Special Report

The States with the Widest Gap Between Rich and Poor

While some income inequality is generally considered necessary in a free market economy, extreme inequality is not. In the United States, there are far more poor people than wealthy ones — and the gap between the rich and poor is growing. Income inequality is a problem among more developed countries, but the U.S. is among the worst.

The U.S. has the fourth worst income inequality compared to other developed countries, according to the Organisation for Economic Co-operation.  Though some are better than others, all 50 states have higher inequality than most of the developed world. 24/7 Wall St. examined the 10 states with widest gap between the rich and poor.

Scored between one and zero, the Gini coefficient is a measure used by economists to rank income inequality. Zero reflects perfect income equality, where everyone makes the same. A score of one reflects an economy where one person has all of the money and everyone else has none. Higher numbers represent significant concentrations of wealth, extreme poverty, and a limited middle class.

The Census began tracking inequality in the U.S. in 1967. The Gini coefficient was 0.397 then. The most recent number puts it at 0.469. Though states range from 0.419 in Utah to 0.499 in New York, America’s income divide has widened.

While the states we examined have high inequality, they’re not necessarily wealthy states. Alabama, Mississippi and Tennessee, have among the lowest median incomes in the country and also have the worst income inequality scores. States with the highest incomes, including Connecticut, Massachusetts and California, are also on the list.  All ten states have — relative to the size of their middle class — a large percentage of their population living at one end of the income spectrum, and in some cases large percentages at both ends.

In four of the states on this list, more than 7% of households earn at least $200,000 each year, much larger than the national proportion of roughly 4%. On the other side of the spectrum, five of these states have among the top 10 largest percentages of households earning less than $10,000 each year. Only two of these states, New York and California, have very large proportions of both extremely wealthy households and extremely poor households.

Having a large population appears to be a factor contributing to inequality as well. Of the states on this list, eight are among the 25 most populous states in the country. The four most populous states — New York, California, Texas and Florida — have among the worst income inequality. It appears that a large, populous state is more likely to have extremely poor rural areas and large cities with wealthy suburbs.

While having high or low median income does not appear to correlate to high income inequality, education does. Looking at the percentage of the population 25 years and older with a high school diploma, eight of the 10 are in the bottom third. This includes California, Texas and Mississippi, which have the three least educated populations in the United States.

In addition to state Gini coefficient scores, which were provided by the Census Bureau, 24/7 Wall St. reviewed the distribution of household income in these states, as well as the median income. We also considered the percentage of residents 25 years and older with at least a high school diploma and the percentage with at least a college degree; the percentage of households below the poverty line; and the percentage of households receiving food stamps.

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

10. Mississippi
> Gini Coefficient: 0.468
> Median Income: $36,851 (the lowest)
> Households Earning $200,000+: 2.1% (2nd lowest)
> Population Living Below Poverty Line: 20.8% (highest)

Mississippi has the 10th-worst income inequality in the U.S. This is an improvement from sixth-worst in 2009. The state has traditionally been one of the poorest in the country. In 2010, Mississippi had the lowest median income at $36,851. It also had the highest poverty rate, with more than 20.8% of households living below the poverty line. Just 81.6% of residents 25 and older have a high school diploma, one of the lowest percentages in the country. While the state has the second-lowest percentage of households in the highest income bracket, which helps lowering its income inequality, it has a nation high 7.7% of households earning less than $10,000 each year.

9. Georgia
> Gini Coefficient: 0.468
> Median Income: $46,430 (21st lowest)
> Households Earning $200,000+: 4.2% (19th highest)
> Population Living Below Poverty Line: 16% (tied for 10th highest)

Though income remained stratified, prosperity in Georgia increased as a whole between 2009 and 2010. During that time, median income rose by $3,090, and the percentage of households earning more than $200,000 rose from 3.43% to 4.2%. In many other regards, Georgia’s economic improvements have been marginal. The percentage of the population below the poverty line fell only slightly, from 16.5% to 16%. Further, the unemployment rate remained high through 2010, at 10.2%, while 20.6% of households earned less than $25,000, the 11th-highest percentage among all 50 states.

8. Texas
> Gini Coefficient: 0.469
> Median Income: $48,615 (24th highest)
> Households Earning $200,000+: 4.8% (16th highest)
> Population Living Below Poverty Line: 15.7% (12th highest)

Texas has the eighth-worst income inequality in the U.S. — an improvement from third worst in 2009. Median income in the state increased from $47,475 in 2009 — when it was the 22nd lowest — while the poverty rate fell from 17.2%, which was the eighth highest in the country at the time. Just 81% of Texans 25 and older have a high school diploma, the second-lowest percentage in the country. Texas is among the five most populous states in the country, a factor that correlates highly with income inequality. According to a recent article in the Texas Tribune, part of the state’s high income inequality can be attributed in part to its Mexican border communities.

