Income Inequality in Texas

Texas

Research demonstrates an association between greater income disparity and worse population health in developed nations. Countries with greater income inequality have decreased life expectancy, educational attainment and social mobility, as well as increased rates of mental illness, obesity, infant mortality, teenage births, homicide and imprisonment. Income inequality creates chronic stress, which may contribute to poor health outcomes.

Income inequality has increased over the past 50 years in the United States, with the top 20% of earners receiving more than half of all U.S. income in 2022. The negative impacts of income inequality on the U.S. economy are expected to worsen in coming years, diminishing gross domestic product (GDP) growth.

The income inequality ratio, sometimes called the S80/S20 or quintile ratio, is the ratio of the average income of the top 20% (richest) to the bottom 20% (poorest) in a population. A high ratio indicates greater income inequality, while a ratio of 1 indicates total income equality. This ratio is one of the measures of income inequality used by the Organization of Economic Cooperation & Development (OECD) to track and compare human development worldwide.

Income inequality affects society as a whole. However, those with the lowest incomes suffer the most. Populations more affected by income inequality include:

• Black adults, who consistently have the lowest median income compared with Asian, non-Hispanic white and Hispanic households.
• Women compared with men. A recent study of 2018 census data found that women earn 82 cents for every $1 earned by men. This gender pay gap is even wider for women of color.
• Adults with low educational attainment. Lower educational attainment is associated with worse jobs and lower earnings.
• Those living in non-metropolitan areas compared with those living in metropolitan areas.

Investing in education is an effective strategy to reduce income disparity. According to a 2019 study, if every state increased its population of college graduates by 1%, it would increase the national GDP by an estimated $103.5 billion. Another important area of focus for policymakers is redistributive tax policies, such as the earned income tax credit, which has been proven to reduce wealth disparities. The Peterson Institute for International Economics offers additional solutions from inequality experts for reducing income inequality, which include expanding tax policies, improving access to education and child care and increasing the federal minimum wage.

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“Chapter 7: Income and Wealth, by Income Tier.” In The Lost Decade of the Middle Class. Washington, D.C.: Pew Research Center, 2012. https://www.pewresearch.org/social-trends/2012/08/22/chapter-7-income-and-wealth-by-income-tier/.

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