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The States With the Biggest Income Inequality

State of Inequality

In case you haven’t noticed, income inequality has become a hot topic as of late.

The Occupy Wall Street protests have brought national attention to the issue, and the movement has repeatedly hammered on the point that the top 1% of income earners own a disproportionate share of the country’s wealth. And Tuesday, the Congressional Budget Office showed that the gulf is widening: Since 1979, the top 1% has seen its income nearly triple while the rest of the country has lagged far behind.

A few parts of the country are driving that trend. On Wednesday, the U.S. Census Bureau released a comprehensive look at income inequality. The state-by-state rankings were compiled using a combination of statistical measures. The first is the Gini coefficient, which measures inequality on a scale of 0 to 1 (with 0 indicating that all households have the exact same income and 1 indicating that one household earns all the income). Also included is P90/10 Index, the ratio of income at the 90th percentile to income at the 10th percentile; and the P95/20 index, the ratio of income at the 95th percentile to income at the 20th percentile.

The following eight states all performed worse than the national averages across all three indices.

Photo Credit: Tony the Misfit

8th Most Unequal State: California

Gini Index: 0.469

P90/10 Index: 11.4

P95/20 Index: 8.715

If you want to know why California is so unequal, look no further than its largest city. According to the census, the Los Angeles area has the third-highest income inequality of the largest American metro areas, boasting a Gini coefficient of 0.484. For reference, that’s above the national coefficient of 0.467, and much higher than European countries, many of which are below 0.3.

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7th Most Unequal State: Alabama

Gini Index: 0.471

P90/10 Index: 11.871

P95/20 Index: 9.006

Consider this: An Alabama resident whose income places him or her in the 90th percentile makes nearly 12 times as much money as someone in the 10th percentile. And things are just as bad in Birmingham: The Alabama metropolitan area has the eighth-worst income inequality in the nation.

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6th Most Unequal State: Texas

Gini Index: 0.474

P90/10 Index: 11.491

P95/20 Index: 8.904

They say everything’s bigger in Texas, and apparently that includes the gulf between the rich and the poor. The Houston metropolitan area ranks fourth in inequality, and the city of Dallas has a sky-high Gini coefficient of 0.532.

Photo Credit: Paul Garland

5th Most Unequal State: Mississippi

Gini Index: 0.474

P90/10 Index: 12.423

P95/20 Index: 9.290

Mississippi’s inclusion on this list isn’t all that surprising. According to a 2008 study conducted by the Center on Budget and Policy Priorities (CBPP), a nonprofit think tank, the income of the richest fifth of Mississippi families has risen by $39,000 since the late 1980s, while the income of the poorest fifth grew by just $3,000. And according to the census, a Mississippi resident at the 95th percentile of income makes more than nine times as much as someone at the 20th percentile.

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4th Most Unequal State: Louisiana

Gini Index: 0.477

P90/10 Index: 12.653

P95/20 Index: 9.517

The census report covers the years 2005-2009, which coincides perfectly with the devastation and aftermath of Hurricane Katrina. And it’s hard not to imagine that the storm played a role in the present state of inequality. As MainStreet reported last summer, rich neighborhoods rebounded much more quickly than poor areas like the Ninth Ward, which was hit hard by the storm. And indeed, the census data suggest that the state of affairs in New Orleans has driven the state’s inequality: The New Orleans metro area ranks among the most unequal in the country.

Photo Credit: The Pug Father

3rd Most Unequal State: Connecticut

Gini Index: 0.481

P90/10 Index: 11.571

P95/20 Index: 8.925

Anyone who has driven through Connecticut won’t be shocked to find it on this list: Depending on which town you’re in, Connecticut is either a wealthy suburb or an impoverished city. And the statistics bear out the anecdotal evidence. A joint study by the CBPP and the Economic Policy Institute found that since the 1980s, income inequality in Connecticut grew faster than in any other state.

Photo Credit: Chris Amelung

2nd Most Unequal State: New York

Gini Index: 0.499

P90/10 Index: 13.507

P95/20 Index: 10.132

We suppose it’s appropriate that the state where the Occupy Wall Street protests began has some of the highest inequality in the nation. A New York resident at the 95th percentile of incomes pulls in 10 times the income of someone at the 20th percentile. And you’d better believe New York City itself contributes to the trend. The sprawling metropolis includes both the wealthy Upper East Side in Manhattan and impoverished neighborhoods in the Bronx, and the New York metropolitan area as a whole ranks as the most unequal metropolitan area in the country.

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The Most Unequal State in the U.S.: The District of Columbia

Gini Index: 0.540

P90/10 Index: 21.987

P95/20 Index: 13.722

It shouldn’t come as a shock that the capital city – which also ranks as the fourth poorest state in the U.S. – would have off-the-charts income inequality. And we’re not kidding when we say off-the-charts. In a district where rich politicians and lobbyists live blocks from poor neighborhoods, a resident at the 90th percentile of income makes 22 times as much as someone at the 10th percentile. If the politicians in Washington want to understand why people are complaining about income inequality, they don’t need to look far.

Photo Credit: VinothChandler

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