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Tuesday, January 18, 2000

CONTACT: CBPP: Jim Jaffe, Michelle Bazie
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EPI: Nan Gibson, Brian Lustig
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This report was updated on April 9, 2008 to reflect new Census Data.  Click to view the new analysis with state-by-state fact sheets.

State Income Inequality Continued to Grow in Most States in the 1990s,
Despite Economic Growth and Tight Labor Markets

Income Gaps Between High and Low-Income Families
Widened in 46 States Since the Late 1970s

Table of Contents (all PDF files)

Press Release  (5pp, 72K)

Executive Summary
I.  Introduction
  (20pp, 62K)

II.  The Long-Term Trend: The Late 1970s to the Late 1990s  (16pp, 208K)

III.   The Recent Trend: The Late 1980s to the Late 1990s   (12pp, 139K)

IV. Causes and Cures: State Policy Options
V.  Conclusion
Methodological Appendix
  (30pp, 112K)

Entire Report  (78pp, 509K)

State fact sheets

To access the PDF files, right-click on the underlined text, click "Save Link As," download to your directory, and open document in Adobe Acrobat Reader.

Washington, D.C. — Despite the strong economic growth and tight labor markets of recent years, income disparities in most states are significantly greater in the late 1990s than they were during the 1980s, according to a new analysis by the Center on Budget and Policy Priorities and the Economic Policy Institute. In two-thirds of the states, the gap in incomes between the top 20 percent of families and the bottom 20 percent of families grew between the late 1980s and the late 1990s. In three-fourths of the states, income gaps between the top fifth and middle fifth of families grew over the last decade, according to the report. By contrast, inequality declined significantly in only three states.

Over the longer term, the report found that income disparities between high- and low-income families increased in all but four states. The report also found that in 45 states, the gap between the average incomes of middle-income families and of the richest 20 percent of families expanded between the late 1970s and the late 1990s.

Pulling Apart: A State-by-State Analysis of Income Trends uses the latest Census Bureau data to measure pre-tax changes in real incomes among high-, middle- and low-income families in each of the fifty states at similar points in the business cycle — from the late 1970s to the late 1980s and from then until recently.

Key findings of the report include the following:

"The report shows that with few exceptions economic growth in the fifty states has not been broadly shared," said Jared Bernstein of EPI, co-author of the report. "The strong economic growth in the U.S. results from the contributions of people in all walks of life, from laborers to corporate executives. The fact that many families are not sharing in the resulting prosperity stands as our nation's most serious economic problem."

Income Disparities Continued to Grow in the 1990s

Over the 1990s, the average real income of high-income families grew by 15 percent, while average income remained the same for the lowest-income families and grew by less than two percent for middle-income families — not enough to make up for the decline in income during the previous decade.

In two-thirds of the states, the gap in incomes between the lowest-income and the highest-income families grew over the last decade. The gap between low- and high-income families declined significantly in only three states — Alaska, Louisiana, and Tennessee.

The states with the widest income gaps and the states in which disparities between high- and low-income families and high- and middle-income families grew the most over the time periods considered in the report are shown in Table A of this release.

Causes of Rising Inequality

The report notes that several factors have contributed to the large and growing income gaps in most states. The growth of income inequality is primarily due to the growth in wage inequality. Wages at the bottom and middle of the wage scale have only recently grown after having stagnated or declined for nearly two decades. The wages of the very highest paid employees, however, have grown significantly. Factors generally identified as contributing to increasing wage inequality include globalization, the decline of manufacturing jobs and the expansion of low-wage service jobs, immigration, the lower real value of the minimum wage, and fewer and weaker unions.

In the last few years, persistent low unemployment and increases in the minimum wage have fueled wage gains at the bottom. As a result, there has been a lessening of wage inequality between the bottom and the top, although the gap between middle- and high-wage workers continues to grow. The recent wage growth for low-wage workers has, however, been far from sufficient to counteract the two-decade long pattern of stagnant or declining incomes.

States Can Choose a Different Course

Government at all levels has an important role to play in pushing back against the growth of income inequality. The role of state governments, in particular, has been increasing.

"As the administration and financing of government programs continue to be shifted from the federal to the state level, state policy-makers must be prepared to shoulder additional responsibilities for pushing back against growing income inequality," said Liz McNichol of CBPP, co-author of the report. "They have the resources to do so, thanks to the current economic expansion producing booming revenues. The question is whether they have the will to do so."

Through policies such as raising the minimum wage, strengthening unemployment insurance, implementing a wide range of supports for low-income working families, and reforming regressive state tax systems, state and federal lawmakers can help moderate the growing income divide.

