Last year, income inequality in the United States reached its highest level since the Census Bureau started tracking it in 1967, according to federal data released Thursday.
In the midst of the longest economic expansion the United States has ever seen, with poverty and unemployment rates at historic lows, the separation between rich and poor from 2017 and 2018 was greater than it has ever been, federal data show.
Nine states saw spikes in that divide: Alabama, Arkansas, California, Kansas, Nebraska, New Hampshire, New Mexico, Texas and Virginia.
The gulf is starkest in wealthy coastal areas such as Washington, D.C., New York, Connecticut and California, as well as in areas with widespread poverty, such as Puerto Rico and Louisiana. Equality was highest in Utah, Alaska and Iowa.
The Gini index measures wealth distribution across a population, with zero representing total equality and 1 representing total inequality, where all wealth is concentrated in a single household. The indicator has been rising steadily during the past several decades. When the Census Bureau began studying income inequality more than 50 years ago, the Gini index was 0.397. In 2018, the Gini index rose to 0.485.
By comparison, no European country had a Gini index greater than 0.38 between 2017 and 2018.
The federal minimum wage is $7.25, and it hasn’t been raised in more than a decade, in the early days of the expansion. That’s one of the biggest reasons the gap between the rich and poor is widening, said Brielle Bryan, an assistant professor of sociology at Rice University.
“Inequality will go up as long as the people at the top of the tail are seeing their wealth increase,” Bryan said. “A booming economy means that people who have higher income and own capital are able to see continued higher returns on that.”
Recent economic gains by lower-income workers who have found jobs and benefited from minimum-wage increases in many states hasn’t made up for the long-running trend of the wealthy seeing far larger income growth than middle- or lower-income earners. The number of families earning $15,000 or less has fallen since 2007, according to the latest census data, while the number of households bringing in $250,000 a year or more has grown more than 15%.
Though the gap between the richest and poorest expanded, the nation’s median household income topped $63,000 for the first time – though after adjusting for inflation, it’s roughly the same as it was 20 years ago.
The persistent rise in inequality has become a central topic in the 2020 presidential race, with candidates such as Bernie Sanders and Elizabeth Warren calling for a wealth tax. This week, Sanders announced his plan for a wealth tax as high as 8% on the ultrawealthy, which would raise $4.35 trillion over a decade, according to analysis by economists who consulted with the Warren and Sanders campaigns.
“There should be no billionaires,” Sanders tweeted to announce his plan. “We are going to tax their extreme wealth and invest in working people.”
Perversely, systemic inequality is actually at its starkest in the top tier. The upper reaches of the economic ladder are populated primarily by white men, Bryan said, and the private sector isn’t subject to the kind of policies and public accessibility that can often shape the lower end. Women in the 95th percentile for earners make around 68 cents on the dollar compared to their male counterparts.
“We don’t have as much sympathy for CEOs,” Bryan said, “but what’s happening at the top end is really symbolic of problems happening throughout the system.”