Pulling Apart: Income Inequality Has Grown in PA

Income inequality has grown in all parts of the country since the late 1970s, and Pennsylvania has not been immune to the trend, as a new national study out today shows.

A joint effort of the Center on Budget and Policy Priorities and the Economic Policy Institute, the study finds that income gaps widened in Pennsylvania between the late 1990s and the mid-2000s, with earnings for low-income families dropping as the income of the wealthiest continued to rise.

Pulling Apart: PA Fact SheetThis “lost decade” is part of a longer-term movement toward greater income inequality in the commonwealth. Since the late 1970s, income gaps have widened between high-income households and the broad middle class. (Click here or on the image to the right for a Pennsylvania fact sheet on inequality.)

The report, Pulling Apart: A State-by-State Analysis of Income Trends, was released in Pennsylvania in coordination with the Keystone Research Center and Pennsylvania Budget and Policy Center. Here are a few of the Pennsylvania highlights:

  • Between the late 1990s and mid-2000s, the annual incomes of the richest fifth of Pennsylvania households grew by 7.2 percent ($11,190), while those of the poorest fifth fell by 7.9 percent ($1,907).
  • The income gap between the very richest households and low-income households increased even more dramatically. The incomes of the richest 5 percent of Pennsylvanians grew by 11.2 percent ($27,387) from the late 1990s to the mid-2000s.
  • Income inequality also grew between middle- and high-income households in Pennsylvania from the late 1990s to the mid-2000s. Middle-income Pennsylvania households saw their incomes rise by only 1.9 percent ($1,169) — compared to 7.2 percent for the richest fifth and 11.2 percent for the richest 5 percent of households.
  • Incomes grew much faster among the wealthy than low-income households. In the late 1990s, the income of the richest fifth of Pennsylvania households was 6.4 times that of the lowest-income fifth, and by the mid-2000s it was 7.4 times larger. The top 5 percent of households had 10.1 times the income of the bottom fifth in the late 1990s, and by the mid-2000s it was 12.2 times larger.

Click to enlargeNationwide, incomes fell by close to 6 percent among the bottom fifth of households, on average, while rising by 8.6 percent among the top fifth between the late 1990s and mid-2000s. Incomes grew even faster — 14 percent — among the top 5 percent of households.

The findings of the report echo many of those in the Keystone Research Center’s State of Working Pennsylvania released shortly before Labor Day. That report found most middle-class Pennsylvania families had seen their wages and income stagnate since 2000 even though productivity in the economy had grown.

Researchers with the Center on Budget and Policy Priorities and the Economic Policy Institute reported that income inequality is rising across the nation for a range of reasons, including long periods of high unemployment, more intense competition from foreign firms, a shift from manufacturing to service jobs, and a minimum wage that has not kept up with price increases.

What can we do about it? At the state level, policymakers can take a number of steps to help address the disparity between the rich and the broad middle class. They include:

  • Raising the minimum wage and indexing it to keep pace with rising costs.
  • Reforming the state’s tax system so that everyone is paying their fair share, and low-income people aren’t paying a higher portion of their incomes in taxes than the wealthy.
  • Making education and work training more accessible by restoring cuts to public schools and universities and investing adequately in workforce training.
  • Protecting supports for low-income workers, such as nutrition assistance, help with housing and skills training. Pennsylvania should also expand Medicaid under the Affordable Care Act to insure more low-income working adults.
  • Enacting an “Investment in the Future” plan that bolsters our infrastructure, manufacturing sector, skills, and scientific research in a way that lays the foundation for long-term growth.

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