Prosperity Watch Issue 57, No. 2: Stark Inequality Pervades, Cuts Across Tar Heel County Lines

January 12, 2016

Income inequality has risen sharply over the last several decades, both here in North Carolina and across the nation.

A major driver of income inequality is lopsided income distribution, with people at the top end of the economic ladder capturing a majority of income growth. This is in great contrast to earlier periods in our nation’s history when economic growth translated into broadly shared prosperity and jobs that pay enough to afford the basics.

Between 1979 and 2012, the average income for the top 1 percent of Tar Heels grew 12 times faster than income for the bottom 99 percent, according to the Economic Policy Institute. Unfortunately, the 2007 economic recession and its aftermath exacerbated inequality. EPI found that the top 1 percent captured all income growth in the first three years of the recovery, meaning that the average income for everyone else declined.

Emerging out of these trends is a stark economic divide that cuts across county lines in North Carolina. The top 5 percent takes home nearly 27 times the average income that the bottom 20 percent has in North Carolina, but the gulf is substantially larger in much of the state. The top-to-bottom ratio ranges from a “low” of 11.9-to-1 in Camden County to a high of 52.4-to-1 in Watauga County, according to Census Bureau data for the 2010-2014 period (see map below). [Due to data limitations, income data is not available for the top 1 percent at the county level.]

Three important findings appear in the data:

  1. Approximately 1 in 5 counties have a higher top-to-bottom ratio than the state ratio of 26.8-to-1.
  2. Of the counties with the five highest top-to-bottom ratios, two are rural (Watauga and Robeson), two are urban (Orange and Mecklenburg), and one is suburban (Pitt).
  3. Of the counties with the 20 lowest top-to-bottom ratios, all but one is in rural counties.

The primary cause of the widening income disparity in North Carolina is the state’s broken economic model. There are too few jobs for everyone who wants to work, keeping unemployment up and wages down. In addition, job creation has shifted away from middle-class manufacturing jobs and towards service jobs that pay far too little for families to make ends meet.

Income disparities this large erode equality of opportunity, harm family economic well-being, and threaten economic growth. As such, it is critical for policymakers to adopt policies that rebuild an economy that works for all by—at the very least—raising the minimum wage and indexing it to inflation, strengthening supports and tax credits for low-income workers, enacting stronger labor standards, and improving supports for jobless workers.

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