Income Inequality has increased in Michigan and most States over the Past Two Decades

A new report from the Center on Budget and Policy Priorities and the Economic Policy Institute has found that in most states the gap between the richest and poorest families has grown over the past two decades. The report analyzed inflation-adjusted Census data by measuring and comparing income trends among the highest-, middle-, and lowest-income families in three periods – the late 1980s, the late 1990s, and the mid-2000s. Since the late 1990s, the incomes fell for poor families while they grew for the wealthiest families. The report is one of the few to address disparities in income by state and as such offers unique insights into inequality in Michigan.

The summary for Michigan had the following key findings:

Michigan’s Richest Families vs. Poorest Families

* The richest 20 percent of families have average incomes 7.0 times as large as the poorest 20 percent of families.

* This ratio was 6.0 in the late 1980s.

* This growth in income inequality is the 31st largest in the nation.

* The very richest families — top 5% — have average incomes 11.5 times as large as the poorest 20 percent of families.

Michigan’s Richest Families vs. Families in the Middle

* The richest 20 percent of families have average incomes 2.4 times as large as the middle 20 percent of families.

* This ratio was 2.1 in the late 1980s.

* This growth in income inequality is the 28th largest in the nation.

Gains for Rich Families Outpaced Gains for Poor Families

Between the late 1980s and the mid-2000s:

* The average income of the poorest fifth of families increased by $1,465, from $16,469 to $17,934. This is an increase of $86 per year.

* The average income of the middle fifth of families increased by $4,186, from $47,573 to $51,758. This is an increase of $246 per year.

* The average income of the richest 5% of families increased by $66,799, from $139,094 to $205,893. This is an increase of $3,929 per year.

* The average income of the richest fifth of families increased by $26,689, from $99,576 to $126,264. This is an increase of $1,570 per year.

The report cites a number of economic trends and government policy reasons for this decline. Among those mentioned are higher-than-average unemployment, globalization, the shift from manufacturing jobs to low-wage service jobs, immigration, the weakening of unions, and the declining value of the minimum wage.

By focusing on state-level inequality, the report also highlights the steps that state governments can take to mitigate the problems associated with this inequality. While changing the policies that produce the inequality is often beyond the states’ control, they can adjust tax policies to rely more on income taxes than sales taxes and fees that effect low income families the most. The report also urges states to bolster their social safety nets by improving unemployment insurance systems, extending the amount of time that workers can receive benefits, raising the minimum wage and tying future increases to inflation, and improving support services such as transportation, child care, and health coverage.

Related Posts:

1. People Living in Poverty in Michigan Increases as Income Level Falls
2. An Analysis of the Bush Tax Plan and Economic Inequality in Michigan
3. Income Jumps by 5.8% for Wealthiest 1% of the US Population
4. New Study Shows Limited Economic Mobility for Black Families
5. Study Finds that only Half of Income-Eligible Households Receive Food Stamps

Tags: economy, michigan, poverty, wealth