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The income/equality trade-off: Are richer states also more unequal?

April 15, 2024


Lisa Camner McKay Senior Writer, Institute
Natalie Gubbay Research Associate, Institute
Nina Leo Creative Director
The income/equality trade-off: Are richer states also more unequal?

One way to think about income inequality is to look at how income is concentrated at the top: Just how much of total income do the highest earners receive? In the United States, the top 2 percent of individual earners received almost 18 percent of total income in 2019. But national averages obscure large differences in how income is distributed within the 50 states.

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The chart suggests there may be an income/equality trade-off: States with higher median incomes also tend to be states where income is more concentrated. But the correlation is not perfect. For example, Connecticut and Maryland have similar median earnings but very different income concentrations.

Source: Federal Reserve Bank of Minneapolis, Income Distributions and Dynamics in America. Regions follow Census Bureau divisions.
  Median individual earnings Concentration of income Income mobility from third to top quartile, 2014–2019
United States $35,610 17.9% 20.9%
Connecticut $42,240 24.0% 20.3%
Tennessee $31,580 17.7% 21.5%
Colorado $39,040 16.5% 22.5%
Indiana $33,460 14.3% 21.3%
Maryland $44,790 14.3% 21.0%

Do states with higher concentrations of income also tend to have higher rates of upward mobility, giving workers more opportunity to make it to the top echelons? Interestingly, rates of economic mobility from the third quartile (that is, the 50th to 75th percentile of the income distribution) into the top quartile did not vary all that much across states.

Lisa Camner McKay
Senior Writer, Institute

Lisa Camner McKay is a senior writer with the Opportunity & Inclusive Growth Institute at the Minneapolis Fed. In this role, she creates content for diverse audiences in support of the Institute’s policy and research work.