PPIC Logo Independent, objective, nonpartisan research
Press Release · May 9, 2001

Gap Between State’s Rich And Poor Shrank During 1990’s Boom

But Income Inequality Still High Compared to Past Decades and Rest of Nation

SAN FRANCISCO, California, May 9, 2001 – The gap between California’s rich and poor narrowed in the mid to late 1990s, according to a study released today by the Public Policy Institute of California (PPIC). But the news isn’t all good: The study also found that California’s income inequality remains much higher than it was in the 1970s and 1980s and substantially higher than in the rest of the nation.

The study, Population Mobility and Income Inequality in California, is the first to analyze family income inequality through 1999. Authors Mary Daly, Deborah Reed, and Heather Royer find that, in the mid 1990s, faster income growth at the lower end of the income distribution caused the gap between families near the bottom and families near the top to decrease by 7 percent. In the late 1990s, the gap neither increased nor decreased because income grew at an equal rate for families near both ends of the distribution.

“This is positive news after years of steadily rising income inequality in California,” says economist and PPIC research fellow Deborah Reed. Nevertheless, income inequality remains a serious concern. Since 1969, the gulf between rich and poor has grown 50 percent in California, compared to 25 percent in the rest of the country. According to Reed, “We still have a sizeable income gap in this state; it would take years of decreases like these to bring income inequality back down to levels of the 1970s and 1980s.”

Reed also points out that the decrease coincides with a period of strong economic expansion and that the income gap could be affected by a slowing economy. A prolonged downturn would be particularly troublesome for lower-income families, who tend to be hit hardest during slumps and whose income over the past few decades has not returned to previous levels following economic declines.

Consistent with earlier PPIC reports, the study finds that immigration remains a leading contributor to the state’s high level of income inequality. An earlier PPIC report also found that the rising earnings value of education and experience has widened the income gap in California.

The Public Policy Institute of California is a private, nonprofit organization dedicated to objective, nonpartisan research on economic, social, and political issues that affect the lives of Californians. The Institute was established in 1994 with an endowment from William R. Hewlett.