Pulling Apart: A State-by-State Analysis of Income Trends

Publication Date: April 2002

Publisher: Economic Policy Institute

Author(s): Jared Bernstein

Research Area: Economics

Type: Brief

Abstract:

We have now reached and passed the peak of the economic expansion of the 1990s. Even before the recent economic downturn set in, there were troubling issues about the distribution of income growth in the last decades of the 20th century.

Based on past history, we would have expected to find a decline in income inequality during the recent expansion. What we find instead is that the incomes of the country's highest-income families climbed substantially over the past two decades, but middle- and lower-income families saw only modest increases in income. The trend has been widespread. Income disparities between the top fifth of families and families at the bottom of the income distribution grew in all but five states over the past two decades.

The gap between high-income and low-income families grew in over half the states during the 1990s and declined in only 6 states. The gap between high-income and middle-income families also grew during the 1990s and over the last 20 years. The gap between high- and middle-income families grew in two-thirds of the states between the late 1980s and the late 1990s and declined in only one state.

Since the late 1970s, this gap increased in all but 6 states. Some progress has been made, however. The poorest families and middle-class families did benefit from economic growth, especially in the last few years of the 1990s. Exceptionally low unemployment rates brought gains to low-wage workers and fairly broad-based wage growth during the end of the 1990s. Still, high-income families gained the most in the 1990s, in part due to capital gains and other income sources such as large executive bonuses that are not fully captured by this analysis. (As the text box on the next page explains, this means that this report's findings understate the growth in income inequality.) In addition, even the recent wage gains had only begun to offset two decades of eroding real wages and are now placed in great jeopardy by the current recession with the accompanying rise in unemployment.