Standard & Poor’s Ratings Services’ (S&P) recent report examined the effects of the widening income gap in the US and concluded that rising share of income to the wealthiest Americans has resulted in less tax revenue for the states. The implications of rising income inequality for the states vary.  

The latest retail data from Wal-Mart and the federal government points to a mixed and at times paradoxical picture. However many analysts are positing that the picture seems to tell of two different consumers and that the economic recovery has not reached down to the lower rungs of the economy.

Discussion about income mobility in the United States usually revolves around the concept of upward mobility which is defined as a person’s chance to make it to a higher economic strata than the one they arrived in.  While the concept is controversial and subject to many debates, a similar concept called intergenerational mobility is less discussed. Intergenerational mobility is defined as how the economic status of children compare to their parents. If for instance children of poor parents are likely to remain poor then there is low intergenerational mobility.

Legislators in several states are considering raising the minimum wage this year, but the issue is controversial. Proponents of raising state minimum wages argue that while the federal rate has remained stagnant—it hasn’t increased since 2009—the costs for housing, food, utilities and health care have continued to climb. This leaves those earning minimum wage with less money to afford the basics, which in turn puts downward pressure on the demand for goods and services. Opponents warn that raising the wage now would have a negative impact on businesses—especially during anemic economic times—and that a minimum wage hike actually hurts those that it intends to help by forcing employers to cut jobs at the low end of the pay scale.

Although the wage gap between men and women has narrowed slightly in recent years, the difference between a woman’s paycheck and a man’s is still significant. The ratio of women’s to men’s median weekly earnings (full-time wage and salary workers) in 2010 was 81.2.  That means that a woman who earns a weekly wage that is statistically in the middle of all weekly wages earned 81.2% of what the same statistical middle-of-the-road male earned last year. The median weekly earnings for a female were $669, while a male earned $824.

The number of poor children has been on the rise for the past 10 years, although those increases vary across state and racial and ethnic lines.  Higher childhood poverty rates mean bigger costs to states, including future health and criminal justice expenses.  

The Great Recession hit rural areas hard as median incomes fell, poverty rates increased and the metropolitan-nonmetropolitan wage gap continued to grow.  In addition, nonmetro areas continue to lose young adults through out-migration, and rural populations are increasingly relying more heavily on transfer payments due to rising medical costs and an aging population.

Long-term unemployment and a depressed economy drove the number of Americans living in poverty up in a majority of states in 2009.  Poverty levels continue to vary significantly across regions, states and age groups.