The US Income Gap Continues to Widen

Written By
Julija A.
May 26,2021
The rich get richer and the poor get poorer — the gap between high-income and low-income families is wider now than it’s been in half a century. American median income hit an all-time high in 2018, but data from the US Census Bureau shows that income inequality continues to grow. It was “significantly higher” in 2018 than in 2017 according to the bureau’s American Survey Report, published September 26, 2019. 

The report surveyed all 50 American states, finding that the gap grew wider in nine states: Alabama, Arkansas, California, Kansas, Nebraska, New Hampshire, New Mexico, Texas, and Virginia.

To measure income inequality, the Census Bureau uses the Gini Index, which represents how far apart incomes are from each other. The index assigns a hypothetical 0.0 score to populations where incomes are distributed perfectly and a 1.0 score to populations where only one household earns all the available income. 

In the US, the Gini Index rose from 0.482 in 2017 to 0.485 in 2018, despite remaining steady for the five previous years. In 2006, this figure was 0.464. This year’s drop is a statistically significant change according to the Census Bureau. 

Economics expert William M. Rodgers III, a professor of public policy at the Heldrich Center at Rutgers University, said that one of the most troubling things about the report is that it "clearly illustrates the inability of the current economic expansion, the longest on record, to lessen inequality."

America is currently in its longest period of steady GDP growth in its entire history — there hasn’t been a recession in over a decade, though some economists warn that the country is on a downward trend and might enter one soon. The economy is relatively strong at the moment and the unemployment rate is at its lowest in 50 years, but the income gap keeps widening. 

California, Connecticut, Florida, Louisiana, and New York, as well as the District of Columbia and Puerto Rico, have the highest inequality rates. In California, the gap was wider in 2018 than in 2017. 

Nation-wide, median household income in 2018 was $61,937 - the highest it’s ever been. However, Puerto Rico and 29 American states have a lower median income than the national standard. 

The study also reported some positive changes: The nation’s poverty rate fell in Puerto Rico and 14 states. In California, Florida, Georgia, and North Carolina, poverty has declined for five consecutive years. 

It’s likely that one of the reasons poverty rates fell is because of the growing number of states that have adopted higher minimum wages. The federal minimum wage hasn’t risen since 2009. 

In New York City, Chicago, and Los Angeles, three of the biggest metropolitan areas in the US, poverty rates have declined for four consecutive years.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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