In 1968, the households in the top earning 20% received 43% of all the earned income in the country. By 2018, the top 20% of households (those earning above $130,000) brought in 52% of all earned income. This, not incidentally, was more than the lower 80% combined.
A useful measure of how unequally incomes are distributed within a population is called the Gini Index. This is a number between 0 and 1, with 0 indicating a completely uniform distribution of income and 1 indicating that a single earning unit (individual or household) is receiving all the income in the population.
It has been well publicized that Connecticut has the highest level of income inequality in the country, with a Gini Index for the 2014-2018 period at .496, above even that of the country as a whole at .482.
In my years-long study of Connecticut towns, I have developed measures of numerous dimensions of their respective populations, some of which have stood out. Not the least of these observations has been that, while Connecticut overall has become more racially and ethnically diverse over time, the populations of several of our towns have diversified at a much slower rate than that of the state.
Some towns have even become less diverse and more predominantly white.
This turns out to be important because whiter towns in Connecticut have also demonstrated another, more insidious economic phenomenon. During the periods tested, years 2006-2010 and 2013-2017, the level of income inequality in 119 of Connecticut’s 169 towns rose. In 50 of our towns, inequality actually decreased. The towns with the highest proportions of residents identifying as white also exhibited the largest increases in income inequality. Conversely, those towns with the lowest percentage white populations produced the lowest increases in inequality.
That there is a racial component to income inequality does not surprise many persons who have experienced it. The difference in median household income between Black and white Americans was about $23,800 in 1970 and about $33,000 in 2018 (measured in 2018 dollars). Median black household income was 56% of median white household income in 1970, 63% of white household income in 2007, and 61% in 2018.
Income inequality makes a significant and persistent impact on people and their communities. Families earning less are impeded from investing in education and may be unable to move to neighborhoods that spend more on opportunity, such as parks and amenities that attract good jobs. Equally, if not more, important as access to goods and services, income inequality also entrenches social and economic immobility by delimiting the informal networks of those affected. Communities with persistent income inequality forego the improved standard of living, not to mention the tax revenue and shared quality of life, that come from access to education, residential stability, and social cohesion.
The ability to access information, goods, services, and other resources through a call or email to a family member, friend, or business contact is a tool many of us take for granted. For example, I was recently contacted by an acquaintance who is familiar with my quantitative work in Connecticut municipalities who asked if I might happen to have a certain type of information about Connecticut towns. I didn’t, so I contacted a friend who works in similar information. He didn’t either but referred me to someone who does.
In less than 24 hours, the person who initially asked me for information vital to her professional role got that information with a simple email. It occurred to me that I, and everyone within that small network are privileged to be part of it and live blissfully within its supportive sphere. Many in our community cannot access job information, social mobility opportunities, or even basic necessities for want of a network that offers those valuable elements. Persistent income inequality effectively prevents formation of those networks.
The first step toward change is becoming aware of the issues. The solution to Connecticut’s income inequality is not simply identifying the haves and the have-nots. Fixing our social and economic inequities is going to require changes in the way we treat each other, from tax policy to zoning rules. It will also require a commitment by each of us to eliminate the barriers to social and economic mobility that help maintain the income and wealth divide
Dan Smolnik is a tax attorney and a member of the Hamden Economic Development Commission. Any views expressed are exclusively his own.