News & Updates

We’ve got some good news and some bad news. The good news is that average U.S. and Minnesota incomes increased from 2014 to 2015. Further good news for Minnesotans is that income growth among each of the Gopher State’s six income groups outperformed the corresponding national growth rates, as described in the preceding North Star article. The bad news is that since the onset of the Great Recession in 2007, a greater share of total income shifted toward high-income households, resulting in greater income inequality.

As noted in the preceding article, a new batch of data from the U.S. Census Bureau’s American Community Survey (ACS) examined the distribution of income among six different income groups: the first or lowest quintile (i.e., the twenty percent of the population with the lowest incomes), the second quintile, the third or middle quintile, the fourth quintile, the next 15 percent, and the top five percent. Since 2007, the share of income accruing to the first four quintiles (i.e., the 80 percent of the population with lowest incomes) declined, while the share accruing to the next 15 percent and the top five percent (i.e., the highest income quintile) increased. This is true both nationally and in Minnesota.

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For example, for each one dollar of U.S. income, 3.410 cents went to the lowest income quintile in 2007; by 2015, only 3.155 cents was accruing to the lowest income quintile—a decline of 7.5 percent over the eight year period. Meanwhile, 22.50 cents of each dollar of U.S. income went to the top five percent in 2007; by 2015, this had grown to 23.26 cents of each dollar—an increase of 3.3 percent.

A similar pattern was occurring in Minnesota over the same period. For example, for each one dollar of Minnesota income, 3.917 cents went to the lowest income quintile in 2007; by 2015, only 3.712 cents was accruing to the lowest income quintile—a decline of 5.2 percent. Meanwhile, 20.66 cents of each dollar of Minnesota income went to the top five percent in 2007; by 2015, this had risen to 21.49 cents of each dollar—an increase of 4.0 percent.

Even after adjusting for the margin of error in these ACS estimates, is highly likely that the shift of income from low-income to high-income households that occurred from 2007 to 2015 is real and not the result of sampling error. Quite literally—both in Minnesota and nationally—the rich got richer and the poor got poorer since the beginning of the Great Recession.

Because the ACS data does not examine income levels of sub-groups within the top five (e.g., the top one percent), it likely overlooks the full extent to which income concentration among the richest of the rich has increased since 2007. Based on data from the Minnesota Tax Incidence Studies as analyzed in an August 29 North Star article, the share of income accruing to the top one percent has increased even more rapidly than the share of income accruing to the top five percent. A September 9 North Star article documents an even more extraordinary concentration of income among the über-rich households at the very top of Minnesota’s top one percent.

Still other data from the American Community Survey allows for a more precise examination of the degree of income inequality nationally and in Minnesota since 2007. This data will be explored in the final installment of this series.

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