Indiana’s income gap widens faster than in most other states

By Tim Grimes
TheStatehouseFile.com

INDIANAPOLIS – The income gap between Indiana’s wealthiest families and its poorest widened quickly and significantly in recent years, according to a new report.

Map created and provided by the Center on Budget and Policy Priorities

Indiana’s richest 5 percent of households had average incomes in the late 2000s that were nearly 12 times as large as the bottom 20 percent of households, according to the study from the left-leaning Center on Budget and Policy Priorities.

The state’s top-earning households also had incomes that were roughly 4 times as large as the middle 20 percent of households.

“The story in Indiana isn’t really any different than a lot of those Midwestern states, those Rust Belt states,” said Derek Thomas, senior policy analyst at the Indiana Institute for Working Families. “That’s all post-industrial decline.”

With that, Thomas said, came loss of jobs and loss of wages.

“The question is how we responded and where we’re at now,” he said. “When we look at the state of Indiana and we measure the bulk of Indiana’s families, we see, over the last decade, Indiana saw the second largest decrease in the nation in median household income.”

From the late 1990s through the mid 2000s – two similar peaks in the nation’s economic cycle – the growth in Indiana’s income gap was the sixth highest in the nation, behind only Mississippi, South Dakota, Connecticut, Illinois and Alabama, the report said.

But it didn’t happen because Indiana’s richest households became richer. It happened because its poorest families became poorer.

“The poor are getting poorer over the last economic cycle,” said Elizabeth McNichols, senior fellow at the Center on Budget and Policy Priorities and co-author of the report. “This is even before the recession hit. This affects children in poverty. If they’re not getting any of the growing prosperity in the country, then it’s hard for them to pull themselves up and get into the middle class.”

The Center on Budget and Policy Priorities suggested raising the minimum wage and strengthening support for lower income families with programs including expanded childcare, healthcare and transportation. The group also proposed strengthening the unemployment insurance system and making the tax system less regressive to fix the problem of income inequality.

McNichols said that income inequality creates problems for societies and that, in the long run, less income inequality will benefit all classes.

“One of the consequences of this income divide is that often there are pockets within cities where poverty is concentrated and schools are often not so good there,” McNichols said. “Property values are low and property taxes are a major funding source for schools. So that means poor children aren’t getting the skills they need for the jobs of the future. And that’s bad for them, but it’s also bad for the country as a whole.”

The average income for the state’s bottom one-fifth of households dropped 23.5 percent from the late 1990s through the mid 2000s, while average incomes for the middle one-fifth fell about 3 percent and the richest one-fifth percent stayed about the same, the report said.

The Center on Budget and Policy Priorities used data from the U.S. Census Bureau to track income changes in each of the 50 states and the District of Columbia at four points: the late 1970s, the late 1990s, and the mid-2000s — all of which represent similar peaks in the business cycle — and the late 2000s.

The time periods are not specific because the center included several years to generate large enough sample sizes for state-level analysis. The center combined data from 1977-1979, 1998-2000, 2005-2007, and 2008-2010. The Census data have been adjusted to account for inflation, the impact of federal taxes, and the cash value of food stamps, housing vouchers, and other government transfers, such as Social Security and welfare benefits.

Tim Grimes is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.

 

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One Response to Indiana’s income gap widens faster than in most other states

  1. Recent Report by the Indiana Institute for Working Families:

    The Cliff Effect: One Step Forward, Two Steps Back.

    The report examines how policy design in Indiana is acting as a disincentive for upward mobility, effectively driving more folks into poverty and weakening our middle class.

    Report can be found here: http://www.incap.org/cliffeffectreport.html#.UKUBBoe7Puw

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