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ND resident needs an income of $502,393 to be in top 1 percent

FARGO - Membership in the much-maligned top 1 percent of income earners in North Dakota would require annual income of at least $502,393. That figure ranks sixth in the nation for 2012, right behind the state of New York, in a new study called "T...

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FARGO – Membership in the much-maligned top 1 percent of income earners in North Dakota would require annual income of at least $502,393.

That figure ranks sixth in the nation for 2012, right behind the state of New York, in a new study called “The Increasingly Unequal States of America.”

The report, released this week by the Economic Analysis and Research Network, examined income inequality by state from 1917 to 2012, and the declining middle class.

Minnesota ranked 11th, with the top 1 percent income threshold of $413,748, and South Dakota ranked 13th at $404,010. The national average was $385,195, according to the report.

The widening gap between the nation’s richest and the masses, and the shrinking middle class, has been the subject of increased attention in recent years.

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The phenomenon, much discussed in political campaigns, is not a new one – but is the first to compare the share of income divided between the top 1 percent and bottom 99 percent for each state.

North Dakota and Minnesota – as well as most of the Midwest – have consistently lagged the United States in the share of income that is captured by the top 1 percent.

Since 1917, North Dakota has divided income between the top and bottom more evenly than throughout the U.S. – but that gap has narrowed significantly in recent years, according to the analysis by the Economic Analysis and Research Network, affiliated with the left-leaning Economic Policy Institute.

“North Dakota has done much better than the rest of the country,” said Mark Price, a labor economist at the Keystone Research Center and one of the authors of the report. “You see much better income growth for the 99 percent.”

North Dakota is one of 10 states where the top 1 percent grabbed the smallest share of income growth between 1979 and 2007. That share was 34.2 percent.

Income distribution in North Dakota also was less concentrated among the top 1 percent from 2009 to 2012, years following the economic trough of the Great Recession.

Average income growth for the top 1 percent more than doubled during that period, growing 103.6 percent and capturing 43.4 percent of total growth. That compared to 53.4 percent in South Dakota and 56 percent in Minnesota.

“They’re doing a bit better,” Price said of Minnesota. “There’s more benefits of growth flowing to the bottom 99 percent.”

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The bottom 99 percent in North Dakota saw income growth from 2009 to 2012 of 21.2 percent, compared to 7 percent in South Dakota and 5.4 percent in Minnesota.

“In that respect, you had a better recovery,” Price said, referring to the distribution of income growth in North Dakota since the recession – still lopsided, but not as much as elsewhere.

“You don’t have as much inequality as the rest of the country,” Price added, noting that tends to be the case in the Midwest.

That’s because the Midwest has fewer wealthy earners in finance, with “hedge fund billionaires” or in entertainment, industries that fuel immense inequality.

It also could have something to do with culture, Price said, but that is difficult for an economist to gauge.

Even with North Dakota’s historical tendency to have lower income inequality, the rapid increase of wealth from the oil boom has largely gone to the top 1 percent, according to the study.

“Where the economy has been strongest, which is in your state, you still have this pattern of income flowing to the top,” Price said.

North Dakota’s average top 1 percent income in 2012 was more than $1.5 million, which ranked 15th. The average income of the bottom 99 percent was $59,931.

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In Minnesota, the average income for the top 1 percent was $1.1 million, with the average income of the bottom 99 percent $50,476. The top 1 percent in South Dakota earned $1.2 million, the bottom 99 percent $50,089.

Now that state figures are available to document growing income inequality, Price hopes policymakers will respond with steps to narrow the gap.

Nationally, income inequality is at a level last seen in 1928, right before the Great Depression, he said.

Beginning in 1947, when the country recovered from the Depression of the 1930s and emerged from World War II, until 1979 most income gains went to the bottom 99 percent, a reminder that wealth concentration is not inevitable, Price said.

Policies to help people climb the income ladder could include making college and post-secondary training more affordable and increased minimum wage laws, he said.

“Increasingly it’s harder and harder for low-income kids to get access to those jobs,” he said.

 

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