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Gini Coefficient What This Means Is Deadly in an Ever Widening Gap Between Wealth and Poverty

October 20, 2015

Wage Theft  – Disparities in their Quality of Life –  Lack of Resources – Inequality  –  Injustice  –  Lack of Opportunity

Wages for the wealthiest 1% of Americans more than doubled between 1979 and 2011. Wages for the median U.S. worker, by contrast, increased just 6% over that period. The gap between the rich and poor jumped dramatically in the 1980s, and the problem of income inequality has continued to grow since then, making upward mobility increasingly difficult for low-income Americans.

 

In some parts of the United States, income inequality is especially high. Based on the Gini coefficient, a widely used measure of income inequality, 24/7 Wall St. reviewed the 10 states with the widest gaps between the rich and the poor.

The coefficient is scaled from 0 to 1, where a 0 represents equal incomes among all people, and a 1 represents complete inequality — all the income in the hands of a single person.

Nationwide, 3.1% of income earned annually goes to the poorest 20% of people, while 51.4% is earned by the richest 20%. Incomes are even more concentrated in the states with the highest income inequality. In New York and Connecticut — the first and second worst states for income distribution — more than one-quarter of all income was held by the richest 5% of state households.

Disparate incomes may only be part of the picture. Wealth — the value of property and financial assets — is considerably more concentrated than income. According to the Center for Budget and Priorities (CBPP), a government policy research institute, over half of all wealth in the United States belongs to the top 3% of earners.

Incomes across the nation have increased since the recession, but income inequality has also increased. Incomes among the richest 20% of households grew faster from 2006 through last year than they did among the poorest 20% of households in all 50 states without exception.

Similarly, according to the Federal Reserve Board’s Survey of Consumer Finances (SFC), The net worth of American families earning the least declined between 2010 and 2013. Families in the wealthiest half of the spectrum, on the other hand, had modest gains.

The reason for this, the SFC explained, is the disparate investment profiles among wealthier and poorer Americans — and in the different growth rate of these investments. For many Americans, housing is the largest — and at times the only — investment, but housing prices grew at a rather slow pace from 2010 to 2013, especially when compared to the stock market. Wealthier Americans, on the other hand, also tend to invest in corporate equity, and the value of such holdings grew at a much faster clip than housing during that time.

Income gaps are widening much faster in some of the worst states for income inequality than across the nation. In Connecticut, for example, the average household income in the lowest quintile shrank, versus the growth of 6.6% among poorer households nationwide. The wealthiest quintile, on the other hand, got richer faster than their nationwide peers. In other states, however, despite leading the nation in poor income distribution, inequality did not necessarily increase faster than it did nationwide.

Beyond poor income distribution, these states also tended to have relatively low educational attainment rates and poor job markets. The percentage of adults with at least a high school diploma exceeded the national attainment rate of 86.9% in only three of the 10 states, for example.

Since wages are the primary source of income for most Americans, the unemployment rate in a given area is also an important factor. The unemployment rates in eight of the 10 states was higher than the national rate.

To identify the states with the worst income inequality, 24/7 Wall St. reviewed the Gini coefficient in each state from the U.S. Census Bureau’s 2014 American Community Survey (ACS). The Gini coefficient reflects the degree to which an area’s incomes deviate from a perfectly equal income distribution. The coefficient is scaled from 0 to 1, where a 0 represents equal incomes among all people, and a 1 represents complete inequality — all the income in the hands of a single person. We also utilized ACS data on poverty rates, income distribution among households, the percentage of households receiving SNAP benefits/food stamps, and the percentage of each state’s employed population working in a each industry. Figures for average annual unemployment and the percentage of hourly workers earning the minimum wage or less are from the Bureau of Labor Statistics (BLS) for 2014.

1. NEW YORK

> Gini coefficient: 0.511

> Median household income: $58,878 (16th highest)

> Households earning $200,000+: 7.6% (7th highest)

> Poverty rate: 15.9% (19th highest)

Income is distributed less evenly in New York than in any other state. The percentages of households earning less than $10,000 and more than $200,000 annually, at 8.1% and 7.6% respectively, are each well above the national shares, one of only two states where this was the case. New York was also one of only two states where more than one-quarter of all income belongs to the wealthiest 5% of residents. Nearly 54% of all income is earned by the wealthiest 20% of income earners, while the poorest 20% earn just 2.6% — the highest and lowest percentages of income earned by the two income groups, respectively.

Massive wealth gaps in New York City, which is home to 43% of New York residents, likely accounts for the state’s nation-leading Gini coefficient. The city is both the largest and most unequal in the United States.

