Over the past two decades income inequality has increased dramatically in Oregon. Oregon’s economy has grown and the state’s highest-income families have seen large gains, but the majority of Oregon families have experienced declining or stagnant incomes, according to a study released today by the Oregon Center for Public Policy and the Washington, D.C.-based Center on Budget and Policy Priorities (CBPP) and Economic Policy Institute (EPI). From the late 1980s to the late 1990s Oregon had the second highest growth in the income gap.
The CBPP/EPI study shows that since the late 1970s the poorest 20 percent of Oregon’s families have experienced declining annual incomes, while the middle 20 percent have not seen any significant changes, and the richest 20 percent have had large gains. The study also indicated that inequality in Oregon is more severe and has grown more than in most other states.
“Instead of growing together, we have been growing apart,” said Jeff Thompson, an economist and policy analyst with the Oregon Center for Public Policy. “The gap between high-income families and everybody else is growing, with middle and low-income families standing still or falling behind.”
“If we stop to ask ourselves, ‘are most Oregonians better off than they were 10 or 20 years ago?’ The answer is no,” Thompson concluded.
The study identifies increasing inequality in wages as the most important factor explaining growing income inequality. Wages for workers at the bottom and middle of the income distribution have only recently grown after years of stagnation and decline. “The trend over the past twenty years has been toward greater income inequality and lower incomes for families at the bottom, regardless of cyclical upturns like we are now experiencing,” said Thompson.
“The share of income held by the bottom 80 percent of families has fallen over each of the past two decades,” noted Thompson. The declining share particularly hurt the poorest 20 percent of families. “If low-income Oregonians had maintained the same share of income over the last 10 years their income would have risen instead of fallen by more than $2,000,” he added.
Compared with other states, Oregon’s income inequality is high and growing significantly. In the late 1990s, only three other states had a larger income gap between middle-income and high-income families. Only seven states had larger gaps between the richest and poorest families. Oregon had the second worst increase in inequality between highest-income and lowest-income families between the late 1980s and late 1990s. Oregon also experienced the second worst increase in the income gap between highest-income and middle-income families during that same time period.
“The high growth in inequality helps explain Oregon’s highest-in-the-nation hunger ranking during a time of economic prosperity,” said Thompson.
Growing income inequality has important implications for a number of public policies, ranging from tax reform to minimum wages, unemployment insurance, health care, hunger, and campaign finance reform.
Thompson noted that “income inequality was one of the factors influencing Oregon’s property tax revolt in the 1990s. The majority of Oregonians’ earnings were down or stagnant, but they were being asked to pay increasing property tax bills.”
“Voters are now being asked to give huge tax breaks to the few who have reaped the lion’s share of Oregon’s economic prosperity. The proposed tax breaks will do nothing to solve issues of inequality. Instead, they will add insult to injury,” said Thompson, referring to the proposals on the November ballot by failed gubernatorial candidate Bill Sizemore and the so-called alternative proposal referred to the voters by the 1999 Legislative Assembly.
“Voters should think twice before damaging the state’s capacity to deliver essential public services like education, health care, child care, nutrition, and services to poor children, seniors and the disabled just to give those at the top an even greater windfall,” said Thompson.
Thompson discussed policy choices that mitigate some of the growing income inequality. “Over the last few years Oregon’s minimum wage increases have boosted the earnings of former welfare recipients and other low wage workers, no doubt helping to moderate income inequality trends,” said Thompson. “Indexing the minimum wage to inflation is a crucial next step to stem the income decline among families at the bottom,” he added. Thompson also pointed to improvements in the unemployment insurance system to broaden the receipt of unemployment insurance benefits among unemployed workers, and increased unionization of the low wage job market.
“The economic health of Oregon cannot be assessed by looking at total, per capita or other measures of ‘average’ income typically relied upon by state officials and many private sector economists,” said Thompson. “Growing inequality makes simple averages poor indicators of economic well being. Oregon’s average family income has risen, but the majority of Oregon families have not seen gains and many have experienced losses,” he added.
The results of this national study mirror the results of research released last year by the Oregon Center for Public Policy. That analysis of state Department of Revenue data showed that the share the share of income held by the top twenty percent of households grew while the rest of Oregon’s households saw their share of income fall between 1989 and 1997. A similar study completed by economists at Dartmouth College and the Census Bureau late last year found that earnings inequality rose more in Oregon than in any other state between 1970 and 1990.
The CBPP/EPI study, Pulling Apart: A State-by-State Analysis of Income Trends, is based on an original analysis of before-tax income for families recorded by the Census Bureau’s March Current Population Survey. The analysis compares “pooled” data from the three most recent years available — 1996, 1997 and 1998 — to similarly pooled data from the late 1970s and late 1980s. Using pooled data rather than data collected within a single year enlarges the sample size, thus increasing precision. The three periods compared reflect similar stages in the economic cycle. All figures in the report are adjusted for inflation and are expressed in 1997 dollars.
The Oregon Center for Public Policy is a non-partisan research institute that analyzes economic and fiscal issues and public policies important to the majority of Oregonians.