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November 15th, 2012 By German Lopez | News | Posted In: News, Economy, Equality

Ohio Income Inequality Growing

State follows nationwide trend between wealthiest and poorest

cbpp

Occupy Wall Street may have been onto something. A new report from left-leaning Center on Budget and Policy Priorities (CBPP) found Ohio’s income gap — the income difference between the rich and poor — is wide and growing. 

Since the 1970s, the poorest 20 percent saw no change in real income, the middle 20 percent gained 21.1 percent, the top 20 percent gained 50.6 percent and the top 5 percent gained 85.1 percent.

In terms of real dollars, low-income and middle-income Ohioans have actually seen their income drop since the 1990s. The drop caused a “lost decade” for Ohio’s lower and middle classes, according to the report. The bottom 20 percent saw a 6.9 percent drop in real income from the late 1990s to the mid-2000s, while the middle 20 percent saw a 2.9 percent drop. Real incomes for the top 20 percent and top 5 percent remained the same.

The shifts have caused a startling difference in real income, which the report calculated by looking at real dollars after federal taxes and including the value of the Earned Income Tax Credit, housing subsidies and food stamps.

The poorest 20 percent make on average about $20,500, and the middle 20 percent make on average about $58,100. Meanwhile, the top 5 percent make about $221,800 — 10.8 times as much as the bottom 20 percent and 3.8 times as much as the middle 20 percent.

Real dollars are a measurement used to gauge the value of money and income after inflation. If a family sees its income in real dollars drop, it means income increases, if they exist, are not keeping up with inflation.

The widening income gap is part of a nationwide trend. In comparison to other states, Ohio mostly did better than the national average. Ohio was not included in any of the six top 10 ranks for inequality, which ranked states for rises in inequality during different time periods. During the late 2000s, New Mexico, Arizona, California, Georgia and New York had the greatest gaps between the wealthiest and poorest. In the same time period, New Mexico, California, Georgia, Mississippi and Arizona had the biggest gaps between the wealthiest and middle.

Part of the cause for the widening gap is the recent recession, but the CBPP report found that the wealthiest have seen their incomes rise again in the recession’s aftermath, while middle and lower incomes have not. The report also blamed government policies — deregulation, trade liberalization, the weakening safety net, the lack of effective laws regarding collective bargaining and the declining real value of the minimum wage — and the expansion of investment incomes, which the CBPP says “primarily accrue to those at the top of the income structure.”

The report finished with some suggestions for states: raise minimum wage and index it for inflation, improve unemployment insurance systems, make state tax systems more progressive and strengthen safety nets.

Policy Matters Ohio, which pointed to the findings in a statement, says the report warrants action. “Poor and middle-income families are seeing their income fall in real dollars and relative to higher earners,” said Amy Hanauer, executive director of Policy Matters Ohio, in the statement. “When households already subsisting on less than $23,000 a year see their incomes drop, that means hunger, instability, poor school performance and worse. Ohio needs to do more to improve the lives of families in this state.”

 
 
 
 
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