(From DECON First)
For the past 25 years there has been much concern over the growing inequality in the U.S. distribution of household income. The share of total personal income going to the lowest quintile (the one-fifth of all households when ranked by annual income) has been falling while the share going to the top quintile, and the top 1 percent, has been rising.
As with any economic measure, the equality of the household income distribution is fraught with mechanical issues. Transfer payments (e.g., food stamps, section 8 housing) are not included, nor are taxes deducted.
Because there has been a steady decline in household size with more single person households, especially among the elderly, there is less inequality in the distribution of income per person.
Regardless, DECON First was curious to ascertain the impact of the “Great” recession on the state’s household income distribution. Between 2008 and 2013 Delaware’s household income distribution has become more equal! A socialist’s paradise!
The cause of the growing equality is losses of income at the two tail ends of the income distribution. Between 2008 and 2013 the bottom quintile of household’s share of total Delaware personal income dropped from 5.2 percent to 3.4 percent. Much of this can be attributed to the weak labor market for individuals with a high school education or less. There is also a growing elderly household population with low current income and accumulated wealth. To top it off, transfer payments in Delaware have been growing like gang busters–e.g., food stamps have doubled since 2008.
At the other end of the distribution, the top quintile’s share of total Delaware personal income fell from 47.3 percent to 39.5 percent. This is unusual since wealth and assets are concentrated among these households and the stock market has been flying high. The major explanation is the 17 percent hike in the state’s top income tax rate and the restart of the top estate tax have caused some higher income households to either pull up stakes or to change their address of primary residence to states where there is no income tax, such as Florida. On top of that, the data on the net migration of wages from northern Delaware shows that workers in high end professional jobs in the state continue to choose to live in neighboring Pennsylvania.
This trend has consequences for businesses who sell to primarily Delaware markets: less demand for luxury items and more demand for discounts. And Delaware can become a beacon for persons seeking more income equality. – Dr. John E. Stapleford, Principal
DECON First focuses on the emerging trends that drive delaware consumer markets. Obviously this includes substantial demographic changes, and these can be tracked down to the community level to assist businesses.
DECON First uses economics to strengthen Delaware business. This is accomplished by providing accurate, objective, and relevant analysis of the economy, coupled with best practice recommendations that deliver new customers. More detailed analysis is found in the DECON First FALL Delaware Economic Review and Economic Briefs.
Direct questions to info@deconfirst.com
