Reactions to the Great Recession like the Occupy Wall Street movement brought to national attention just how massive the wealth gap in the United States had become. Even as the economy recovered, the gap between the top 1% of earners and the rest of the population has continued to increase.
This is according to an extensive report on inequality from economists Estelle Sommeiller and Mark Price, published in July by the Economic Policy Institute. The authors built on top of research from economists Thomas Piketty and Emmanuel Saez and used IRS data, finding that in 2015, five states, 30 metro areas, and 78 counties had exceeded the previous national record for share of income by the 1%, at 23.9% — a record set in 1929, on the eve of the Great Depression.
The divide between the rich and poor in the US has continued on an upward trend since the 1970s, and we live in a time where economic growth is disproportionately benefitting the wealthiest Americans.
“In looking at our inequality data I think what most people expect is what you see in the data, places like New York, Connecticut and California have high levels of inequality,” Price told Business Insider. “What I think is often more surprising is that inequality hasn’t just risen in those places but really in every state since 1973.”
It’s a scenario that, regardless of political allegiance, results in a weaker economy where fewer people can participate. The only ones benefitting are the ultra-wealthy, and it’s why Sommeiller and Price named their report “The new gilded age,” a reference to the period following the Civil War when a new upper class thrived while the country underwent social upheaval.
The authors found the following:
- The average household income of the 1% in 2015 was $421,926. The 1% in 13 states and Washington, DC, exceeded this average.
- From the end of the recession in June 2009 through 2015, the incomes of the 1% grew at a faster rate than those of the 99% in 43 states and Washington, DC.
- The 1% captured more than half of all income growth in the following nine states in 2015: Connecticut (100%; income declined for rest of population), North Carolina (100%), Nevada (81%), Florida (77.5%), Maryland (58.4%), Massachusetts (58.4%), California (53.1%), Missouri (53.1%), and New York (51.4%).
- That same year, these states have an inequality ratio between the 1% and 99% higher than the national average of 26.3%, in decreasing order: New York, Florida, Connecticut, Nevada, Wyoming, Massachusetts, California, and Illinois.
- The most unequal metro area is Jackson, Wyoming, home of the Jackson Hole resort town. Other metro areas with top inequality are in similar places like Aspen, Colorado, or Park City, Utah.
“Once you recognize that the primary driver of inequality in the US is the rise in incomes at the top, especially for executives in finance and technology, this data begins to make a bit more sense to people,” Price said, noting that all states tend to follow trends set by Wall Street and Silicon Valley.
“And, of course, the companion to these trends is the slow growth in wages for most workers in pretty much every part of the country in the last 45 years even as productivity has risen much faster,” he said, noting that union bargaining power is about as low as it was in the early 20th century. “The wedge between wage growth and productivity growth, which is driven most especially by a decline in bargaining power for workers, is what is serving up all the extra income at the top.”