Region has sharpest rise in income disparity

Income inequality in New England is rising at the highest rate in the nation, according to a study by the Carsey Institute at the University of New Hampshire.

The study fund that, between 1989 and 2004, the region experienced the largest increase in income inequality in the country, due to both growth among top earners and the hollowing out of the middle class caused by significant changes in the nation’s economy.

“This is not simply the ‘rich getting richer’,” said the study’s author, Ross Gittell, the James R. Carter Professor at UNH and a senior fellow at the Carsey Institute. “The loss of manufacturing employment for low-skilled workers has been coupled with increased demand, and rewards, for high-skilled and high-tech employment. These shifts were more pronounced in New England because of the region’s highly educated population, strong research and development base, and relatively high cost of business operations, which pushes low-skilled jobs elsewhere.”

According to the study, over the last decade and a half:

• Household average real income declined between 2 and 5 percent for the lowest-income families.
• Mid-range incomes grew less than national counterparts.
• Income growth was concentrated in the top quintile of households. Average real income has grown 20 percent for this group, and 27 percent for households in the top five percent.
• Three states in the region – Connecticut, Massachusetts and Vermont – ranked among the top five nationally in the increase in income disparity.
• Six of the 20 metropolitan areas with the highest income disparity in the nation are in New England: Nashua, N.H.; New Bedford, Mass.; and Stamford-Norwalk, Bridgeport, Waterbury and Danbury, Conn.

According to the study, the shift from traditional commodity-based manufacturing to technology and knowledge-based businesses has created a new economic structure and context for the New England states. This shift is more pronounced in New England, due in part to the region’s highly educated population and strong research and development base, as well as the high cost of business in the region, the study found.

Such economic divisions have consequences, Gittell said. “Diverging household incomes can fray the social fabric as social connections and the opportunities for families to mix with members of different classes diminish, and the opportunities for lower- and middle-income individuals to move up in social status may decrease,” he said.

The complete brief can be downloaded at the Carsey Institute’s Web site: www.carseyinstitute.unh.edu.