State with widest gap between rich and poor? New York

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Michael B. Sauter, Alexander E.M. Hess and Samuel Weigley , 24/7 Wall St.

Since the late 1970s, income inequality in the U.S. has grown by nearly 20 percent. The Great Recession has brought the disparity between the rich and the poor to the forefront of the news. The Occupy Wall Street movement and terms such as the 99 percent and 1 percent further highlight the attention about the subject. Instead of improving after the recession, income inequality rose 1.6 percent between 2010 and 2011.

In some states, the Gini coefficient -- a ratio between zero and one that reflects perfect equality at zero and significant concentrations of wealth, extreme poverty and a limited middle class as the ratio increases -- is well below 0.0476 national average. In Wyoming, the coefficient is just 0.408. In New York state, income inequality is now at 0.503. Based on 2011 figures from the U.S. Census Bureau’s American Community Survey, 24/7 Wall St. identified the states with the widest gap between rich and poor.

In an interview with 24/7 Wall St., Director of Research and Policy at the Economic Policy Institute Josh Bivens explained that the recession, despite its disastrous effects on employment, actually has temporarily caused growth in inequality to slow, as extremely high-income individuals in finance were hit particularly hard. Still, Bivens believes that income will again begin rising much faster among the top 1 percent than the rest of the population in the next several years.

The reasons some states have more income inequality than others are varied, but the industrial makeup of these states is perhaps chief among them. States with a disproportionate representation of industries with the potential for extremely high-income positions are more likely to have higher income inequality than those with more diverse industries.

Connecticut and New York, for example, are home to the largest finance centers in the country. Investment bankers and hedge fund managers in the state can earn many times the average middle-class worker. In New York, 8 percent of households earned $200,000 or more in 2011, much higher than the national average of 5.6 percent. In Connecticut, 11.2 percent earned more than $200,000.

In other states, such as Texas and Louisiana, the oil extraction industry has created a small group of billionaires. These states also have some of the largest impoverished populations in the country. In Louisiana, more than one in five residents live below the poverty line, significantly higher than the national rate of just 15.9 percent.

Unemployment hit 7.8 percent in September, the lowest it has been since January 2009. It rose to 7.9 percent in October as more people returned to the work force. However, while more people return to work, this is not necessarily positive news for the long-term health of the American middle-class. The U.S. is not projected to return to pre-recession employment levels until 2017, Bivens explained, and as Americans return to work, they will be more willing to work for lower wages.

In this environment, “it’s really tough for workers to get good wage increases at the middle when there are unemployed workers who could replace you if you start making big wage demands,” Bivens said.

Based on data from the U.S. Census Bureau, 24/7 Wall St. identified the 10 states with the widest gap between rich and poor, as measured by states’ Gini coefficient scores. In addition to these scores, 24/7 Wall St. reviewed median income and the distribution of household income provided by the Census Bureau for these states. We also reviewed the percentage of households living below the poverty line and the percentage of households receiving food stamps. Additionally, we looked at the Institute for Policy Studies’ Inequality Report Card, which provided grades to senators and congressmen based on their voting record related to income inequality.

These are the states with the widest gap between rich and poor.

1. New York

· Gini coefficient: 0.5033

· Median household income: $55,246 (16th highest)

· Households earning $200,000+: 8.0 percent (6th highest)

· Population living below poverty line: 16.0 percent (21st highest)

New York, which had the highest income inequality in 2010, had an even higher inequality in 2011. The 16 percent of the population living below the poverty line in 2011 increased from 14.9 percent in 2010 to 16 percent in 2011. The median income declined by $466 between 2010 and 2011. Meanwhile, the percentage of households raking in at least $200,000 was 8.0 percent in 2011, virtually unchanged from 2010 and well above the national rate of 5.6 percent. According to a recent study conducted by Martin Prosperity Institute, income inequality in the New York City metro area is roughly equivalent to that of Swaziland, a poor sub-Saharan country that has the lowest life expectancy in the world.

2. Connecticut

· Gini coefficient: 0.4859

· Median household income: $65,753 (4th highest)

· Households earning $200,000+: 11.2 percent (the highest)

· Population living below poverty line: 10.9 percent (5th lowest)

At 11.2 percent, Connecticut has the highest percentage of households making $200,000 or more. On the other side of the income gap, the percentage of the population living below the poverty line rose from 10.1 percent in 2010 to 10.9 percent in 2011. Many residents also lost their jobs. The state’s unemployment rate in Sept. 2012 was 8.9 percent, up from 8.6 percent the year before. During that time, the national unemployment rate fell from 9 percent to 7.8 percent. In Connecticut’s Fairfield County, the Gini coefficient was 0.535 -- higher than any state. The county is home to several hedge funds and country clubs, but also to government housing and food pantries.

3. Louisiana

· Gini coefficient: 0.4836

· Median household income: $41,734 (7th lowest)

· Households earning $200,000+: 3.5 percent (17th lowest)

· Population living below poverty line: 20.4 percent (3rd highest)

The percentage of households below the poverty line shot up to 20.4 percent in 2011, the third-highest percentage in the country, from 18.7 percent in 2010, the sixth-highest rate that year. Households earning less than $10,000 grew to 7.7 percent in 2011, the second-highest in the country. In 2010, it was 6.2 percent -- sixth-highest at the time. This happened even as the unemployment rate in Louisiana dropped to 5.6 percent in 2011 from 6.2 percent in 2010, indicating job growth primarily at the lower-end of the wage spectrum. East Carroll Parish, located in the northeast corner of the state, had the highest income inequality of all counties in the U.S., according to a Feb. 2012 report from the U.S. Census Bureau looking at data from 2006-2010.

4. New Mexico

· Gini coefficient: 0.4821

· Median household income: $41,963 (8th lowest)

· Households earning $200,000+: 3.4 percent (tied for 15th lowest)

· Population living below poverty line: 21.5 percent (2nd highest)

Between 2010 and 2011, New Mexico’s Gini coefficient rose from 0.464 -- then 15th in the nation -- to 0.482, one of the highest in the country. During this time, many New Mexicans brought home less money, as median income fell from $43,326 in 2010 to $41,963 in 2011. Also, 7.2 percent of the state’s households earned less than $10,000 last year -- one of the highest rates in the nation. Poverty is a long-running problem in New Mexico. The percentage of households living below the poverty line rose from 18.1 percent in 2010 to 21.5 percent last year -- the second-highest poverty rate in the nation. Despite the state’s high poverty rate, one of its three congressman, Steve Pearce, received a “D-” from the Institute for Policy Studies on promoting income equality.

5. California

· Gini coefficient: 0.4812

· Median household income: $57,287 (10th highest)

· Households earning $200,000+: 7.8 percent (7th highest)

· Population living below poverty line: 16.6 percent (18th highest)

Nearly 8 percent of households in California earned at least $200,000 in 2011, more than all states but six. But while California has its sliver of Hollywood bigwigs and self-made billionaires striking it rich in Silicon Valley, the state also has a fair share of residents on the lower-end of the income spectrum. The state’s 16.6 percent poverty rate was higher than the national poverty rate of 15.9 percent. Despite this, California in some regards did better than its peers. For instance, the 8.3 percent of Californians on food stamps in 2011 was a lower percentage than all but four states. Furthermore, the 4.7 percent of households earning less than $10,000 in 2011, while far from being the lowest percentage among all states, was better than the 5.1 percent across the country.