OKPOLICY.ORG
Kylie Thomas is an OK Policy intern and a Master’s student in economics at American University. She previously earned her Bachelor’s degree in economics from the University of Tulsa.
The Economic Policy Institute (EPI) recently released an updated report on income inequality in the U.S. by state, and the data shows improvements in Oklahoma. In 2012, income inequality in Oklahoma reached a historic high. The bottom 99 percent of Oklahomans were earning an average income of $41,995, while the top 1 percent were earning $1,105,521, which was 26 times greater. Overall, in 2012, Oklahoma ranked 12th highest in the nation for income inequality.
However, Oklahoma’s income inequality gap narrowed in 2013 (the year of most recent data). To be considered part of the top 1 percent in 2013 in Oklahoma, an individual needed to make an income of at least $324,935. The average income of the bottom 99 percent rose nearly $3,000 to $44,849 and fell for the top 1 percent to $903,201, which is still 20.7 times greater than the bottom 99 percent. That’s a little more equal than overall in the U.S., where the average income of the top 1 percent was 25.3 times greater than the bottom 99 percent. Consequently, Oklahoma’s national rank improved from 12th to 15th most unequal.
It is important to include a few caveats with these numbers. If there’s significant inequality within the bottom 99 percent, the average income of the bottom 99 percent may not be an accurate representation of how most families are faring. For example, poverty in Oklahoma remains higher than the national average and higher than before the Great Recession. And recent income gains for the 99 percent have a long way to go to make up for the fact that for more than 30 years, wage growth in the U.S. has been stagnant for middle-wage workers and declining for low-wage workers
New Data on Metro Areas and Counties
EPI’s report also includes data on income inequality across metropolitan areas and counties. In 2013, income inequality was greater in the Tulsa metro area, ranked 60th in the nation for income inequality, than the Oklahoma City metro area, ranked 147th. The average income of the top 1 percent in the Tulsa metro area ($1,225,934) was nearly 25 times greater than the bottom 99 percent ($49,223) — more unequal than the state as a whole. In the Oklahoma City metro area, the average income of the top 1 percent ($1,038,673) was 20.1 times greater than the bottom 99 percent ($51,746) — less unequal than the state.
In 2013, income inequality was greater in Tulsa County, ranked 104th in the nation for income inequality, than Oklahoma County, ranked 188th. In fact, income inequality in Tulsa County surpassed the national average, as average income of the top 1 percent ($1,496,092) was 28.8 times greater than the bottom 99 percent ($51,937). On the other hand, in Oklahoma County, the average income of the top 1 percent ($1,216,953) was 24.4 times greater than the bottom 99 percent ($49,802).
Improvements are still needed
Oklahoma, despite having lower income inequality than the U.S. as a whole, is still among the nation’s most unequal states. The top 1 percent of Oklahomans take home 17.1 percent of all income. Still, this year Oklahoma continued to cut taxes for the wealthy, while simultaneously slashing the Earned Income Tax Credit, and reducing funding for higher education and health care. These cuts hurt families with lower incomes the most. And it is likely these budget cuts coupled with continued tax cuts for the wealthy will further widen the state’s income inequality gap rather than narrow it.
Studies by major international research organizations like the OECD and International Monetary Fund show that extreme income inequality reduces economic growth. For example, the OECD estimates that in the two decades leading up the Great Recession, the cumulative growth in the U.S. would have been six to nine percentage points higher had income inequality not increased. While most economists argue some level of inequality is necessary for growth, extreme inequality impairs growth when it causes those with low incomes suffer poor health and struggle to invest in education. In contrast, reductions in income inequality have been shown to boost economic growth, especially when that growth is the result of a rise in the income share of the bottom 20 percent.
Although we have made progress, improvements through policy changes still need to be made. In our already slowing economy, income inequality is not an issue we can afford to ignore.
