States on a state-by-state basis, showing how income inequality has changed at the state level over the period between 1917 and 2011.

Let's open with a few statistics:

1.   Between 1979 and 2007, the top one percent in the U.S. took home 53.9 percent of the total increase in U.S. income.

2.   Between 1979 and 2007, the bottom 99 percent of Americans saw their average income grow by only 18.9 percent compared to 200.5 percent for the top one percent.

3.   In four states (Alaska, Michigan, Nevada and Wyoming) only the top one percent saw their incomes rise between 1979 and 2007 with the bottom 99 percent seeing their average incomes falling.

4.   In 15 states, the top one percent captured between half and 84 percent of all income growth between 1979 and 2007.  These states include Arizona (84.2 percent), Oregon (81.9 percent), New Mexico (72.6 percent), Hawaii (70.9 percent), Florida (68.9 percent), California (62.4 percent), Washington (59.1 percent), Texas (55.3 percent), Montana (55.2 percent), Utah (54.1 percent), South Carolina (54 percent) and West Virginia (53.3 percent).

5. The share of income held by the top one percent declined in every state except one in the 50 years following the Great Depression.

6. In contrast, the share of income held by the top one percent rose in every state in the time period between 1979 and 2007.

Now, let's get to the subject of this posting, a state-by-state examination of income growth between 1979 and 2007 for the top one percent and the bottom 99 percent.  Here is a chart showing the states in order from greatest to least average real income growth for the top one percent:

In the cases of the top four states, Connecticut, Massachusetts, New York and Wyoming, the top one percent saw their average real income growth rise by between 354.3 percent and 414.6 percent between 1979 and 2007 compared to between -0.8 percent and 51.7 percent for the bottom 99 percent.  These statistics show marked polarity between the very top of the income heap and just about every one else in these four states; on average, the top one percent fared nearly 15 times better than the bottom 99 percent when it came to real income growth.

In the cases of the bottom four states, West Virginia, Louisiana, Mississippi and Michigan, the top one percent saw their average real income growth rise by between 74.1 percent and 100 percent between 1979 and 2007 compared to between -0.2 percent and 29.5 percent for the bottom 99 percent.  Even in the states where the top one percent saw the lowest overall real income growth, they still fared nearly six times better on average than the bottom 99 percent when it came to real income growth.

Here is a graph showing how the share of all income held by the top one percent of Americans has changed over the years between 1917 and 2011:

After the Great Depression, the share of all income held by the top one percent fell from 23.4 percent in 1928 to only 9.9 percent in 1979 when it once again began to rise.  By 2007, the share of all income held by the top one percent had risen to 21.8 percent, an eight decade high and part of a trend that began in earnest around the turn of the new millennium.

Looking at more recent data, it becomes quite apparent which income group in the United States has benefitted from the recovery since the end of the Great Recession as shown on this chart which lists the states in order from greatest to least income growth for the top one percent:

On a nationwide basis, the top one percent saw their incomes grow by 11.5 percent between 2009 and 2011.  While that doesn't sound like much, it is substantially more than the income change seen by the rest of the 99 percent who actually saw their incomes shrink by 0.7 percent over the two year period.  This means that the top one percent received 140.9 percent of total income growth captured by the nation over the two year period between 2009 and 2011.

In closing, let's look at a few hard numbers.  Here are the actual average income levels for the top one percent, the bottom 99 percent and the top-to-bottom ratio for the top ten states as ranked by highest to lowest top-to-bottom ratio:

This data gives us some sense regarding the income disparity between the have-a-lots and everyone else.  To further help you put the data into context, in Connecticut, the income threshold for the top 1 percent is $624,524, in New York, it's $465,706, in Florida, it's $336,935, in Massachusetts it's $483,642 and in Nevada it's $291,973.

While many of us have a sense that at least some of the growth in income polarity in the United States over the past three decades can be attributed to Wall Streeters and their massive bonuses (which explains the presence of both New York and Connecticut at or near the top of most lists in this study), the data shows that most states have seen very significant increases in income for the one percent who live among us and that their incomes continue to grow far faster than ours even after the Great Recession, a situation that did not occur after the Great Depression.  Had the incomes of the middle fifth of American households grown at the same rate as overall average household income between 1979 and 2007, household income would have been $18,897 or 27 percent higher than its actual level in 2007.  I'm sure that most middle-income American families could have made very good use of the extra money.