Income includes the revenue from wages, salaries, interest on a savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it. Income inequality refers to the extent to which income is distributed unevenly among a population.
The Gini coefficient, also called the Gini Index or Gini ratio, is a statistical measure of distribution intended to represent the income or wealth distribution of a nation. It ranges from 0 (0%) to 1 (100%), with 0 representing perfect equality and 1 representing perfect inequality. A higher Gini coefficient means greater inequality. The Gini coefficient would be zero is everyone in a nation had the same income.
The Gini coefficient is defined based on the Lorenz curve. The Lorenz curve plots the percentiles of the population on the horizontal axis of the graph according to income or wealth, whichever is being measured (income, in this case). The cumulative income of the population is plotted on the vertical axis. The United States has a Gini coefficient of 0.485, the highest it has been in 50 years, according to the United States Census Bureau. Each state also has a Gini coefficient.
Zippia analyzed datasets from 2010 and 2016 from the American Community Survey and then analyzed the Gini coefficient for each state in both periods. Based on this, the five states with the highest income inequality in the United States are: New York (.5102), Connecticut (.4947), Louisiana (.4903), California (.4880), and Florida (.4852). All five of these states have a Gini coefficient that is higher than the U.S. Gini coefficient. New York has the greatest income inequality in the United States. In 2015, the average income of the top 1% was $2.2 million and the average income of the bottom 99% was $49,617. This is a ratio of 44.4 to 1. Nationally, the numbers were $1.32 million for the top 1% and $50,107 for the bottom 99%, a ratio of 26.3 to 1.
The five states with the least income inequality are: Alaska (.4174), Utah (.4261), Wyoming (.4279), New Hampshire (.4344), and Hawaii (.4369). Despite these states being the least unequal in the U.S., their Gini coefficients are still higher than many countries around the world. Alaska is about as unequal as Russia. Montana, California, Rhode Island, and Maine are experiencing the fastest changes in income inequality in the U.S. From 2010 to 2016, Montana’s Gini coefficient increased by .022, California’s increased by .019, and both Rhode Island’s and Maine’s increased by .018.
Income inequality has both economic and political impacts such as slower GDP growth, reduced income mobility, greater household debt, political polarization, and higher poverty rates. Crime has been shown to be correlated with inequality. The separation of society into the “elites” and the “masses” played a central role in the collapse of other advanced civilizations such as the Roman Empire.