Even though income inequality is growing in Iowa, a new report says the state ranks lowest in the country when it comes to the disparity.

A report from the Center on Budget and Policy Priorities and the Economic Policy Institute says average income in the top fifth of Iowa households grew by an inflation-adjusted 8.6 percent from the late-1990s to the mid-2000s. For the bottom fifth, incomes fell by 5.8 percent.

The figures mirror what happened nationally.

“That’s clearly not a recipe for shared prosperity,” said Doug Hall, director of the Economic Analysis and Research Network at the Economic Policy Institute, a foundation- and labor-funded group.

The center, whose work frequently focuses on the impact of federal and state government policies on low-income people, hopes the data will influence state legislatures going into session early next year to push back against the trends.

The report says these latest disparities are merely a continuation of what’s been happening for decades.

Since the late-1970s, the average income for Iowa households in the bottom fifth of earners went up only an inflation-adjusted

8.4 percent, the report said. In the top fifth, they increased 62.1 percent.

Even with the disparity in income growth, however, Iowa is situated better than other states. The report said households in the bottom and even middle rungs of the income ladder are doing better relative to those at the top than they are in every other state.

Iowa ranked 50th in the gap between its top and bottom earners, as well as the gap between top earners and those in the middle.

The average income for Iowa’s top 20 percent of households was 5.6 times higher than it was for those in the bottom 20 percent for the years 2008 through 2010. The top fifth, meanwhile, earned a bit more than twice those in the middle 20 percent.

The disparity was worst when the bottom fifth was compared with the top 5 percent. There, top earners made 8.7 times more.

By contrast, the top 5 percent of Illinois households earned 14.6 times more than those in the bottom fifth, the report said.

The top fifth of earners made 8.3 times more than those in the bottom fifth. That ranked Illinois ninth highest in the country in income inequality, according to the report.

David Osterberg, executive director of the Iowa Policy Project, said he thinks Iowa’s ranking probably is because of the fact that there are relatively few companies with national headquarters — and thus, highly paid executives — in Iowa.

Still, he declined to say Iowa was doing well. “Iowa is the least bad on this scale,” he said. The Iowa City-based group frequently studies income disparities in the state and has urged the state to pursue policies raising wages at the lower end.

The national report, which was issued last week, blamed several factors for growing income inequality in the states. It said wages are not only growing unequally, but the expansion of investment income and declining value of state minimum wages also contributed.

The group argued that states should raise and index the minimum wages, improve unemployment insurance and make state tax systems more progressive.

Pay inequality rankings

How the top fifth of household income compares with the bottom fifth by state.

State Top-to-bottom ratio
1. New Mexico 9.9
2. Arizona 9.8
3. California 9.5
4. Georgia 9.3
5. New York 9.2
6. Louisiana 8.8
7. Texas 8.6
8. Massachusetts 8.3
9. Illinois 8.3
10. Mississippi 8.3
50. Iowa 5.6

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