How does Minnesota’s income inequality compare with other states?

Income inequality in the United States has looked about the same for years now: The richest 10% of households earn more than a third of all income, and the poorest earn less than 2%.

In Minnesota, these ratios are slightly better — enough to rank the state among the least unequal.

“For the level of income we have, we don’t have a lot of inequality,” said Fabrizio Perri, an economist at the Minneapolis Fed. “Even people at the bottom 10% do relatively well compared to the median. That’s an important feature of Minnesota.”

The disparity is still bigger than gaps seen in some European countries, and Minnesotans are less likely to climb the income ladder — or fall down it — than other Americans.

Given Minnesota’s access to education, health care and a low unemployment rate, the state “could do even better than other states” than it already does, Perri said.

High income inequality can have widespread consequences, restraining overall economic growth, research shows.

“In particular, what matters most is the gap between low-income households and the rest of the population,” according to a widely cited OECD study. “In contrast, no evidence is found that those with high incomes pulling away from the rest of the population harms growth.”

New data from the federal Bureau of Economic Analysis allows for income inequality comparisons between states based on a snapshot of personal income.

The BEA’s personal income data trends higher than other income statistics because it includes wages as well as the value of benefits such as health insurance; business ownership; rental property; Social Security and other government benefits; interest; and dividends.

Median personal income

Comparing median personal incomes across states, Minnesota is the wealthiest in the Midwest and has the 15th-highest median personal income in the nation. Half of all households make more than $121,000 and half make less, according to BEA data.

90/50

Comparing the richest 10% (90th percentile) of earners to the median income gives the 90/50 ratio. The higher the number, the greater the gap between the richest residents and the average earner. For Minnesota, the top earners make 2.4 times the median. North Dakota has the narrowest gap, 2, by this measure, and California is most unequal at 2.7.

80/20

Another inequality metric looks at the top 20% of earners (80th percentile) compared to the bottom 20%. This 80/20 ratio has the richest Minnesotans making not quite three times what the poorest 20% earn. The state ranks squarely in the middle compared to other states.

“There’s not a lot of difference among states,” Perri said of this metric.

The top 20% of earners nationally take in about half of all income, which is roughly the rate in each state.

50/10

Comparing the median income to the bottom 10% of incomes shows the gap between the poorest Minnesotans and the average earner, or the 50/10 ratio. While plenty of states do slightly better on this metric, among states with Minnesota’s median income or higher, only five are less unequal. Compared to many other states, the bottom 10% of Minnesota earners are faring better, Perri said.

Delaware scores the best here, while Mississippi and the District of Columbia have the largest gaps between median earners and the poorest 10%.

Gini coefficient

The Gini coefficient, or Gini index, measures income inequality on a scale of 0 to 1, with higher numbers representing more inequality. If all incomes were the same, the index would be 0; a society in which one person controls all wealth would have a score of 1. Norway has the lowest Gini index globally at 0.22.

The Gini numbers across the U.S. are fairly uniform, with an average U.S. rate of 0.47. That number has been increasing steadily over the past half century.

Minnesota fares better than average and is tied for the ninth-lowest Gini coefficient at 0.40. Maine had the lowest Gini score and South Dakota the highest in 2022.