7. California
> Gini Coefficient: 0.471
> Median Income: $57,708 (9th highest)
> Households Earning $200,000+: 7.2% (7th highest)
> Population Living Below Poverty Line: 13.8% (23rd highest)

In 2010, California had the seventh-highest proportion, among all states, of households earning at least $200,000 annually. Simultaneously, 397,626 households earned less than $10,000 annually, more than any other state. Though only the 21st highest proportion among states, the sheer number of impoverished families represents a major problem for California. Similarly, while the proportion of households living below the poverty line of 13.8% is not remarkably high compared to other states, California households have the highest average household size of any states on this list. Fixing California’s problematic income gap likely will require an improvement in the state’s unemployment rate, which stood at 12.4% in 2010, the second-worst rate in the nation.

6. Alabama
> Gini Coefficient: 0.472
> Median Income: $40,474 (5th lowest)
> Households Earning $200,000+: 2.9% (tied for 11th lowest)
> Population Living Below Poverty Line: 18.1% (tied for 2nd highest)

Alabama has the sixth-worst income inequality in the nation. Median income in 2010 has increased from $39,980 in 2009, when it was the third lowest in the country. However, the poverty rate also has increased from 2009’s level of 17.5% to become the second highest in the country, at 18.1%. Some 14.3% of the state’s residents rely on food stamps, the eleventh-highest percentage in the country.

5. Florida
> Gini Coefficient: 0.474
> Median Income: $44,409 (15th lowest)
> Households Earning $200,000+: 4.1% (20th highest)
> Population Living Below Poverty Line: 14.9% (16th highest)

With an unemployment rate of 11.3% in 2010, Florida has had trouble creating the jobs necessary to eliminate its sizable income gap. Though 8.1% of Florida households earn at least $150,000 a year, 12.4% of the state population remain on food stamps. Many Floridians live in extreme poverty, as Florida has the third-largest number of households — in excess of a quarter million — earning less than $10,000 a year. Yet the opposite strata of the income distribution is also well occupied. Florida has the fifth-most households earning more than $200,000 annually.

4. Massachusetts
> Gini Coefficient: 0.475
> Median Income: $62,072 (6th highest)
> Households Earning $200,000+: 9.0% (4th highest)
> Population Living Below Poverty Line: 12% (13th lowest)

Massachusetts has the fourth-worst income inequality in the U.S. — worse than its 10th place in 2009. Median income has increased considerably from $59,373 in 2009, while the proportion of households earning more than $200,000 remained in fourth place. More households have slipped below the poverty line as the poverty rate has increased from 10.3% in 2009. Massachusetts’ top ranking in the country with the highest percentage of individuals over 25 holding a bachelor degree may exacerbate the income disparity.

3. Louisiana
> Gini Coefficient: 0.475
> Median Income: $42,505 (10th lowest)
> Households Earning $200,000+: 3.5% (tied for 23rd lowest)
> Population Living Below Poverty Line: 17.7% (5th highest)

Though Louisiana’s 2010 unemployment rate of 7.5% was lower than the national average and the lowest on this list, Louisianans face other constraints limiting upward mobility for the majority of households. A sizable portion of the population has not completed their high school education — only 82.5% of residents older than 25 had a high school diploma, while only 21.8% had a college degree. Additionally, though much of the population may be employed, 15.3% of residents received food stamps, and the state’s median income is lower than all but nine states.

2. Connecticut
> Gini Coefficient: 0.486
> Median Income: $64,032 (4th highest)
> Households Earning $200,000+: 10.3% (2nd highest)
> Population Living Below Poverty Line: 10% (5th lowest)

Connecticut has the second-worst income inequality in the U.S., with a 0.006 jump in inequality since 2009. Median income has increased from $63,851 in 2009. Slightly more households have fallen below the poverty line since 2009, but Connecticut maintains its position as one of the states with the smallest number of residents living in poverty. As much as 36% of Connecticut residents over 25-years old hold a bachelor’s degree, which is the fourth-highest rate in the country and helps explain why Connecticut enjoys some of the highest rankings of high-income households in the country.

1. New York
> Gini Coefficient: 0.499
> Median Income: $54,148 (14th highest)
> Households Earning $200,000+: 7.4% (6th highest)
> Population Living Below Poverty Line: 14.1% (21st highest)

New York is the state with the highest income inequality, though its Gini coefficient has decreased from its 2009 level of 0.502 to 0.499. Median income has increased significantly from $50,216 in 2009 to $54,148 in 2010. Also, the number of households earning $200,000 or more increased from 6.15% in 2009 to 7.4% in 2010. The population living below the poverty line has decreased slightly. Despite dropping from a Gini coefficient above 0.5, New York still has a long way to go.

-Michael B. Sauter

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