Pulling Apart: A State-by-State Analysis of Income Trends

November 14, 2012

Gap Between Rich and Poor Grew More in Rhode Island than in Many Other States since 1970s

Providence, RI —Income gaps widened in Rhode Island between the late 1970s and the mid-2000s, as they did for the country as a whole, according to a new study by the Center on Budget and Policy Priorities and the Economic Policy Institute.

The richest fifth of Rhode Island households saw their income almost double between the late 1970s to the mid-2000s, while the poorest fifth saw their income climb by just 12 percent.  The middle fifth saw their income rise by 42 percent during this time period, significantly lower than the increase experienced by the wealthiest.
In the late 1970s, the richest fifth’s income was 4.5 times higher than the poorest fifth, but by the mid-2000s, the wealthy made 8.1 times more than the poor.  Income gaps widened more in Rhode Island than in all but eight states over this time period.
Nationally, between the late 1970s and mid-2000s the richest fifth experienced a 71 percent increase in income while the poorest fifth of Americans saw their income increase by only 7 percent.
“This is a disturbing trend that should concern all Rhode Islanders.  The benefits of hard work should be enjoyed by everyone, not just households at the top,” said Kate Brewster, Executive Director of the Economic Progress Institute.   “As Rhode Island policymakers prepare for the coming legislative session, their agenda should include policies that narrow the income gaps between rich and poor in our state.”
The report, Pulling Apart: A State-by-State Analysis of Income Trends, also finds that low- and moderate-income families in the Ocean State, and across the nation, did not share in the most recent economic expansion that occurred between the late 1990s and mid-2000s.  The incomes of the richest fifth of households in Rhode Island grew by 11 percent while those of the poorest fifth stagnated.  The middle fifth experienced a 6 percent increase.
The study also includes a snapshot of income inequality in the late 2000s which shows that in Rhode Island, the average income of the richest fifth ($167,950) is 7.5 times the average income of the poorest fifth ($22,482) and 2.5 times higher than the middle fifth ($67,194).
Income inequality is rising in states 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.
Many of the reasons for growing income inequality are outside of the control of states. However, Rhode Island policymakers can take a number of steps to help address the disparity between the rich and poor.
Recommendations include:
  • Increase state investments for skills training, literacy, English language proficiency, and GED attainment so that Rhode Islanders are able to obtain a better paying job;
  • Improve the progressivity of state taxes:  Add another bracket to the top of the income tax structure so that higher income households pay their fair share;
  • Continue to raise the minimum wage and increase the refundable portion of the state’s EITC to boost the income of low-wage worker; and
  •  Strengthen supports for low-income workers by expanding access to child care assistance, fixing the state’s welfare program, and ensuring access to affordable health insurance.
READ THE FULL JOINT REPORT by The Center on Budget and Policy Priorities and The Economic Policy Institute.