States that Voted for Obama Hardest Hit by Income Inequality

By USDR

Income inequality has risen in nearly every state in the union over the past 10 years, according to a new study by MoneyRates.com, and the largest gaps between rich and poor are in states that voted Democratic in the 2012 presidential election. However, no state eclipsed the degree of inequality found in Washington, D.C., where high-income workers earn more than two and a half times what low-income workers do.

The MoneyRates.com study examined wages from the Bureau of Labor Statistics to observe how the divide between a top 25th percentile income and a bottom 25th percentile income has changed over the past 10 years. The survey measured inequality by calculating how many times a low-income worker’s salary could fit into a high-income’s worker salary.

In Washington, D.C., that figure was 2.60, meaning that a worker in the top 25th percentile for income earned at least 2.6 times what a worker in the bottom 25th percentile makes ($102,980 vs. $36,690). The next sharpest divide between rich and poor appeared in California, which had an income-inequality figure of 2.55.

On the other end of the spectrum, South Dakota’s income-inequality ratio was the lowest in the nation at 1.89 ($41,580 vs. $21,580). Maine had the next lowest income-inequality ratio at 2.01.

The only states in the nation where income equality didn’t grow over the last 10 years were Wyoming, which saw a 3.11 percent reduction in inequality, and Louisiana, which saw a 1.24 percent drop. Still, the resulting income-inequality figures for Wyoming (2.29) and Louisiana (2.38) both placed them above the national average figure of 2.23.

Maryland and South Carolina led the nation for growth in the gap between rich and poor at 12.05 percent and 11.70 percent, respectively. On a national basis, the gap between rich and poor grew 6.43 percent.

Here are the top 10 areas for large gaps between the rich and poor and their income-inequality ratios:

(Note: Some states appear to be tied due to rounding.)

1. Washington, D.C. (2.60)
2. California (2.55)
3. New York (2.50)
4. New Jersey (2.45)
5. Michigan (2.43)
6. Illinois (2.41)
7. Texas (2.40)
8. Louisiana (2.38)
9. Maryland (2.38)
10. Virginia (2.38)

Here are the top 10 states for small gaps between the rich and poor and their income-inequality ratios:

(Note: Some states appear to be tied due to rounding.)

1. South Dakota (1.89)
2. Maine (2.01)
3. Vermont (2.02)
4. Arkansas (2.04)
5. Mississippi (2.07)
6. North Dakota (2.07)
7. Iowa (2.07)
8. New Hampshire (2.07)
9. South Carolina (2.08)
10. Nebraska (2.09)

Richard Barrington, CFA, senior financial analyst for MoneyRates.com and author of the study, says that a low income-inequality ratio doesn’t always favor the average worker, however. Median wages tend to be higher in states with wider gaps in income, even when adjusted for cost of living.

“People have to ask whether they really mind someone else making a lot more money, as long as average wages are higher as well,” says Barrington.

But the study also suggests that there may be a point of diminishing returns to this effect, as states that saw the fastest-rising income gaps over the last 10 years also had below-average growth for median wages.

“Putting these two sets of numbers together suggests that some degree of income inequality is actually good for the average worker, but if the gap starts to widen too quickly, that average worker gets left behind,” says Barrington. “Therefore, perhaps the goal shouldn’t be to shrink differences in income, but to stop them from growing too quickly.”

For more details, please see MoneyRates.com’s report on income inequality.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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