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April 04, 2007
Income Gap Increasing Fastest in New England

The New England region experienced the largest income-gap increase in the country between 1989 and 2004, according to research by the Carsey Institute at the University of New Hampshire.

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Over the same period, the Pacific region and the Mid-Atlantic region saw the second and third largest increases, respectively.

Ross Gittell, a senior fellow at the Carsey Institute, says the increase in New England was caused by both growth among top earners and the hollowing out of the middle class caused by significant changes in the nation's economy.

"This is not simply the 'rich getting richer'," says Gittell. "The loss of manufacturing employment for low-skilled workers has been coupled with increased demand, and rewards, for high-skilled and high-tech employment. These shifts were more pronounced in New England because of the region's highly educated population, strong research and development base, and relatively high cost of business operations, which pushes low-skilled jobs elsewhere."

The research found that income growth was concentrated in the top quintile of households. Average real income has grown 20 percent for this group, and 27 percent for households in the top five percent.

Three states in the region--Connecticut, Massachusetts, and New Hampshire--ranked among the top five nationally in the increase in income disparity.

Six of the 20 metropolitan areas with the highest income disparity in the nation are in New England: Nashua, NH; New Bedford, MA; and Stamford-Norwalk, Bridgeport, Waterbury, and Danbury, CT.

Gittell says that because the region is relatively prosperous and has relatively low levels of poverty, it is in a stronger position to combat the trend. New England is home to four of the 10 states with the lowest proportion of people living below the poverty level.

The researchers also offer several policy suggestions:

  • Upgrade the education and technological skills and economic opportunities of all individuals in the region with workforce "re-preparation" programs to help those displaced from manufacturing jobs by off-shoring.
  • Improve quality of and access to lower-cost education.
  • Expand programs designed to meet entry-level, incumbent workers' needs for opportunities to advance toward positions with more responsibility, skill, and compensation, across the region.
  • Ensure available child care, affordable housing, and transportation assistance for low and middle income families and workers.
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