Broad Attacks Needed on Income Gaps

February 1, 2000. An op ed by FPI’s Trudi Renwick, in Newsday.

A new study by the Center on Budget and Policy Priorities and the Economic Policy Institute reports that New York has the most unequal income distribution of the 50 states. Concerted action by both the public and private sectors is needed to reverse this imbalance.

The average income of the top 20 percent of New York families is 14 times as large as the average income of the poorest 20 percent. New York also has the third widest income gap between the rich and the middle class, behind only Arizona and New Mexico.

For the 11 largest states, the study also looks at the incomes of the richest 5 percent of families. In New York in the 1996-98 period, these families had incomes that averaged $269,051, or 25 times more than the incomes of the lowest fifth (which averaged $10,769 during this period) and 5.8 times greater than the average income ($46,756) of the middle fifth.

These findings are consistent with other evidence that New York State’s recent prosperity is not being widely shared. Since the late 1970s, no state has seen greater growth in the gap between rich and the poor than New York. In the late 1970s, New York had the most unequal income distribution of any northern industrial state (7.8 to 1), but it was very close to the national average of 7.4 to 1, and ranked “only” 12th among the 50 states. By the late 1980s, it ranked fourth and it now has a comfortable top ranking.

These widening income gaps are the result of two divergent trends. The average income of the top fifth of families is going in one direction -up -at the same time the average incomes of families in the other fifths are being pulled the opposite way, overwhelmingly by forces outside their control.

The average income of New York families in the top fifth of the income distribution grew 15 percent since the late 1980s, while the average income of New York’s bottom fifth fell 15 percent. The average incomes of families in the three middle fifths of the income distribution also fell.

Unfortunately, these widening gaps were not discussed by Gov. George Pataki in either his State-of-the-State Address or his budget message. He was also silent on the broad range of issues critical to ensuring that the economic well-being of low- and moderate-income families does not continue to deteriorate. These include ensuring that the unemployment insurance system works for low-wage workers (access to this safety net now is based on total wages earned rather than on the number of hours worked) and restoring the purchasing power of the minimum wage.

In the 1960s and 1970s, someone working full time at the minimum wage could keep a family of three out of poverty. Today, such a family would be well below the poverty line. It wasn’t until last month, however, that the governor, after more than three years, even agreed to bring New York’s $4.25 minimum wage up to the federal level. Never in history had New York gone this long with a minimum wage below the federal level.

Republican governors in neighboring states are taking a more enlightened approach. The minimum Connecticut wage is $6.15, a dollar above the federal rate. In Massachusetts, it’s $6 and will go to $6.75 a year from now.

New York needs a comprehensive strategic plan for reducing poverty, increasing job opportunities and making it easier for people to move up the socioeconomic ladder. At both the state and local level, religious, labor, civic, academic, philanthropic and business leaders can contribute to the development of such a plan by convening summit meetings and other forums at which people from different walks of life can explore the causes and the consequences of New York’s widening income gaps in a thorough and deliberative manner.