About the Data in the Report

The report is based on an original analysis of before-tax income for families recorded by the Census Bureau's March Current Population Survey. The analysis compares "pooled" data from the three most recent years available — 1996, 1997 and 1998 — to similarly pooled data from the late 1970s and late 1980s. Using pooled data rather than data collected within a single year enlarges the sample size, thus increasing precision. The three periods compared reflect similar stages in the economic cycle. All figures in this report are adjusted for inflation and are expressed in 1997 dollars.

An analysis of the average income of the top five percent of families was also conducted for eleven large states: California, Florida, Illinois, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania and Texas. They are the only states with sufficient observations in the Current Population Survey to allow the calculation of reliable estimates of the average income of the top five percent of families.

The Center on Budget and Policy Priorities is a nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs. It is supported primarily by foundation grants.

The Economic Policy Institute is a nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy.

Table A
Ten States where Income Inequality Between the Top and the Bottom Was Greatest, 1996-98 Ten States where Income Inequality Between the Top and the Middle was Greatest, 1996-98
New York Arizona
Arizona New Mexico
New Mexico New York
Louisiana Oregon
California Texas
Rhode Island California
Texas South Dakota
Oregon Rhode Island
Kentucky Florida
Virginia Kansas
Ten States where Income Inequality Between the Top and the Bottom Grew Most, 1970s - 1990s Ten States where Income Inequality Between the Top and the Middle Grew Most, 1970s - 1990s
New York Arizona
Arizona Oregon
Rhode Island Rhode Island
Oregon Kansas
California New York
New Mexico West Virginia
West Virginia California
Kentucky South Dakota
Connecticut New Mexico
Kansas Kentucky
Ten States where Income Inequality Between the Top and the Bottom Grew Most, 1980s - 1990s Ten States where Income Inequality Between the Top and the Middle Grew Most, 1980s - 1990s
Rhode Island


Oregon Oregon
Arizona South Dakota
New York Rhode Island
Connecticut Kansas
Kansas New York
New Mexico Connecticut
Washington New Hampshire
California Nevada
Montana Maryland

State Group Contact List

Arise Citizens' Policy Project
Kimble Forrister
Phone: 334-832-9060

Children's Action Alliance

Elizabeth Hudgins
Phone: 602-266-0707

Arkansas Advocates for Children & Families

Richard Huddleston
Phone: 501-371-9678

California Budget Project

Jean Ross
Phone: 916-444-0500

Colorado Fiscal Project

David Hogan
Phone: 303-573-5421

Connecticut Voices for Children

Shelley Geballe
Phone: 203-498-4240

Florida Institute for Economic Justice, Inc.

Nelson Easterling
Phone: 850-907-9855

United Vision for Idaho

Judy Brown
Phone: 208-882-0492

Voices for Illinois Children

Brian Matakis
Phone: 312-516-5556

Illinois Tax Accountability Project
Ralph Matire
Phone: 312-258-5638

Kentucky Youth Advocates

Doug Hall
Phone: 502-875-4865

Maine Center for Economic Policy

Christopher St. John
Phone: 207-622-7381

Maryland Budget & Tax Policy Institute

Steve Bartolomei-Hill
Phone: 301-565-0506

TEAM Education Fund

Jim St. George
Phone: 617-426-1228 ext. 102

Michigan League for Human Services

Sharon Parks
Phone: 517-487-5436

Minnesota Budget Project

Nan Madden
Phone: 651-642-1904

Jennifer A. Hill
Phone: 314-361-3400 or

Progressive Leadership Alliance of Nevada

Bob Fulkerson
Phone: 775-348-7557

Association for Children of New Jersey

Jeannette Russo
Phone: 973-643-3876

New Jersey Policy Perspective
Jon Shure
Phone: 609-771-4280

Fiscal Policy Institute
Trudi Renwick
Phone: 518-786-3156

North Carolina Budget & Tax Center
Dan Gerlach
Phone: 919-856-2158

Mark Cassell and Amy Hanauer
Phone: 216-932-8250

Oregon Center for Public Policy
Chuck Sheketoff and Jeff Thompson
Phone: 503-873-1207

Pennsylvania Partnerships for Children

Diane McCormick
Phone: 717-236-5680

Keystone Research Center
Steve Herzenberg
Phone: 717-255-7145

The Poverty Institute
Linda Katz and Kate Brewster
Phone: 401-456-8239 or

Council of Community Services

Steve Fricker
Phone: 615-385-2221

Center for Public Policy Priorities

Dick Lavine
Phone: 512-320-0222

Economic Opportunity Institute
John Burbank
Phone: 206-694-6797

Wisconsin Budget Project

Jon Peacock
Phone: 608-284-0580, ext. 307

Center on Wisconsin Strategy (COWS)
Joel Rogers
Phone: 608-262-4266


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