Not since the 1930s Great Depression has income been more concentrated in the top percentile of earners, according to a report by the University of Tennessee’s Center for Business and Economic Research (CBER).
The “Economic Report to the Governor of the State of Tennessee” points to the gap between the haves and the have-nots that is continuing to grow.
The report says that in 2002 the richest 1 percent of the population had an average annual income of $631,700. Since 1979, their income has increased by 111 percent, said Matt Murray, CBER’s associate director. Meanwhile, income for the bottom 20 percent of earners only rose 5 percent, he said.
“If you are at the very bottom of the income distribution in this country, you have seen, over the last 30 years, your income decline when adjusted for inflation,” Murray said.
Expanding globalization is one of the reasons behind the increase in wealth for the “ultra rich,” Murray said. Instead of being able to only reach a local or national audience, individuals are now able to broaden their opportunities for success in the global market, he said.
“If you’ve got something unique out there, the global market is in a position to reward you,” Murray said.
In the midst of the widening gap between the rich and the poor, Tennessee remains below the national average in per capita income. According to the report, in 2006 Tennessee’s per capita income was just below $31,000, about $3,500 below the national average.
While many factors contribute to this number, Murray said one of the main factors that holds Tennessee below the national average is the state’s low standards in education. Tennessee currently ranks 43rd in the nation based on people with a high school diploma.
Bill Fox, CBER director, also said poor education is holding Tennessee incomes back.
“Tennessee lags behind the nation mostly because our education levels are low. Our spending levels per student are very low on national standards, and our education attainment levels are very low. The result is an undereducated population,” he said.
Education needs to become a top priority for the income disparity to decrease, Fox said. A bigger investment in education is needed, but he cautioned that the investment would only help if the money were spent wisely.
Murray also pointed to improving educational standards as the best solution for shrinking the income gap. He said a better education would not only help Tennesseans increase their income, but would also decrease the disparity between social classes on a global scale.
“Education can serve an important role in diminishing the degree of inequality, in particular for lower- to middle-income individuals by raising their performance in the economy,” he said. “Better educated people earn more, substantially more.”
While Tennessee lags behind other states in terms of per capita income, Murray said that when compared to other people in countries across the world, Tennesseans are rich. In the East African republic of Burundi, the world’s poorest country, the average income is 25 cents per day, according to the report. Therefore, the issue of unequal wealth distribution is not only a national, but also an international problem, Murray said.
The forecast for the poorest countries does not look bright, as many of them cannot pull themselves out of their ongoing economic problems, Murray said.
“The situation confronting those countries at the very bottom of distribution is dire, and that’s probably not a strong enough term to use,” he said.
When compared to these countries, the problems facing the United States are much less of a concern, he said.
“We can complain about the distribution of income in this country, but we are still a very wealthy society, particularly when you compare us against one of the poorest countries in the world.”