A new state by state study by the Center for Budget Policy Priorities, a Washington D.C. based policy think tank, says what we all have known for some time… the rich are richer, the poor are getting poorer. Can’t even get a trickle to come down.
The gaps between the incomes of the richest households and low- and middle-income households are wide and growing in most states. Across all states, the average income of the richest fifth of households was eight times that of the poorest fifth as of the late 2000s.
Here’s the numbers for Nevada:
“Prolonged growth in income inequality undermines the basic American belief that hard work should pay off,” said Elizabeth McNichol, co-author of the report and senior fellow at the Center. “Anyone who contributes to the nation’s economic growth should reap the benefits of that growth. But for decades now, those benefits have been skewed in favor of the wealthiest members of society.”
Folks, this has been a lost decade for low and middle income earners. Incomes fell by close to 6 percent among the bottom fifth of households, on average, while rising by 8.6 percent among the top fifth, during this period. Incomes grew even faster — 14 percent — among the top 5 percent of households. For the middle fifth of households, incomes grew by just 1.2 percent.
However, this is a trend that has been occurring for decades! Since the 1970s, rich households’ incomes have grown much faster in every state than have the incomes of poor and middle-income households. In contrast, from World War II through the mid 1970s, the gains of economic growth were more evenly shared across the income scale. I’ve written before about this… between 1983 and 2007, total inflation-adjusted wealth in the U.S. increased by $27 trillion. Almost half of the $27 trillion (49 percent) was claimed by the richest one percent. The top 10 percent grabbed almost $29 trillion… more than the total of increase. In other words, the bottom 90 percent suffered an average decline of just over $16,000 per household.
Growth in wage inequality has been the biggest factor contributing to the large and growing income gaps in most states. Wages of the highest-paid employees have grown significantly. At the same time, wage growth at the bottom and middle of the wage scale has been stagnant or modest for a number of reasons, including long periods of high unemployment, more intense competition from foreign firms, a shift from manufacturing to service jobs, and a minimum wage that has not kept up with price increases. Government actions — and, in some cases, inaction — have contributed to the increase in wage and income inequality in most states.
The richest households also reaped the benefits of rising investment income in the form of dividends, rent, interest, and capital gains, which primarily accrue to those at the top.
The good news? States Can Mitigate the Harmful Growth in Inequality.
The consequences of growing income inequality reach beyond individual families. For instance, in order to compete in the future economy, states and the nation as a whole need a highly-skilled workforce. But research shows that children from poor families don’t perform as well in school and are likely to be less-prepared for the jobs of the future. Moreover, as income gaps widen, wealthy households become increasingly isolated from poor and middle-income communities. This hurts the nation’s sense of community and shared interests, for example, undermining support for public schools and other building blocks of economic growth.
While inequality results to a significant degree from economic forces that are largely outside state policymakers’ control, state policies can mitigate the effects of these outside forces. Some specific options for Nevada:
- Raise, and index, the minimum wage. The purchasing power of the federal minimum wage is 13 percent lower than at the end of the 1970s, well short of the amount necessary to meet a family’s needs.
- Make state tax systems less regressive. Nearly all state tax systems are regressive — that is, they widen income inequalities — because states rely more on sales taxes and user fees, which hit low-income households especially hard, than on progressive income taxes. This is especially true for Nevada.
- Strengthen supports for low-income workers. Maintain or improve services such as child care, transportation, and health insurance that push back against growing inequality by helping low-wage workers move up the income ladder and shielding vulnerable citizens from poverty’s long-term effects.
- Strengthen, not weaken, the unemployment insurance system. To strengthen the unemployment insurance system, states that have cut benefits should restore them and policymakers should build on recent efforts to fix outmoded rules that bar many unemployed workers from accessing benefits.
Finally, we need to strengthen the education system. As my good friend Jennifer Reed wrote about today, we have substantial problems with our education facilities, inadequate number of teachers, and despite the fact that “Nevada is already facing the highest drop-out rate in the nation and CCSD has the second largest English Language Learner (ELL) population in the U.S. (next to California’s Los Angeles County). Yet, Nevada is one of only eight states that doesn’t offer additional funds for ELL students.”
People with a college education make more money on average than those without. They are more stable members of society, commit less crime, and are more likely to own a home. We should make be making the pathway to a college education more accessible.
Instead, Nevada has led the charge to make large cuts to education, raise tuition and limit access to our institutions of higher learning. We have a regressive tax system that takes 10% of income from the bottom 25% and only 5% from the top 25%.
It’s time citizens of this state stop looking at ideology or party affiliation and start looking at the realities around them. Let’s make some sensible choices that are better for our community as a whole. Growing income disparity is not good for our communities, nor for our economy or government budgets. This problem isn’t going away. We have to act on it.