The United States of Inequality

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Brooklyn residents receive free food as part of a Bowery Mission outreach program on December 5, 2013.Credit John Moore/Getty Images

It will come as little surprise that income inequality in the United States is greatest in New York and Connecticut. Those states are home base for Wall Street, where the income gains of the few have been amplified by outsized growth in the financial sector and protected by taxpayer-provided bailouts.

But forces of rising inequality are operating throughout the United States, as a new study by researchers at the Economic Policy Institute makes clear.

The study, which measures income inequality by state, metro area and county, shows that inequality has risen in every state since the 1970s. It also shows that rising inequality is entrenched.  Recessions in recent decades have temporarily slowed income growth among the top 1 percent, but they have not altered the basic pattern in which the rich have gotten much richer while nearly everyone else has seen income stagnate or decline.

Between 2009 and 2013, for example — a period that encompasses most of the post-Great Recession era – the top 1 percent captured all of the income growth in 15 states (Connecticut, Florida, Georgia, Louisiana, Maryland, Mississippi, Missouri, Nevada, New Jersey, New York, North Carolina, South Carolina, Virginia, Washington and Wyoming). In another 9 states (Arizona, California, Illinois, Kansas, Massachusetts, Michigan, Oregon, Pennsylvania and Texas), the top 1 percent captured half to nearly all of the income growth.

In all, the top 1 percent in the United States captured 85.1 percent of total income growth from 2009 to 2013. In 2013, the 1.6 million families in the top 1 percent made 25.3 times as much on average as the 161 million families in the bottom 99 percent.

Those and other figures are reminiscent of conditions in the Roaring Twenties. In 1928, the peak year of that decade’s boom, the top 1 percent took home 24 percent of the nation’s income. In 2013, the top 1 percent nationally took home 20.1 percent of all income, while in five states (New York, Connecticut, Wyoming, Nevada and Florida) the income share for the top 1 percent exceeded the peak from 1928.

To explain how the economy became so lopsided, the E.P.I. study compares the decades of rising inequality since 1979 with the era from 1928 to 1979, when inequality narrowed and the American middle class emerged, grew and prospered.

The mid-20th century was characterized by public policies and societal norms that fostered broad prosperity, including a rising minimum wage, firm rules for time-and-a-half for overtime, strong private-sector unions and cultural and political taboos against high pay and bonuses for executives in the face of layoffs of workers.

In contrast, the decades since 1979 have been characterized by erosion of the minimum wage and overtime-pay standards, a decline in unionization and cultural and political acceptance of excessive executive pay.

Rising inequality in the current economic recovery also has roots in politics and policy. Since the end of the Great Recession in 2009, the Fed has been consistent — and correct — in trying to stimulate the economy by keeping interest rates low. But Congress backed off fiscal stimulus efforts starting as early as 2010, largely for partisan reasons that have nothing to do with the public interest. Loose Fed policy in the absence of loose fiscal policy tends to concentrate the benefit of stimulus among the already wealthy, resulting in wider inequality. A solution would be for Congress to stimulate the economy with more spending on infrastructure like roads, bridges and airports, which would create jobs and lift pay , helping to narrow income inequality. Unfortunately, the Republican-dominated Congress has not been willing to do what’s necessary to get the economy back on track.