Note: This story was reported by contributor Brian Wallstin
Few trends are as worrisome to economists than the growing disparity between the rich and everyone else. The incomes of the wealthiest Americans have been rising dramatically since the 1970s, while wage gains among the poor and middle-class have stagnated.
Before the recession, however, low- and middle-income households in New Hampshire managed to gain on their wealthier neighbors compared to other states, according to a new study by the Center on Budget and Policy Priorities and the Economic Policy Institute.
The report, one of the few that measures wealth disparity at the state level, shows that New Hampshire was the only state in which income inequality between the middle class and the rich actually declined between 1998 and 2007.
Nationally, the CBPP found that incomes of the middle 20 percent grew by only 1.2 percent during that time, compared to 8.6 percent among the top 20 percent. But in New Hampshire, incomes for the middle 20 percent of households grew 9.9 percent, compared to a 3.9 percent increase among the Granite State’s wealthiest 20 percent.
New Hampshire’s poor also did relatively better than the lowest-income households in other states.
While the income of the bottom 20 percent of U.S. households fell by an average of almost 6 percent between 1998 and 2007, the bottom 20 percent of New Hampshire households saw a 27 percent increase, or almost $6,600 — the largest income gain among the poor in the country.
But while the CBPP study puts New Hampshire among the 10 states with the smallest income gap, the disparity between the rich and the poor in the Granite State remains considerable. And the gap will likely be greater when the impact of the recession is taken into account, says Jeff McLynch, executive director at New Hampshire Fiscal Policy Institute.
“While the recent news is that the problem hasn’t grown worse in the near term, it has grown worse over the longer term,” McLynch says. “And the evidence we have to date is that the progress we have made in the last decade may be eroding already.”
Indeed, since the 1970s, household income for the wealthiest 20 percent in New Hampshire has grown 85 percent, compared to 46.1 percent for the middle-class and 27.4 percent for the poor. And the richest five percent of New Hampshire households have an average income almost 10 times that of the poorest 20 percent — $281,800 to $29,300 — and 3.6 times more than the middle 20 percent, whose average income is $78,800.
McLynch says evidence shows that wages for the poorest workers in New Hampshire have fallen since 2007, and they have fallen more sharply than those of people at the top of the income scale.
As the CBPP report notes, research has long established a link between income inequality and a host of problems, including inadequate schools, substandard housing, more crime and poor health.
Among the solutions recommended by the study: an increase in the minimum wage; more generous unemployment insurance benefits; and economic policies that increase the after-tax income of poor and middle-class families.
McLynch says the New Hampshire legislature could take several steps to ease the burden on low- and middle-income residents, beginning with an expansion of Medicaid under the Patient Protection and Affordable Care Act, known by many as “Obamacare.” That would reduce the health care costs for thousands of residents and provide more long-term economic security.
And while lawmakers aligned the state’s minimum wage with federal law in 2011, it’s still the lowest of any New England state.
The legislature could also decide to expand the state’s Low and Moderate Income Homeowner Property Tax Relief Program. In the early years of the program, about 24,000 people received an average of about $325 a year in property-tax relief, McLynch says. Now, about half as many people qualify for the program, and they receive an average of less than $200.
Any or all of these steps would not only improve the lives of many struggling Granite Staters, McLynch says, but would help the entire state.
“There are really serious consequences of income inequality,” McLynch says. “It’s not just that there are low-income people who struggle to make ends meet, but in general the community as a whole faces very serious problems arising from that.”