Income inequality in Kentucky has grown significantly since 1979 and Fayette County is among the counties with the greatest inequality, says a study released last week by the Kentucky Center for Economic Policy.
In Lexington/Fayette County, the average income of the top 1 percent was nearly 20 times higher than that of the remaining population — with the average income of the top 1 percent in Fayette County at $860,607 and the bottom 9 percent with $43,553.
Other counties with large income inequality include Kenton, Jessamine, McCracken and Jefferson. Counties with the least income inequality include Robertson, where the top 1 percent earns $152,637, and Gallatin, Bullitt, Spencer and Trimble.
Anna Baumann, a policy analyst at the Kentucky Center for Economic Policy, said that income inequality “has been a growing problem in Kentucky and the nation since the late 1970s.”
“It persists in relatively poor states like ours, both in big cities and small towns, pointing to the widespread problem that those at the top are disparately benefiting from growth in our economy,” Baumann said.
Policies are needed to “grow our middle class and restore the American Dream,” she said.
“Given the need for tax reform in Kentucky, it’s especially important at this time that we differentiate the bad from the good. ... Cutting income taxes and shifting to a consumption-based system would worsen income inequality and leave us less to invest in our schools, our people, our communities.”
The latest data showed real income for the wealthiest 1 percent of Kentuckians rose by 60.1 percent between 1979 and 2013, while dropping 2.6 percent for everyone else.
Christopher Bollinger, director of the Center for Business and Economic Research at the University of Kentucky, said that the center “has produced a variety of very carefully done reports over the last 20 years clearly demonstrating that the main reason Kentucky lags behind the rest of the country is our abysmal education attainment rates. Until we catch up to the rest of the country, we will continue to face these problems.”
He said that Lexington, Louisville and Northern Kentucky have high educational attainment rates and corresponding low unemployment rates.
The fastest-growing employment sectors in Kentucky are in the health care industry, Bollinger said.
“The main challenge that Kentucky faces is that the type of jobs which are typically most in demand require higher education of some sort,” Bollinger said. “Indeed, in order to attract the firms which are growing quickly, we need a well-educated labor force.”
But Kentucky lags behind the country in educational attainment, with 25 percent having a bachelor’s degree or more, compared nationally with 32 percent.
“We also are sending kids to college at a lower rate than the rest of the country,” Bollinger said.
Kentucky’s income ascension for the 1 percent was not unique among states.
Between 2009 and 2013, the top 1 percent received 85.1 percent of total income growth in the United States. In 15 states, the top 1 percent captured all income growth during that period: Connecticut, Florida, Georgia, Louisiana, Maryland, Mississippi, Missouri, Nevada, New Jersey, New York, North Carolina, South Carolina, Virginia, Washington and Wyoming.
The income threshold for the top 1 percent was highest in the Jackson, Wyoming/Idaho metropolitan area, at $1.6 million, and lowest in Bennettsville, S.C. at $126,085. Middlesboro, Ky., was next lowest, at $136,814.
Both nationwide and in Kentucky, Baumann said, “the decline of industries that have traditionally paid middle-class wages for folks with less education, and a shift toward low-wage, low-skill jobs in service sectors as well as a lot of temporary employment, are surely part of the shrinking middle class.”
In Kentucky and nationwide earnings are depressed by trade policies that have led to more outsourcing of manufacturing jobs and declining unionization in industries such as manufacturing and mining, she said.
One note of optimism in Kentucky: Baumann noted that manufacturing “has actually done well compared to some of our neighbors, thanks to recovery in the auto industry and our central location.”