May 2006

Number 06-15

This report was written by the Fiscal Policy Institute here in New York State as part of a national study of state-by-state income trends prepared jointly by the Center on Budget and Policy Priorities and the Economic Policy Institute. Both of these reports have striking similarities pointing to a growing gap between low income and high income families. This Briefing Bulletin offers a number of the key findings from both the national report and
New York State report.

Background —

While the economy has improved since 2000 and 2001, the good news has been tempered by the fact that the troubling trends in income distribution of the 1980s and the 1990s are continuing into the current century. In sum, from the 1980s to the early 2000s, the incomes of the nation's highest income families rose substantially, while middle and lower income families saw only modest increases.

The reasons for the growing gap are many. The economic downturn of 2000 and 2001 has lingered longer than usual which impacts poor and middle income families. Federal tax cuts are directed toward high earners which widens the income gap between high and low incomes. Wages at the bottom and the middle of the wage scale have been stagnant while wages for higher paid employees have grown. And, this trend of growing inequality has occurred in most parts of the country.

Income Inequality Increased in Most States over the Last Two Decades —

The report concludes that the income gap between the richest and poorest fifths of families is significantly wider than it was two decades ago:

• In 38 of the 50 states the incomes of high income families grew faster than the incomes of low income families between the early 1980s and the early 2000s.

• In the 11 large states, the income of the top 5 percent of families increased by 73 to 132 percent from the 1980s to the early 2000s. Conversely, the incomes of the bottom 20 percent of families increased by only 11 to 24 percent. The 11 states are: California, Florida, Illinois, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas.

• Middle income families also lost ground in comparison to the families at the top. In 39 states, the gap between the average income of middle income families and the average income of the richest fifth of families widened significantly.

 The report for New York State builds upon the national report and analyzes New York State in depth. The following are a number of key findings:

• In the early 2000s, New York had the widest income gap between rich and poor of all 50 states — high incomes were 8.1 times greater than low incomes.
• In the early 2000s, New York State had the sixth widest gap between the rich and the middle class — high incomes were 2.7 times greater than middle incomes.
• Income inequality in New York is growing; because over the past 20 years, the incomes of the rich have grown five times faster than the incomes of the poor.

There is Much That Government and Business Can Do to Push Back Against this Trend —

The report suggests a number of options including:

• Index the minimum wage to inflation and restore its purchasing power to 1960s levels.
• Improve unemployment insurance.
• Provide affordable health care.
• Stop increasing the pay gap between top executives and line workers and middle managers.
• Stop using independent contractors and part-time work arrangements to avoid paying fair wages and benefits.

Comments —

The national report is available at the website for the Center on Budget and Policy Priorities. http://www.cbpp.org/1-26-06sfp.htm

The state report is available at the website for the Fiscal Policy Institute http://www.fiscalpolicy.org/PullingApartNY2006.pdf

If you have any comments or questions on this Briefing Bulletin and/or the reports, please contact Dan Kinley or Neil Foley at NYSUT's Research and Educational Services.

NF/sh/57259

NYSUT's Division of Research and Educational Services serves as the research arm of NYSUT, providing information and assistance to Field Services, to other NYSUT divisions, and to local leaders. In addition, the Division provides a variety of information and workshops to local leaders and to local member organizations.

NYSUT.ORG. Copyright New York State United Teachers. 800 Troy-Schenectady Road, Latham, New York, 12110-2455. 518.213.6000.