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Report: Widening income gap leaving poor behind

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A proverb that goes "the rich get richer and the poor get poorer" is proving true in West Virginia, according to one study.

The study released this morning by the Economic Policy Institute and the Center on Budget and Policy Priorities found that West Virginia's poorest residents are seeing a decline in income since the late 1990s while families earning the most are seeing their income increase.

"Prolonged growth in income inequality undermines the basic American belief that hard work should pay off," said Elizabeth McNichol, co-author of the report and senior fellow at the Center. "Anyone who contributes to the nation's economic growth should reap the benefits of that growth.  But for decades now, those benefits have been skewed in favor of the wealthiest members of society." 

According to the report, West Virginia had the seventh largest increase in income inequality in the nation between the late-1970s and the mid-200s.

"This is an extremely troubling trend for West Virginia," stated Stuart Frazier, policy analyst with the West Virginia Center on Budget and Policy. "Growing up in poverty is harmful to our state's children and affects everything from their performance in school to their earnings as adults."

In the mid-2000s report points out that the richest 20 percent of families average about $134,464 per year. That's more than eight times more than the average income of the poorest 20 percent -- $15,917 per year.

The trend, the report points out, is toward a widening of that gap. While the upper 20 percent made 8.4 times the amount of the lower 20 percent in the mid-2000s, that same ratio was just 4.9 in the mid-1970s.

Since the late-90s average income of the poorest 20 percent decreased nearly 12 percent while the top 20 percent of incomes rose over nine percent.

The data prompted the West Virginia Center on Budget and Policy to suggest action. Its proposed solutions, sent in a news release regarding the study, are raising the minimum wage, reducing regressiveness of state tax systems, improving unemployment insurance and strengthen support systems for low-income workers.

"With the election over, it is time for the governor and the legislature to do what they can to help narrow the income gap between the state's poor families and those who are better off. Our state has a high number of low-paying jobs and this has contributed to the inability of our poorest families to raise themselves out of poverty," said Ted Boettner, executive director of the West Virginia Center on Budget and Policy. "Raising the minimum wage would go a long way toward helping the state's low-income workers and would help reverse the trend we are seeing in today's report."

Frazier suggested the creation of a state-level Earned Income Tax Credit similar to federal policy. That policy gave low and middle class families a refundable tax credit to maintain incentive to work.

West Virginia has been just one of seven states where the average income of the bottom 20 percent shrank. Nationwide, while the gap between the top and bottom 20 percent of income earners widened, lower income earners did see an increase.

"As state policymakers plan their budgets for next year, they should pursue policies that push back against the trend of rising inequality," said McNichol.  "States that narrow — rather than widen — income gaps will reap economic benefits in the long run."