Many of the things that make NH's economy one of the nation's strongest is also widening the income gap between the haves and the have-nots, a trend exacerbated by the recession. While NH has the third-lowest income disparity in the country behind Alaska and Utah, it's growing at a rate faster than the national average and those of our New England neighbors.
So why is the income gap in NH relatively narrow compared to the rest of the country? It's a result of several factors, chief among them having well-paying jobs in a range of industry sectors and occupations, including high tech. Also, NH has relatively small minority and immigrant populations, a low poverty rate, high levels of educational attainment, a relatively high percentage of families with two income-earners, and the fourth-lowest unemployment rate nationwide.
During the recession, many states saw the income gap between the top and bottom earners start to slow or even shrink. In the Granite State, though, wages in higher-paying occupations continued to increase at a much higher rate than in lower-paying occupations, where wages tended to stagnate.
The haves in NH are mostly in health care, which made up seven of the top 10 highest-paying jobs in the state in 2009, the most recent data available. Chief executives, postsecondary education economics teachers and air traffic controllers round out that list. On the low end, the food service industry dominates.
Measuring Inequalities
New Hampshire currently has one of the strongest economies in the nation, with the fourth-lowest unemployment rate. And while the state's income gap is widening at a higher rate than other states, that rift is growing at a much lower rate than it did in the 1990s.
One widely accepted measure of the overall distribution of household income is called the Gini Coefficient. The Gini ranges from zero to 1 and is calculated as the difference between a state's income distribution and a reference distribution where income is uniformly distributed across all households. As the Gini approaches one, there is a greater income disparity among households in a geographic area. The measure of household income is comprehensive as it includes income from wages, business earnings, interest, dividends and real estate investment.
Between 1989 and 2009, the most recent data available, NH's Gini coefficient went from 0.375 (the lowest in the nation) to 0.422 (the third lowest). All the New England states ranked among the top 10 states for increase in income inequality as measured by the change in the Gini coefficient from 1989 to 1999. The region's rising income inequality was attributed to extraordinary growth in sectors with high wages, including industries affected by the high tech and financial market boom in the 1990s, during which NH's income gap increased 3.8 percent.
In the first decade of the 21st Century (1999-2009), growth in high tech, finance and other high-paying industries slowed, causing income disparity to increase at a much slower rate than in the previous decade. In the 1990s, all 50 states experienced increases in income disparity. In contrast, over the last decade, one-sixth of states had declining income disparity.
During the '90s, NH had the 8th highest increase in income disparity. Between 1999 and 2009, the income gap in NH has grown by only one-quarter of what it did in the '90s, but the state ranked first in New England and the Northeast in increase in income disparity. This ranked the state 16th in the nation in terms of the increase in income disparity between 1999 and 2009.
Contributing to the recent widening in NH's income gap was the state's strong overall economic performance, particularly toward the end of the decade. New Hampshire had the fifth-highest increase in income disparity among the 50 states during the great recession. Other states in the top five were North Dakota, Wyoming, Minnesota and Montana, all of which had relatively strong economies during the recent recession with unemployment rates well below the U.S. average.
The Top vs. The Bottom
According to the most recent data from the U.S. Bureau of Labor Statistics, the top 10 occupations by average annual wage in NH in 2009 all have average annual wages above $124,000. Seven of the 10 lowest-paying occupations in NH are in food service, all with annual earnings below $20,150.
During the last decade, the average annual wage among the top 10 paying occupations in NH increased 65 percent, compared to the 7 percent increase in average annual wage among the bottom 10 paying occupations. (Occupations on both lists were weighted by share of total occupational employment.) This compares with national figures of 32 percent and 8 percent respectively.
New Hampshire's relatively strong economy allowed top paying occupations to grow earnings at double the national rate, particularly in health care. CEOs also did well in NH compared to the nation, with salaries increasing 50 percent compared to 35 percent nationally, though that does not account for bonuses and stock options.
The increase in NH's minimum wage in May 2007 to above the federal level did not result in significantly higher average annual pay for the lowest paying occupations. And the data suggests a continued sizable supply of workers in low wage areas relativeto demand.
In NH, the differentials in growth over the last decade between the high and low paying occupations was more pronounced (50 percent greater) during the great recession than the first eight years of the last decade. From 2007 to 2009, wages in NH's top paying industries continued to increase at a significant rate while wages in the lowest paid occupations and among average workers stagnated.
There are 6,600 people employed in the top 10 paying occupations in NH-one-sixth the number in the bottom 10 occupations. During the last decade, employment in the top 10 declined as employment in the bottom 10 increased by 30 percent. The fact that there are fewer people in the top paying occupations seeing their incomes increase significantly while the number of people in the bottom paying professions continues to increase means income disparities in NH will continue to rise.
New Hampshire will have to maintain a strong position in high paying, knowledge-based and high valued-added occupations to continue to have a strong economy. And strong performance in these occupations will continue to result in increases in income inequality in NH if the pay in the higher waged occupations increases while the pay in lower wage occupations stagnates. While this is expected to be the case over the course of the next few years as the nation slowly recovers from the great recession, NH is expected to have one of the lowest income disparities in the Northeast over the next decade.
Ross Gittell is the James R. Carter professor and professor of management at the Whittemore School of Business and Economics at the University of NH. He can be reached at 603-862-3340 or ross.gittell at unh.edu.
Current Issue - May 2024