Income Inequality

Definition

Gini Index

Why is it Important?

The Gini Index of income inequality measures the distribution of income in the community. Distribution is measured on a scale from zero to one, where zero represents a community where each person earns the same amount and one represents a community where one person earns all of the income. While some income inequality is a characteristic of market economies, too much inequality is found to prevent economic growth.¹ For example, income inequality can contribute to financial instability, political unrest, and reduced opportunities for low-income residents to innovate and start new businesses. In addition, high levels of income inequality are associated with higher mortality rates.² It is important to analyze the distribution of income along with other economic measures such as personal income, gross metropolitan product, and the poverty rate to obtain a complete picture of the community’s economy.

How are we Doing?

Income inequality in the St. Louis region is slightly higher in 2021 (0.471) than it was in 2010 (0.454). Nationally, income inequality also increased over this time period and is slightly higher than in St. Louis, 0.485. Income inequality in the St. Louis region is in the middle of the peer regions, ranking 21st among the 50 most populous metro regions.

Another way of looking at income inequality is to divide all households into quintiles based on income. The result is five categories, each with an equal number of households. The mean (average) income by quintile can reveal an unequal distribution of income if those with the highest incomes have substantially larger incomes than those at the low end of the spectrum. In the St. Louis region, the mean household income of the highest quintile ($243,127) is just over 15 times larger than the mean household income of the lowest quintile ($15,756). The United States has a slightly more unequal distribution, with the highest quintile earning an average income 17 times larger than the lowest quintile. From 2010 to 2021 the mean income of households in the lowest quintile increased  more in St. Louis (6.7 percent) than for the United States (3.5 percent) but the mean income of households in the highest quintile increased to a larger degree in both St. Louis (18.4 percent) and the United States (18.8 percent).

Geographic Level

St. Louis Metropolitan Statistical Area (MSA). View map.

Notes

¹Berg, Andrew and Jonathan D. Ostry, Inequality and Unsustainable Growth: Two Sides of the Same Coin?, 8 Aril 2011; accessed on 4 February 2014 at http://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf

²Grabmeier, Jeff, Income Inequality Leads to More U.S. Deaths, Study Finds, 8 May 2012; accessed on 4 February 2014 at http://researchnews.osu.edu/archive/incmort.htm

Data Sources

American Community Survey, United States Census Bureau