While wages for all workers are increasing, the income gap between the wealthiest earners and Missouri’s poorest workers persists, according to a recent national report.
The findings reveal Missouri’s top wage earners brought home 7.3 times the income of their lower wage counterparts, data that ranks the state No. 27 in terms of the largest gap between the top 20 percent of wage earners and the bottom 20 percent between 2008 and 2010. The Economic Policy Institute and Center on Budget and Policy Priorities’ Nov. 15 report, titled Pulling Apart: A State-by-State Analysis of Income Trends, compared data collected by the U.S. Census Bureau from 1977 through 2010.
According to the report, the average income for Missouri employees living in the bottom fifth of households was $20,882, compared to the average income for the top wage earning households of $151,980. The state’s top-to-bottom wage earner ratio of 7.3-to-1 was below the national gap ratio of 8-to-1. Between 1977 and ’79, no states reported a disparity of greater than 8-1, but with the most recent sample data, 15 states exceeded that ratio, the report states.
While the gap between top and bottom wage earners is widening – excluding a slight recessionary dip across all incomes 2008–10 – overall wages are on the rise, according to a Nov. 26 report by the U.S. Bureau of Economic Analysis. In 2011, all of the 366 metropolitan statistical areas in the U.S. reported increases in personal income for the first time since 2007.
In the five-county Springfield MSA, per capita personal income landed at $33,302 in 2011, an increase of 4.1 percent compared to 2010. The income average puts the Springfield MSA – comprising Greene, Christian, Webster, Polk and Dallas counties – at No. 276 in the country. Workers in the Kansas City MSA brought home $43,062 on average last year, ranking it No. 62 in the U.S., while St. Louis was No. 65 with $42,864 in per capita personal income. By comparison, St. Joseph workers pulled in $34,189 last year, good for No. 253, and Columbia personal income was $37,350, ranking it No. 168.
Shrinking the gapAmy Blouin, executive director of the Missouri Budget Project – a public policy organization that “promotes economic opportunities for all” – said a three-pronged approach is needed to shrink the wage gap in Missouri.
She suggests investing in quality education, spending for services that help families such as health care or road infrastructure, and reducing tax obligations on low-wage earners are ways to close the income level gap.
“Wealth is concentrating at the top end of the income scale and not being spread to all Missourians,” Blouin said. “That concentration hurts all of us, no matter what your income level.”
While recognizing the wage gap is a problem for many individuals, Show-Me Institute policy analyst David Stokes said the issue isn’t one the government should attempt to solve through class warfare.
“We need to have policies that encourage economic growth for everybody, not taking from some to give to the other. Whether you think that is a good idea philosophically or not, it is not good economics,” said Stokes, representing the free-market think tank. “If we’re going to have a tax debate about setting taxes to fund the necessary functions of government, that’s one thing. But if you’re going to propose setting a tax code to arbitrarily lower that wage gap, I don’t think it is going to help the people you want to help.”
He said Missouri economic growth has been anemic during the last several years, ranking toward the bottom consistently in studies that measure economic growth by states. In order to improve the wage profile in Missouri, Stokes said state legislators ought to be aggressive and adopt a lower income tax level to make the state more competitive with its peers and to encourage private development.
Kansas, for example, recently lowered its income tax rate to 4.9 percent from 6.45 percent.
“If you think growth is bad now, wait until all the small businesses on the western side of the state start calculating what they’d be saving if they moved to Kansas,” Stokes said.
Sluggish in MissouriIn June, the Federal Commerce Department released a study ranking Missouri 43rd among states for economic growth in 2011. For the third straight year, the state’s economy grew at a slower pace than the nation’s – up 0.04 percent, adjusted for inflation, compared to the 2011 national average rate of 1.5 percent.
Blake Cully, director of compensation for Mercy Central Communities, said wages for its roughly 20,000 employees among 14 hospitals in southwest Missouri, Arkansas and Kansas have been largely stagnant since 2008.
He said only employees in high-demand positions such as registered nurses and physical therapists have received wage growth during the last four years. Those groups have seen their starting incomes go up 7 percent and 10 percent, respectively. Cully said wages for bedside nurses, for example, start around $37,000 per year and have been adjusted upward twice since 2008 as those workers are becoming an increasingly critical link in the continuum of care. Top wage earners such as physicians and surgeons, as well as lower-income food-service workers and custodians, haven’t generally experienced salary increases, he said.
“We’ve really only seen pockets of people that have seen salary growth in that time frame,” Cully said. “It is really a supply-and-demand issue.”
While supply and demand may be the top consideration for employers, Blouin said if the gates were moved up to reduce the tax burden on low-income workers, that could do the most to improve the economy and ease wage-gap concerns.
According to
TaxFoundation.org, Missouri has 10 individual income tax brackets, with the top tax rate of 6 percent hitting workers who earn more than $9,000 per year. Blouin recommends widening the tax brackets so the highest rate wouldn’t be applied until higher wages are reported.
“Our income tax thresholds haven’t been updated since the 1930s,” Blouin said. “If we can update the thresholds to something more reasonable and give people at the lower end of the income scale more take-home pay by reducing their state income tax, that will have a ripple effect throughout the economy.”
The Pulling Apart report suggests states also can mitigate income inequality by increasing the minimum wage. The purchasing power of the federal minimum wage is 13 percent lower than the late 1970s, the report states.
However, analyst Stokes said adjusting the minimum wage doesn’t automatically benefit low-income families.
“That’s not going to work,” Stokes said, citing a Show-Me Institute study completed in September that reviewed 100 studies on minimum wage levels and their effects on employment. “That helps middle-class and upper-class teenage kids working summer jobs. It is not going to help out poor families.”