2. CONNECTICUT

> Gini coefficient: 0.500

> Median household income: $70,048 (4th highest)

> Households earning $200,000+: 10.0% (2nd highest)

> Poverty rate: 10.8% (3rd lowest)

Connecticut trailed only New York in income inequality. The wealthiest 5% of Connecticut residents earned more than one-quarter of all income earned in the state, the largest share of income earned by the top 5% after only New York. The share of total income held by Connecticut households in each of the bottom four quintiles are all nearly the lowest compared to other states.

Even with the disparities in income, Connecticut residents are relatively well off. A typical household in the state earns more than $70,048 annually, nearly the highest median household income nationwide. Only 10.8% of people live in poverty, and 6.0% of households have incomes less than $10,000, each among the lower rates compared to other states.

ALSO READ: 10 Cities Where You Don’t Want to Get Sick

3. LOUISIANA

> Gini coefficient: 0.490

> Median household income: $44,555 (7th lowest)

> Households earning $200,000+: 3.6% (25th lowest)

> Poverty rate: 19.8% (3rd highest)

Nearly one in five Louisiana residents live in poverty, the third highest proportion. The high rate is at least partially attributable to Louisiana’s poor income distribution, which is third worst nationwide. While 3.9% of U.S. workers earn the minimum wage or less, 6.3% in Louisiana workers earn so little, also the third highest proportion. The prevalence of minimum wage jobs is likely because of the prevalence of low-paying retail trade jobs — the sector employs 12.3% of workers statewide, the 10th highest share compared to other states.

4. CALIFORNIA

> Gini coefficient: 0.489

> Median household income: $61,933 (9th highest)

> Households earning $200,000+: 8.1% (5th highest)

> Poverty rate: 16.4% (17th highest)

California, home of Hollywood mansions and the impoverished Central Valley, is sharply divided along income lines. The state’s median home value of $412,700 is the second highest in the country, and roughly one in 10 California homes are worth more than $1 million, the highest such proportion nationwide. The Fresno, Modesto, and Bakersfield-Delano metro areas make up the Central Valley — one of the nation’s largest sources of food and among the poorest areas in the country.

While the state’s poverty rate of 16.4% is only slightly higher than the national poverty rate of 15.5%, the level of poverty in California may be higher when living costs and other factors are taken into account. Using the supplemental poverty measure, which factors in government benefits and certain living expenses, California’s poverty rate is closer to 25%, or one of the highest in the country. Many Californians on the low end of the income spectrum are likely among those who did not complete high school. Just over 82% of adults have a high school diploma, the lowest percentage in the country.

ALSO READ: America’s Most and Least Educated States: A Survey of All 50

5. MASSACHUSETTS

> Gini coefficient: 0.486

> Median household income: $69,160 (6th highest)

> Households earning $200,000+: 9.3% (3rd highest)

> Poverty rate: 11.6% (10th lowest)

Massachusetts is one of the most unequal states in terms of income, but overall, the state is also one of the wealthiest. A typical Massachusetts household earns $69,160 annually, and 9.3% of households earn more than $200,000, each among the highest such figures in the country. There is strong positive relationship between education and income, and high wages in Massachusetts are likely due to the state’s well-educated population. More than 41% of adults have at least a bachelor’s degree, the highest percentage nationwide.

Since the recession, the average income among the poorest 20% of households increased by 8.5%, faster than the comparable national growth. However, among the state’s wealthiest 5% of households, incomes increased by more than 30%, the seventh largest growth in the country.

6. FLORIDA

> Gini coefficient: 0.483

> Median household income: $47,463 (12th lowest)

> Households earning $200,000+: 4.0% (22nd highest)

> Poverty rate: 16.5% (16th highest)

Like the nation as a whole, Florida is divided in two. In addition to wealthy retirement homes and luxury hotels on pristine Miami beaches, Florida is home to some of the poorest areas in the nation.

Florida’s wealthiest 5% of households earn 24% of all income earned in the state, the highest income share held by a state’s top 5% after only New York and Connecticut. Since 2006, incomes among the richest 5% of households in Florida increased by 11.8% to $323,954, one of the slowest growths among top earners. Meanwhile, however, average income among the poorest 20% of households in the state decreased by 1.7% over that period to $11,022.

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7. RHODE ISLAND

> Gini coefficient: 0.483

> Median household income: $54,891 (19th highest)

> Households earning $200,000+: 5.9% (11th highest)

> Poverty rate: 14.3% (24th lowest)

Incomes among poorer Americans have increased slower than incomes of wealthier Americans from 2006 through last year. In Rhode Island, the average income of the poorest 20% of households actually decreased over that period, while incomes among the richest 20% of state household increased faster than the nation — one of only a handful of states where this was the case. Perhaps as a result, households earning more than $200,000 make up 5.9% of Rhode Island’s homes, while those earning less than $10,000 make up 8.4%, each the 11th highest such share in the country. Rhode Island is one of only two states where both of these measures exceeded the corresponding national shares.

