President Barack Obama delivers his State of the Union address tonight. He’s expected to make a big deal about economic mobility and reducing income inequality in the U.S.
But the challenges are substantial when it comes to narrowing the divide. Texas has the eighth highest level of income inequality, based on 2010 Census data.
"In terms of Texas, we have a lot of upper end income inequality," says Mark Frank, an economics professor at Sam Houston State University. "We have a lot of income inequality because we have the top 1 percent or .01 percent."
Much of the state’s income inequality cuts along racial and ethnic lines. In Texas, poverty rates among Hispanics and African Americans are 2.5 to 3 times higher than whites.
Steve Murdock, a former director of the U.S. Census Bureau who now runs the Hobby Center for the Study of Texas at Rice University, says incomes for Hispanics and African Americans are 60 to 75 percent of what they are for whites -- and he says those are also the fastest growing parts of Texas’ population.
"The vast amount of our growth, whether you look at Texas or the United States, is due to minority populations," Murdock says. "So for example in the 2000 to 2010 period of time, only 11 percent of the Texas population growth was due to non-Hispanic whites, 65 percent was due to Hispanics, about 12 percent African Americans."
That means that without closing the income gap between ethnic groups, Texas will see poorer people as the non-Anglo population grows, Murdock says. One obvious way some have suggested to address that -- raising the minimum wage.
"If you have a growing segment of the population that’s earning below a living wage, by increasing the minimum wage, that’s going to perhaps increase the earning or the amount of money that they make and will perhaps slow a little bit of the downside of income inequality," says Lloyd Potter, Texas state demographer. But Potter says there’s also a downside to raising the minimum wage.
"But of course then there are the potential negative impacts that many people talk about of doing that – raising costs and potentially putting businesses out of business as a function of not being able to compete effectively," Potter adds.
While income inequality in Texas tends to be higher than many other states, Texans are also less likely to improve their financial position in their lifetime, too.
"Our research found that nine states all in the south have consistently poor economic mobility, meaning their citizens are less likely to move up from the bottom, and more likely to fall down once they reach the top," says Erin Currier, director of the Pew Charitable Trusts' research on economic mobility. " And Texas was one of those states that performed below the national average on those measures."
Currier says the key challenge for the President is to suggest reforms that focus on economic mobility. Sam Houston State’s Mark Frank says he will be listening for long-term strategies – particularly ones that involve access to education.
"A lot of the income inequality disparities have to do with educational gaps and getting more of your high school graduates to go on and go to college and complete a college degree," Frank says. "That’s the real secret not only for income mobility questions but also income inequality questions."
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