The Implications of Extreme and Rising Economic Inequality for Ohio’s Children

With respect to economic inequality, the United States is unusual worldwide for three things:

1. Its economic inequality is getting worse;
2. Its middle class is shrinking; and
3. The nation tolerates a high degree of economic inequality.

Because the Census Bureau keeps records about economic conditions in the US, changes in economic inequality can be tracked over time. Relevant factual descriptions, including those that come directly from the Census Bureau, are presented next.

Increasing Economic Inequality, Shrinking Middle Class

Economic inequality comes in two flavors: income inequality and wealth inequality. All families require income, but most families with children have very little net wealth. Families with children typically live from paycheck to paycheck and don’t own their homes or automobiles outright (Bhutta et al., 2020; U.S. Bureau of the Census, 2019).

Income inequality. Income has been tracked for nearly a century in the United States.

• Both the Congressional Budget Office and the Bureau of the Census (using different methods of estimation) find that income inequality increased by about 20% between 1980 and 2016 (Pew Research Center, 2020).
• The proportion of Americans in the middle class, moreover, shrank from 61% in 1971 to 51% in 2019 (Pew Research Center, 2022).

These facts, among others, show that American society is becoming less and less equal economically, and more and more divided into rich and poor. In terms of global comparisons of income, the United States is more unequal than most nations—especially those in the developed world (Hoffman et al., 2020; World Bank, 2023).

Wealth inequality. Wealth inequality is far more extreme than income inequality: about double.

• Between 1983 and 2016, the richest families increased their share of total wealth. In 1983, these families controlled 60% of all wealth; but in 2016 they controlled almost 80% of all wealth (Pew Research Center, 2020).
• Meanwhile, middle- and low-income families saw their share of total wealth decline substantially (Pew Research Center, 2020).
• According to the large Swiss bank Credit Suisse (2019), the United States is the second most unequal nation in the world.

Globally Extreme Inequality

The Gini coefficient (external link) is a measure of inequality that can be used to represent the distribution of any resource. Most often, though, it’s used to characterize income and wealth inequality. It’s easily explained—and useful for education leaders to know about. Its value runs from 0 (complete equality) to 1 (complete inequality).

As it turns out, economic inequality varies in severity across countries. The Table below shows the values for both income and wealth inequality in the United States, in comparison to key competitors and allies.

Table: Economic Inequality (Gini Coefficients, After Taxes & Transfers), 2020-21

Ohio’s Income Inequality by Race and Ethnicity

The median income of families with children is one objective indicator of economic inequality, and recent data show trends by race and ethnicity. The Table below provides the numbers for Ohio.

Median Income of Ohio Families with Children, by Race & Ethnicity

The Table shows several things. First, incomes rose overall between 2005 and 2021, as one would expect considering that the inflation rate from 2005 to 2021 was 42%. Second, the ranking by race and ethnicity remained unchanged across the timespan—with Non-Hispanic White families earning the most and Black families earning the least. Third, although income for all groups rose and exceeded inflation, the income of Non-Hispanic White families saw the greatest proportional increase and the income for multi-racial families showed the smallest proportional increase. The increase for Black families was also relatively low.

Implications of Worsening Economic Inequality for Ohio’s Children

Does economic inequality affect children’s wellbeing? According to Pickett and Wilkinson (2007), economic inequality affects wellbeing even more than family income does. In Ohio, for instance, where economic inequality is close to the mid-point for the nation as a whole, children are in jeopardy.

Data from the Annie E. Casey Foundation support this generalization. In fact, on every one of the Foundation’s indicators, Ohio falls below the national average: (1) overall child wellbeing, (2) economic wellbeing, (3) education, (4) health, and (5) family and community wellbeing (see Annie E. Casey Foundation, 2022, pp. 19-28).

References

Annie E. Casey Foundation (2022). KIDS COUNT data book, 2022: State trends in child well-being: EBSCOhost. http://files.eric.ed.gov/fulltext/ED625969.pdf

Bhutta, N., Bricker, J., Chang, A. C., Dettling, L. J., Goodman, S., Hsu, J. W., Moore, K. B., Reber, S., Volz, A. H., & Windle, R. A. (2020). Changes in U.S. family finances from 2016 to 2019: Evidence from the Survey of Consumer Finances. Federal Reserve Bulletin, 106(5). https://www.federalreserve.gov/econres/scfindex.htm

Credit Suisse. (2019). Global wealth databook. https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/global-wealth-databook-2019.pdf

Hoffmann, F., Lee, D. S., & Lemieux, T. (2020). Growing income inequality in the United States and other advanced economies. Journal of Economic Perspectives, 34(4), 52–78. https://doi.org/10.1257/jep.34.4.52

Kids Count Data Center. (2023). Median Family Income Among Households with Children by Race and Ethnicity In Ohio. Annie E. Casey Foundation. https://datacenter.aecf.org/data/tables/8782-median-family-income-among-households-with-children-by-race-and-ethnicity?loc=37&loct=2#detailed/2/37/false/2048,1729,37,871,870,573,869,36,133,35/4038,4040,4039,2638,2597,4758,1353/17618

Pew Research Center. (2022, April) How the American middle class has changed in the past five decades. https://www.pewresearch.org/short-reads/2022/04/20/how-the-american-middle-class-has-changed-in-the-past-five-decades/

Pew Research Center. (2020, January). Most Americans say there is too much economic inequality in the U.S., but fewer than half call it a top priority. https://www.pewresearch.org/social-trends/2020/01/09/most-americans-say-there-is-too-much-economic-inequality-in-the-u-s-but-fewer-than-half-call-it-a-top-priority/

Pickett, K. E., & Wilkinson, R. G. (2007). Child wellbeing and income inequality in rich societies: Ecological cross sectional study. BMJ: British Medical Journal, 335(7629), 1080–1085. https://doi-org.proxy.library.ohio.edu/10.1136/bmj.39377.580162.55

U.S. Census Bureau. (2019). Selected housing characteristics: 2019 American Community Survey one-year estimates. https://data.census.gov/cedsci/table?q=DP04&g=0400000US39_1600000US3955000&tid=ACSDP1Y2019.DP04

World Bank. (2023). [Spreadsheet of Gini coefficients, by country]. https://api.worldbank.org/v2/en/indicator/SI.POV.GINI?downloadformat=excel