Gap between rich, poor families in state still widest in nation

The chasm between New York’s richest and poorest families continues to be the widest in the nation,

The chasm between New York’s richest and poorest families continues to be the widest in the nation, though its growth might slow as high earners’ stocks get pummeled during the current economic downturn, according to a report released Wednesday by the Fiscal Policy Institute.

Aided by capital gains off of investments and sweeter executive salaries, the average income of families in the state’s top 20 percent earnings bracket became 8.7 times larger than the lowest 20 percent’s take. Between 2004 and 2006, the U.S. average income ratio for those two groups was 7.3-to-1. Utah had the lowest ratio at 5.4-to-1, according to FPI, a nonpartisan research and education organization in Albany.

Between the late 1980s and mid-2000s, the average income of New York’s richest families grew six times faster than its poorest families. During that period, the average annual income of the top 20 percent grew by $38,681 or 35 percent, to $148,192. Meanwhile, the bottom 20 percent rose 5.4 percent to $17,107.

The FPI figures are adjusted for inflation and are in 2005 dollars.

The biggest factor behind the income gap was wage inequality, FPI said. Low- and middle-scale workers’ wages were hurt by the diminishment of the state’s manufacturing sector, the expansion of the service sector, weaker and fewer unions plus a low real value of the minimum wage.

“You’re not going to become a millionaire by being in a union, but at least you can pay your bills,” said Prairie Wells, the outreach coordinator for the Capital District Area Labor Federation, a regional arm for the AFL-CIO.

Last year, the median weekly earnings for U.S. unionized workers was $863, compared with $663 for non-union workers, according to the AFL-CIO. Wells said the inequality picture worsens when taking into account that 28 percent of the average Capital Region household’s annual income is spent on health care.

Top earners jumped ahead with the help of stocks and bonds. By 2004, 13 percent or $83.2 billion of New Yorkers’ total income came from capital gains, compared with 4% percent or $12 billion in 1994. But capital gains accounted for only 5.1 percent of total income in 2002, when the nation was climbing out of a recession.

FPI Senior Economist Trudi Renwick said the top earners’ lead over others in the state might not grow rapidly amid Wall Street’s current tumult. But the gap will likely quickly widen again as the economy recovers.

Another factor narrowing the gap was the New York’s higher minimum wage, which rose to $7.15 per hour from $5.15 over three years. By 2009, the federal minimum wage is slated to climb to $7.25.

To further narrow New York’s income gap, FPI said lawmakers should index the state minimum wage for inflation, which has already been done in several states including Florida, Washington and Arizona.

The state should also create a broader tiered income tax system so low earners are not paying as much as high earners. The state’s number of income tax brackets has shrunk from 14 in the 1970s to five. Another key measure involves increased funding for education from pre-kindergarten through college, Renwick said.

Categories: Business

Leave a Reply