Is Ohio’s income inequality bad for the economy?

BY: MARTY SCHLADEN

It seems that income inequality would slow down the economy. But in a recent survey, much of a panel of Ohio economists said…it depends.

In the survey of 26 Ohio economists released Monday, 14 agreed that rising inequality in Ohio is slowing economic growth, four disagreed and eight said they weren’t. not sure.

By some economic measures, there is certainly cause for concern that a large portion of Ohioans are so poor that they struggle to be productive in the state’s economy. Consider:

  • 29.9% of the state’s population lived on wages at or below 200% of the federal poverty guidelines in 2019, or less than $52,000 for a family of four. That means the state was tied with Indiana as the 31st poorest state by this measure, the Kaiser Family Foundation reported.
  • Six of Ohio’s 10 most common jobs pay wages below 130% of individual federal poverty guidelines — less than $18,000 a year, Advocates for Ohio’s Future reported in 2021
  • In 2020, 6.53 infants died per 1,000 live births, putting Michigan’s Ohio as the 10th worst state, the US Centers for Disease Control and Prevention reported.
  • Earlier this month, a US Census Bureau survey estimated that 762,000 Ohioans often or sometimes did not have enough to eat in the past week. Meanwhile, Ohio food banks say they may run out of food.
  • In 2020, 42% of all births in Ohio were funded by Medicaid, the government’s health program for the poor, KFF reported. It was the 20th highest rate in the United States.
  • Life expectancy at birth in 2020 was 75.3 years in Ohio, the 13th lowest of any state, the CDC reported.

The fact that so many people live in or near poverty and in poor health can limit economic growth in many ways. On the one hand, they simply have less money to spend on goods and services produced by others, which limits economic activity.

On the other hand, they might lack things like stable housing and transportation that are almost necessary to hold a job. Additionally, people in Ohio seem to get sicker at a younger age than in most other states, which limits their ability to work and participate in the economy.

Most economists surveyed agreed that the fact that so many people earn so little is holding Ohio back.

“High-income, high-education, high-tax-base areas are doing well, but at the expense of low-income, low-education, lower-tax-base areas, and the end result is that the state as a whole is downgraded,” Kevin Egan of the University of Toledo wrote in the survey’s comments section. “Really, we’re all in this together because every household is a worker, especially investments in children as future workers and Ohio has a child poverty rate of 19%, double the poverty rate of some other states. We could choose many effective and equitable policies to reverse this trend, starting with reducing child poverty rates.”

Fadhel Kaboub of the University of Denison agreed that inequality costs everyone.

“The empirical literature is very clear on the negative impact that inequality has on economic growth,” he wrote. “The most effective growth-enhancing policies are those that invest in education, health, infrastructure and job creation opportunities for the lower half of the income scale.”

As they often do, one economist who said he was unsure of the impact of inequality on the overall economy wanted clearer definitions.

“My gut says ‘okay’ but I don’t think the evidence is clear,” wrote Paul Holmes of Ashland University. “I think it also depends on what we mean by ‘growth’; (gross domestic product) per capita could be increased by inequality while the median household income could be decreased, for example.

None of the four economists who disagreed that inequality lowers economic growth offered an explanation for this view.

This article was republished with permission from the Ohio Capital Journal. To learn more about new Ohio policies, visit www.ohiocapitaljournal.com.

Bonny J. Streater