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Wisconsin IDEA
Insight • Data • Economics • Analysis
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Wisconsin Income Equality Patterns
Income Inequality in Wisconsin Lower Than the US But Rising Over Last 30 Years
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In 2014, French economist Thomas Piketty published “Capital in the Twenty-First Century,” revitalizing the debate around income inequality. Concerns about how the benefits of economic growth are distributed across the population have been discussed for decades, if not centuries. The most common concern is that higher-income individuals benefit disproportionately from economic growth, with the benefits trickling down slowly to lower-income individuals. In other words, as the economy grows, the distribution of income tends to skew towards higher-income individuals.
One method economists use to track patterns in income equality or inequality over time is the Gini Coefficient of Income Equality. Created by Italian statistician Corrado Gini in 1909, the Gini Coefficient ranges from zero to one, where lower values (near zero) indicate a more even distribution of income, and higher values (near one) indicate a more unequal distribution. A Gini Coefficient of one represents a “king’s economy,” where all income flows to a single individual.
Using data compiled by Mark Frank at Sam Houston State University, we can track the Gini Coefficient for Wisconsin relative to the U.S. from 1917 to 2020. Two key observations emerge from this analysis. First, Wisconsin’s Gini Coefficient has historically been lower than that of the U.S., indicating that income distribution in Wisconsin is generally more even. Second, following the instability of the Great Depression and WWII, the Gini Coefficient has been trending upward over the last several decades, highlighting concerns about rising income inequality across the U.S.
Beyond these broad patterns, several modest trends warrant discussion. First, there was a surge in income inequality starting in the mid-1980s, generally associated with the policies of the Reagan Administration. The extent to which Reagan’s policies caused this rise in inequality remains debated among economists. Second, since about 1990, Wisconsin’s Gini Coefficient has increased slightly slower than the U.S. average. While the data for Wisconsin points to rising income inequality, the Gini Coefficient does not provide insights into the economic well-being of lower-income individuals, such as patterns in poverty rates. It could be that the economic well-being of all individuals has been rising over time, but the distribution of that increase is uneven.
Moreover, research suggests that results can be sensitive to how income is measured. For example, does one use before- or after-tax income? How are transfer payments, such as unemployment insurance, treated? How does one account for wealth as opposed to income? Regardless of how these technical issues are addressed, the overall conclusion of rising income inequality is widely supported. The next natural question is what are the implications of rising income inequality.
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Econ Quiz: Middle Class Households
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The Pew Research Center recently released its semi-regular report on income distribution across the United States. The report notes that the middle class makes up a smaller portion of households than it once did, in part because the proportion of households in the upper income group has increased from 11% in 1970 to 19% in 2023, but also because the proportion of households in the lower income group has grown from 27% to 30% of U.S. household in that same time period.
That prompts the question, what income levels are considered lower income, middle income, and upper income? Middle income households are defined as those with annual incomes two-thirds to twice the national median income after adjusting for household size. Using a household of three people as an example, lower income households were those earning less than $61,000 annually, middle income households of three earned between $61,000 and $183,000, and upper-income households of three earned more than $183,000.
We can make an interesting comparison by looking at incomes that fall squarely in the middle of each group. Within each category — lower, middle, and upper — household median incomes have grown since 1970. After adjusting for inflation, median annual earnings for lower income households grew by 55%, moving from $22,831 to $35,318. Median annual earnings for upper income households grew by 78%, moving from $144,068 in 1970 to $256,920 in 2023.
That brings us to today’s question. Using inflation adjusted dollars, the median income of middle-income households was $66,417 in 1970. What was the median income of middle-income households in 2023?
A. $82,068
B. $106,092
C. $198,701
D. $101,401
E. $75,213
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Wisconsin REV Has Launched!
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Wisconsin’s Rural Entrepreneurial Venture (REV) program launched on June 3rd with its inaugural cohort diving into the first phase known as eReady. Each WI REV community’s leadership team started their journey with an orientation meeting that included their WI REV coach and eReady coach to learn about the eReady three-month process and to start reviewing the Ord, NE case study. They then gathered virtually for their first plenary session, coming together as a cohort to discuss the economic benefits Ord has seen over the past 20+ years and to reflect on potential goals their own communities might realize through employing the WI REV framework.
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2024 Wisconsin Connecting Entrepreneurial Communities Conference
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On May 30-31, over two hundred rural economic developers, community leaders, and entrepreneurs descended upon Platteville, WI, a small town in southwestern Wisconsin, population of 11,840, for Wisconsin’s first Connecting Entrepreneurial Communities (CEC) Conference. Known as a conference “about small towns, for small towns,” the CEC conference offers programming, discussion, and networking for stakeholders in Wisconsin’s rural business development. Other Midwestern states such as Michigan, Minnesota, Missouri, and Nebraska hold the CEC Conference on an annual basis as part of their rural economic development strategy.
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How Ready are Owners for Business Succession and Transition?
Wednesday, July 31, 2024 | 12:00 pm - 1:00 pm (CST)
Business Succession and Transition (BST) is the process of preparing for and transferring business leadership and ownership. This is a critical issue for baby boomer retirements as 55 plus owners hold approximately 50 percent of businesses in Minnesota and the United States.
This webinar will share findings from a recent survey of small businesses in Minnesota that explored business owner awareness, attitudes, aspirations, and preparedness for transferring their business when the time comes. Join us for a free virtual webinar as we discuss the importance of business succession and transition planning and highlight what community economic development practitioners can do to support small businesses with guest presenters, Michael Darger.
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Immigration, Employment, and Entrepreneurship: A Legal Symposium for Wisconsin’s Workforce
Friday, September 20, 2024 | SAVE THE DATE!
Join us for a professional development training for business service providers who work with new immigrants and newcomers in Wisconsin, covering topics related to employment and entrepreneurship. Continuing legal education credit available.
The Rural Wisconsin Entrepreneurship Initiative will host a legal symposium for Wisconsin’s workforce at the WI Latino Chamber of Commerce in Fitchburg. This is a professional development event, led by the Law and Entrepreneurship (L&E) Clinic. This symposium will provide insights into enhancing service providers’ understanding of laws, regulations, and practical solutions concerning employment and entrepreneurship for new immigrants and undocumented workers. The training will cover topics relevant to employers, employees, job seekers, and entrepreneurs.
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(WisBusiness.com - 6/26/2024)
(Capital Times - 6/15/2024)
(Institute for Business & Entrepreneurship - 6/5/2024)
(Wisconsin Newspaper Association - 5/28/2024)
(Public News Service - 5/10/2024)
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Equal Employment Opportunity & Affirmative Action Statements
An EEO/AA employer, the University of Wisconsin-Madison Division of Extension provides equal opportunities in employment and programming, including Title VI, Title IX, the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act requirements. Please make requests for reasonable accommodations to ensure equal access to our educational programs as early as possible preceding the scheduled program, service, or activity.
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