I subsribe to several on-line financial newsletters, ya know, stock tips, retirement plans, etc... but this appeared in one today, an article on "income inequality," which I found interesting. First, this article addressed "income" not "wealth" which most of you know is different. Using the Gini Coefficient or Index, as some call it, economies can be quantified. A score of 1.000 means ALL income belongs to just one person, and that is not true in even the worst dictatorships or monarchies. But, the closer to 1.0 the score is the more concentrated the income is.

The US is about in the middle of the index with a score today of .36. The highest recorded score for the US occurred in 1994 when it peaked at close to .44. The article further looked at some state comparisons, and those with the most regulations have the highest index scores. The reason is, according to the author, tougher regs make it harder for middle-income to lower high income entities to compete, specifically small business vs. big business, which makes sense. Let's say some state raises the cost of licensing and/or getting required permits and inspections, and raises taxes as well, makes sense that those with deeper pockets can better navigate the increased costs, often benefitting in increased market-share as the smaller competitors drop away.

I experienced this first-hand as a small business consultant. From January, 2009 thru the end of 2016, obummer's increased regs on banks and businesses...the special tax on tanning salons, for instance, made it much harder on those struggling to finance start-ups and expansions. Many simply couldn't qualify for bank loans given the tougher regs. As a result of that, the US's Gini Index steadily climbed from a low of .397 (2008) to a high of .426 (2016). The only reason it didn't go higher i.e. create more of a disparity, is due to the overall stagnant nature of the economy. Even the big guys struggled to increase their income. Beginning in January, 2017, the trend reversed till today it sits at .36.

The focus of the article is on the adverse effects government regulations have on the distribution of income. Again, it is easy to understand that those with deep pockets can survive the extra costs associated with regulations better than those with less money.

BTW, I find it interesting that the historic peak for the US occurred in 1994, during Clinton's first term. I don't think there is a direct correlation there. As I have posted before over an 8-year tenure Bill Clinton sits at #1 in the history of our nation in economic growth, just ahead of Reagan at #2. I suppose, early on, during the recovery from the recession of 1990-91, Bush I's term, income was more concentrated in fewer hands. That's what the Gini Index measures, the concentration of income.

If you're into complicated statistical equations, with all those crazy symbols like the sigma et al, you'll love that article! I just cut to the summaries where it's explained in plain English.