As Income Inequality Rises in U.S., Society Suffers

April 27, 2011; Source: Daily Yonder | According to a new study by the Southern Rural Development Center (SRDC), income inequality is rising in the U.S. That’s not necessarily news, as numerous media reports during the current financial crisis have noted that income inequality in this country is at a historic level, unequaled since the Great Depression.

This study, however, not only sheds new light on patterns of income distribution, but also explores whether differences in county level per capita income are associated with other social issues. The authors conclude that the correlations are striking, and that rising income inequality therefore needs far more attention from policy makers.

Specifically, SRDC studied county level data on per capita income in 1980, 1990, 2000 and 2008, the most recently available census income. The data purposefully includes only market-generated income (wages, pensions, business income and interest), excluding government transfer payments. The authors argue that such data more accurately reflects the effect of markets on income inequality.

The authors compared per capita market income changes in each county over this time period, and concluded that the gap between high income and low income counties nationally has grown between 1980 and 2008 (in 2008 dollars), in both urban and rural areas. Per capita market income in the most wealthy (top 10 percent) counties in the nation increased by 63.8 percent over this time period, as compared with a 38.3 percent increase in the poorest (bottom 10 percent) of counties. Per capita market income growth in rural counties lagged behind urban counties, but the gap between wealthy and poor rural counties was less pronounced than the gap between wealthy and poor urban counties.

To examine the potential correlation between income inequality and social issues, the authors divided the counties into ten groups, based on their per capita market income. They then compared several social indicators for which county-level data is available within each decile. The findings? As income inequality increases in U.S. counties, so does the violent crime rate, the property crime rate, the teenage birth rate, the general incidence of poverty, and the incidence of child poverty in particular.

Although this data illustrates correlation, not causation, the trends are consistently associated, and that should cause concern. As the authors note, “We would suggest that policy makers consider the continuing increase in income inequality in this country – and the ill effects associated with this trend.”—Kathi Jaworski