Inequality report: Colorado income gap steadily widening

[dropcap]C[/dropcap]olorado places among the top ten states in the nation when it comes to measuring the pace of income inequality growth over the past three and half decades. It’s nothing to brag about.

The top 20 percent of earners here took in half of the income generated in the state since the late-1970s. The bottom earners took in a mere 3 percent during that time, according to a brief released Thursday by the Colorado Fiscal Institute. That places the state at number eight among states with the highest growth in income inequality in the period. As the institute’s economist Chris Stiffler explains, it wasn’t always like this in Colorado and it’s not a positive development for the state economy.

“In the late 1970s the ratio of income of the top 20 percent was five times the income of the bottom 20 percent. Now the top 20 percent of incomes is 8.2 times greater than the bottom… Colorado used to have a much more equal distribution of income, one a lot more equal than the nation, particularly from 1960 to 1980.”

As the charts in the report make clear, something happened during the Reagan years. The years 1980 to 1988 saw the most sustained and steady climb in unequal earning — and, despite occasional dips, the trend toward greater inequality has continued in the decades since, with incomes for the middle class stagnating as earning falls for the poor in rough proportion to the way it rises for the rich.

Why is that bad? On that point, Stiffler is as clear and direct as he can be:

“Since 70 percent of the economy is driven by consumer spending, it is very important that the middle class have the money or “purchasing power” to go out and support local businesses and keep the economy working. As a higher portion of Colorado’s income gets concentrated in the hands of a few individuals, this leaves fewer customers with money to spend in the local Colorado economy. When half of the state doesn’t have the disposable income to spend in the economy, everyone suffers.”

Expanding middle classes characterized the industrialized democracies of the 20th century, where quality of life steadily climbed over decades and opportunity was real and motivating. In recent years, fear that that era is closing has spurred the international Occupy movement and, in effect, all but ended Republican Mitt Romney’s presidential ambitions, when he was caught writing off the “47 percent” poor U.S. population as “takers” and not “makers.”

Although President Obama in his state of the union address this week referenced the battle over growing income inequality, analysts have said that the main prescription he offered — a hike of the minimum wage — will do little to reverse the negative trend documented in Colorado and around the country by economists like Stiffler.

Colorado Inequality Brief

[ Top image: A Colorado mobile home park via MissJenny. It’s a long way from Aspen. ]