The increasingly unequal West

Rich get richer while everyone else wallows in a region once known to be economically egalitarian.

 

Los Alamos, New Mexico, with about 10,000 people living in mid-century suburban homes amidst heavily secured labs, is probably one of the weirder towns you’ll ever visit. Where else can you stand on the corner of Oppenheimer Drive and Trinity Street? With more than 900 millionaire households and a median household income of $107,000, it’s also one of the richest towns in America.

It’s a vastly different world than you’ll find just 18 miles away, in Española, another town of about 10,000 people, this one situated along the waning waters of the Rio Grande. Here, the homes are much, much older, and anything but suburban. The median household income is $33,000, less than one-third that of Los Alamos’s, and 28 percent of the residents live under the poverty line.

The economic imbalance between Los Alamos and Española may be extreme, but the dynamic is common. In his State of the Union speech last month, President Obama highlighted the growing gap between rich and poor in America, and its damaging effect on the social and economic fabric of the country. And as a recent Economic Policy Institute report shows, the West, which was once more economically egalitarian than the rest of the nation, is now becoming more and more a region of haves and have nots, with very little in between.

While there are a variety of measures of income inequality, perhaps the most straightforward is the percentage of income held by the top 1 percent. The higher the percentage, the greater the inequality (the more the rich have, the less there is leftover for everyone else). At the end of the 1920s, that era of untethered capitalism, the richest one percent was bringing in a whopping 24 percent of the total income. The Great Depression, the New Deal, World War II and progressive tax policies put an end to that, and throughout the ‘50s, '60s and '70s, the 1 percent held about 10 percent of the income. But starting in the 1980s, the rich began getting richer, and the wealth didn’t do much trickling down — by 2007, just before the Great Recession, the 1 percent once again held 24 percent of the income. Another way to put that: In 2012, the average income for the 1 percent was $1.3 million, or 30 times more than the average for the other 99 percent.

The West has generally followed the same pattern, but historically, the income gap was less pronounced, with the wealthiest Westerners typically having a slightly smaller percentage of the region’s income than the rich in other regions. Beginning in the 1990s, however, the West’s income gap began growing. Now our region is just as unequal, and in some cases far more so, than everyone else. Take Wyoming, one of the most glaring examples. In 1928, the 1 percent had 12.2 percent of the state’s income (compared to 24 percent nationwide); in 1979 it had dropped to less than 10 percent; but by 2007, Wyoming’s wealthiest had 31.4 percent, giving it the nation’s third highest, top-heavy concentration of income, after Connecticut and New York. Another way to put it: Between 1979 and 2011, the top 1 percent's collective income grew by 172 percent; the bottom 99 percent's shrunk by 2.5 percent.

For the 1 percent, the Great Recession and its accompanying dent in the housing and stock markets, was just a little bump in the road to greater riches. They’ve recovered healthily, their collective income jumping back up even as the rest of us have fallen further behind. The causes of the increasing imbalance are myriad, write the authors of the EPI report, ranging from the demise of unions, to stagnating working class wages, to skyrocketing pay for CEOs.

Such forces are also in play in the West. But in the case of Wyoming, where the balance has shifted so dramatically over the years, something else must be happening. Perhaps more of the nation’s ultra-rich — the average income of the top .1 percent in that state is an astounding $368 million — are making the state their primary residence, drawn by its lack of state individual and corporate income taxes.The shift may also reflect a change in the structure of the extractive industries. Back in the day, it took a heck of a lot more people to produce a ton of coal or a barrel of oil than it does now, and most of those people were unionized, permanent workers who made a good wage and built up the middle class. The wages are still high, but there are fewer workers, the unions have faded and transient contractors make up a larger share of the extractive workforce, particularly in the oil and gas patch. Service industries, where wages tend to be lower, represent a larger sector of the economy. And in many Western states, regressive tax policies drain the pockets of the poor and middle class, while taxing the über rich at ever-decreasing rates.

As the middle class disappears so does the main driver of our economy, middle class purchasing power. And thus, the economy as a whole suffers, further exacerbating the wage gap. As the poor get poorer, they are less and less able to get a decent education, or pull themselves out of poverty. Economic mobility suffers. The authors of the EPI report conclude:

In the next decade, something must give. Either America must accept that the American Dream of widespread economic mobility is dead, or new policies must emerge that will begin to restore broadly shared prosperity.

Since the “1 percent economy” is evident in every state, every state—and every metro area and region—has an opportunity to demonstrate to the nation new and more equitable policies. We hope these data on income inequality by state will spur more states, regions, and cities to enact the bold policies our nation needs to become, once again, a land of opportunity.

Jonathan Thompson is a senior editor at High Country News. Homepage photograph of a protestor at the Occupy the Round House rally in Santa Fe, 2012, courtesy Flickr user suenosdeuomi.