8. TEXAS

> Gini coefficient: 0.483

> Median household income: $53,035 (23rd highest)

> Households earning $200,000+: 5.5% (16th highest)

> Poverty rate: 17.2% (12th highest)

While a number of the states with the widest income gaps are, as a whole, quite wealthy, the median annual household income in Texas is $53,354, in line with the national figure of $53,657. The state also has one of the higher poverty rates in the nation, at 17.2%. Nearly 6.0% of hourly workers in Texas are paid at or below the minimum wage, the seventh highest such share in the nation. Whether a higher minimum wage would lead to economic prosperity is debated among researchers, but the state is unlikely to raise the minimum wage in any case. This past summer, the Texas House of Representatives rejected by a large margin a proposal to let state residents vote on whether the minimum wage should be increased to $10.10.

Unlike most states with poor income distribution, the unemployment rate of 5.1% in Texas is relatively low, in contrast with the national jobless rate of 6.2%.

 

Wages for the wealthiest 1% of Americans more than doubled between 1979 and 2011. Wages for the median U.S. worker, by contrast, increased just 6% over that period. The gap between the rich and poor jumped dramatically in the 1980s, and the problem of income inequality has continued to grow since then, making upward mobility increasingly difficult for low-income Americans.

 

Wages for the wealthiest 1% of Americans more than doubled between 1979 and 2011. Wages for the median U.S. worker, by contrast, increased just 6% over that period. The gap between the rich and poor jumped dramatically in the 1980s, and the problem of income inequality has continued to grow since then, making upward mobility increasingly difficult for low-income Americans.

 

In some parts of the United States, income inequality is especially high. Based on the Gini coefficient, a widely used measure of income inequality, 24/7 Wall St. reviewed the 10 states with the widest gaps between the rich and the poor.

The coefficient is scaled from 0 to 1, where a 0 represents equal incomes among all people, and a 1 represents complete inequality — all the income in the hands of a single person.

Nationwide, 3.1% of income earned annually goes to the poorest 20% of people, while 51.4% is earned by the richest 20%. Incomes are even more concentrated in the states with the highest income inequality. In New York and Connecticut — the first and second worst states for income distribution — more than one-quarter of all income was held by the richest 5% of state households.

Disparate incomes may only be part of the picture. Wealth — the value of property and financial assets — is considerably more concentrated than income. According to the Center for Budget and Priorities (CBPP), a government policy research institute, over half of all wealth in the United States belongs to the top 3% of earners.

Incomes across the nation have increased since the recession, but income inequality has also increased. Incomes among the richest 20% of households grew faster from 2006 through last year than they did among the poorest 20% of households in all 50 states without exception.

Similarly, according to the Federal Reserve Board’s Survey of Consumer Finances (SFC), The net worth of American families earning the least declined between 2010 and 2013. Families in the wealthiest half of the spectrum, on the other hand, had modest gains.

The reason for this, the SFC explained, is the disparate investment profiles among wealthier and poorer Americans — and in the different growth rate of these investments. For many Americans, housing is the largest — and at times the only — investment, but housing prices grew at a rather slow pace from 2010 to 2013, especially when compared to the stock market. Wealthier Americans, on the other hand, also tend to invest in corporate equity, and the value of such holdings grew at a much faster clip than housing during that time.

Income gaps are widening much faster in some of the worst states for income inequality than across the nation. In Connecticut, for example, the average household income in the lowest quintile shrank, versus the growth of 6.6% among poorer households nationwide. The wealthiest quintile, on the other hand, got richer faster than their nationwide peers. In other states, however, despite leading the nation in poor income distribution, inequality did not necessarily increase faster than it did nationwide.

Beyond poor income distribution, these states also tended to have relatively low educational attainment rates and poor job markets. The percentage of adults with at least a high school diploma exceeded the national attainment rate of 86.9% in only three of the 10 states, for example.

Since wages are the primary source of income for most Americans, the unemployment rate in a given area is also an important factor. The unemployment rates in eight of the 10 states was higher than the national rate.

To identify the states with the worst income inequality, 24/7 Wall St. reviewed the Gini coefficient in each state from the U.S. Census Bureau’s 2014 American Community Survey (ACS). The Gini coefficient reflects the degree to which an area’s incomes deviate from a perfectly equal income distribution. The coefficient is scaled from 0 to 1, where a 0 represents equal incomes among all people, and a 1 represents complete inequality — all the income in the hands of a single person. We also utilized ACS data on poverty rates, income distribution among households, the percentage of households receiving SNAP benefits/food stamps, and the percentage of each state’s employed population working in a each industry. Figures for average annual unemployment and the percentage of hourly workers earning the minimum wage or less are from the Bureau of Labor Statistics (BLS) for 2014.

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