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Pulling Apart: A State-by-State Analysis of Income Trends (2002)

April 20, 2002

Pulling Apart: A State-by-State Analysis of Income Trends (2002)

April 20, 2002

Despite Past Decades’ Booms, Income Gaps Widened in 45 States, Ohio Inequality Growth Among the Largest

Despite tremendous economic growth in the 1980s and 90s and low unemployment in the late 1990s, gaps between high-income and low- and middle-income families are historically wide, according to a new study by the Center on Budget and Policy Priorities (CBPP) and the Economic Policy Institute (EPI).

In all but five states, income inequality has greatly increased over the past 20 years. Prior to the late 1970s, economic growth in the United States was evenly shared.

Elizabeth McNichol, director of CBPP’s State Fiscal Project and co-author of the report, commented on the findings, “People from all walks of life, from laborers to corporate executives, contributed to the strong economic growth in the 1980s and 1990s. Everyone should share in the resulting prosperity.”

Ohio had the fifth highest increase nationally in income-inequality between the top and bottom 20 percent of families over this 20-year period, with a decline in real income of $830 for the bottom fifth of families while the average income of the top fifth increased by $43,020. By the late 1990s, the income of the poorest fifth of Ohio families was $14,680, while that of the richest fifth was $142,810 — 9.7 times higher.

“The fact that the strongest economy in 30 years failed to decrease income inequality reveals both the depth and tenacity of this social and economic problem.” said Jared Bernstein, EPI economist and report co-author.

Ohio was one of only five states where the poorest fifth of families experienced a decline in income between the late 1970s and the late 1990s. “Low-income families have fallen behind in Ohio,” said Amy Hanauer, Executive Director of Policy Matters Ohio, which released the report locally. “In most states, poor families’ incomes just grew more slowly than wealthier families, but in Ohio they actually declined.”

While the national trend toward greater income inequality has received widespread coverage, there has been less attention on how this trend varies by state. The report, Pulling Apart: A State-by State Analysis of Income Trends, breaks down data from the Census Bureau’s March Current Population Survey, to arrive at state-specific figures on before-tax income for families of two or more related individuals. The study compares combined data from 1998, 1999 and 2000 to data from the late 1970s and late 1980s — time periods chosen because they stand as high points in their respective business cycles.

Pulling Apart also found the gap between high-income families and families in the middle fifth of income
distribution grew in two-thirds of all states, including Ohio. Earlier research by Policy Matters Ohio found that the middle fifth of Ohio's two-parent families increased its work hours by 28 percent over a similar period, from 3065 to 3920 hours per year.

In the late 1970s, there was not a single state where the average income of families in the top fifth of the distribution was as much as 2.7 times as great as the average income of families in the middle fifth. By the late 1990s, there were 30 states, including Ohio, where the gap was this wide. The top fifth in Ohio earns about 2.7 times as much as the middle fifth, up from 2.2 times as much in the late 1970s.

"Despite dramatically increased work hours, low and middle income families in Ohio are not keeping pace," Hanauer said.

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.

The Center on Budget and Policy Priorities is a non-partisan policy research institute that conducts research and analysis on a range of government policies and programs, with an emphasis on those affecting low and moderate income people.

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