Missoulian – March 12, 2017
Montana is the state with the fastest growth of income inequality, according to a recent report based on U.S. Census Bureau data.
The report, from a website called Zippia that covers career issues, summarizes data from the American Community Survey from 2010-2016.
Montana’s income inequality increased 4.97 percent over those six years. The state ranks 30th in overall income inequality; New York tops that list.
“What we are seeing is not unique to Montana, but we have seen income inequality grow at a faster rate in Montana over the past five years,” said Heather O’Loughlin, co-director of the Montana Budget and Policy Center.
O’Loughlin said part of the reason Montana ranks at the top of the list is likely that non-wage income is making up a bigger share of the state’s economy. A vast majority of that kind of income, such as capital gains and real estate investments, goes to higher-income households, O’Loughlin said.
In 2010 there were 16,919 families in the state with incomes of $150,000 or more a year. In 2016, that number was 27,144.
The number of families at the other end of the spectrum has been more static; in 2010 there were 110,757 families that earned less than $25,000 a year compared to 102,896 in 2016.
“Income growth among middle and lower income earners as a share of total income has declined.,” O’Loughlin said. “While we’ve seen increased productivity and a modest rise in total earnings, it is concerning to see lower and middle-income earners’ piece of the pie continuing to shrink.”
O’Loughlin cited a report for the Montana Department of Revenue detailing income inequality by looking at individual income tax returns.
The report found that incomes for wealthy households in Montana grew quickly during that period because of things like rental real estate, royalties, partnerships, corporations and trust incomes.
Income inequality has a strong relation to accessing affordable housing, O’Loughlin said. As housing costs have gone up, middle- and lower-income families spend more of their paycheck, often more than they can afford, to rent or buy homes, she said.
A recent report from the Bureau of Business and Economic Research at the University of Montana found that housing prices in Montana have risen 40 percent over the past seven years, compared to income rising by about 10 percent over the same period.
“As income levels of the very wealthy have grown more rapidly, this can also play a role in the rising cost of real estate overall,” O’Loughlin said.
The data shows that income inequality has increased in all states. It also found that inequality increased the slowest in Wyoming; in Montana the rate of inequality growth was 7.5 times higher than Wyoming. Another border state, South Dakota, had the second-lowest income inequality growth, while Idaho ranked No. 5 and North Dakota came in at 16.
The analysis uses a Gini coefficient, which is a way to statistically measure income inequality. Montana’s coefficient increased 2.2 points.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.