Editorial: Minnesota above average, but economic inequality persists

This is the second installment in an editorial series called The Changing Face of Minnesota. This year, the ECM Publishers Editorial Board is examining demographic changes and disparities in Minnesota that center around race, wealth, age, region and employment.

 

Years before “the 1 percent” was coined as an invective against deeply uneven U.S. wealth distribution, a Minnesota congressman was tilting his sword at the problem.

The late Martin Sabo, a Minneapolis Democrat, repeatedly introduced a bill called the Income Equity Act to limit corporate tax deductions on executive salaries. His ambition, always thwarted, was to use the tax code to try to narrow the gap between sky-high executive salaries and those of the rank and file.

Sabo believed growing stratification was corrosive, a threat to upward mobility and social cohesion. “We all do better when we all do better,” said another politician of the era, the late Sen. Paul Wellstone.

Were they still alive, these late-20th century figures might be heartened by some of the comparatively positive economic metrics of their home state, disturbed by others and despairing of an unimpeded national trend toward income inequality.

Since the late 1970s, income inequality has grown throughout the United States and in Minnesota, which nonetheless has stayed above average. The state’s “Gini coefficient” — a numerical value of inequality — has been consistently lower than the nation’s since 1979, St. Paul-based think tank Growth and Justice reported in 2015.

Minnesota was the 16th most equal state in 2012. It enjoyed a higher median household income, lower poverty and lower overall inequality than the country as a whole, and was recovering the advantage it held before the Great Recession of the late 2000s and early 2010s, according to Growth and Justice.

The top 1 percent of Minnesota families take home 16.3 percent of income in the state, the Washington, D.C.-based Economic Policy Institute reported last June, citing 2013 data. The average income of the top 1 percent was $1.04 million, says the EPI, which advocates for low- and middle-income workers. It took $411,022 in earnings to crack the top 1 percent.

The average income for everyone else was $52,689. The state’s median income was $61,500 in 2014, the same as in 2013, the U.S. Census Bureau reported in September 2015.

That round of census data included a shocking statistic that reverberated throughout state government. Household income for blacks in Minnesota fell 14 percent from 2013 to 2014, with their median income dropping from $31,500 to $27,000. The drop came amid a falling longer-term unemployment rate for black Minnesotans, from 20 percent in 2011 to 13 percent in 2014, the Minnesota State Demographic Center reports.

Rapid growth in the number of black Minnesotans, including those with limited English skills, is believed to have contributed to the sudden loss of prosperity.

Poverty rates in 2014 were 38 percent for black Minnesotans, 32 percent for the state’s American Indians and 23 percent for Minnesota Hispanics. The rate was 12 percent for all Minnesotans and 8 percent for white Minnesotans.

Multicolored maps showing income and Gini coefficient levels by county illustrate deep income stratification within Minnesota. Counties with the lowest median incomes and highest inequality are concentrated in northern Minnesota, Growth and Justice reports. By contrast, several suburban counties outside Hennepin and Ramsey boast the highest incomes and lowest inequality.

In extreme cases, median incomes are more than twice in some suburban counties (such as Scott and Washington) than they are in rural counties (such as Mahnomen and Clearwater).

This year Growth and Justice unveiled its Minnesota Rural Equity Project, an effort to study and attack the disparities.

U.S. wage gains, following years of stagnation, have begun to reverse the 2014 drop in black incomes. Reacting to the drop, the Legislature approved $35 million for targeted job training and other efforts.

Gov. Mark Dayton in 2014 signed a law increasing the minimum wage from $6.15 an hour to its current $9.50 for large employers and $7.75 for small employers, with an annual inflationary boost. A universal $15 minimum-wage campaign has for years been gaining steam nationally and is now part of the mainstream political debate in Minneapolis and St. Paul.

Some argue that a $15 minimum would be too disruptive to many businesses and is ill-suited for a wide range of employers. Some workers who don’t finish high school or gain employment skills may find it harder than ever to be hired by businesses demanding added value at such a wage.

In any case, this is no time for government to skimp on higher education, early education with targeted scholarships for at-risk toddlers, skills training, health care, child-care assistance and programs such as the Earned Income Tax Credit that make climbing the ladder of a changing, competitive economy a little easier.

“ … We need to set aside the belief that government cannot do anything about reducing inequality,” former President Obama said in December 2013, calling growing economic inequality “the defining challenge of our time.”

“We know from our history that our economy grows best from the middle out, when growth is more widely shared,” Obama said. “ And we know that beyond a certain level of inequality, growth actually slows altogether.”

– An opinion of the ECM Editorial Board.

Reactions to this editorial — and to any ECM Editorial Board commentary – are always welcome. Send to: [email protected]

 

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