Income Inequality

Issue Basics

New data show that while, overall, our economy continues to recover from the 2008 recession, the gap between rich and poor is substantial and growing larger. In Pennsylvania, the top 1% earned 21.7 times more than the bottom 99%, making our state the 14th most unequal in the nation. The average income of the top 1% is $1,100,962 compared to everyone else, who have an average income of $50,830.

Since 1979, Pennsylvania’s productivity has grown by 78%—but hourly median compensation has grown only 10%. Pennsylvania workers have not shared in the fruits of their labor.

Following national trends, income inequality, measured by the share of all income received by the top 1%, reached its peak in Pennsylvania in 1928. The 1940s through the early ’70s are often called the Golden Age because prosperity was broadly shared despite persistent race-based and gender-based inequality. During these years, the share of income held by the top 1% fell sharply. In the last 40 years, however, inequality has approached the levels of the late 1920s. The top 1% received only 3.4% of overall income growth from 1945 to 1973, but since 1973, they’ve received 46%.

The most unequal county in Pennsylvania is Montgomery; in 2015, the county’s top 1% earned, on average, 31.2 times the average income of the bottom 99% of families. The next nine most unequal counties were Cumberland (99% to 1% average income ratio of 26.7), Delaware (25.3), Allegheny (24.5), Chester (23.9), Philadelphia (20.5), Washington (19.9), Bucks (19.6), Potter (19.2), and Blair (19.2). The county with the smallest gap between the average income of the top 1% and the bottom 99% was Perry where the top 1% earned 8.2 times the average income of the bottom 99% of families.

The roots of growing inequality include the falling purchasing power of the minimum wage, a decline in union membership, and federal and state tax policy designed to benefit the top 1%. (When top tax rates fall, high-paid executives, hedge fund managers, and other high earners have a stronger incentive to game the system to rake in even higher incomes.) To reverse growing inequality, we should support unionization in the private and public sectors, raise the minimum wage, and fix our rigged tax system.