Income inequality in Texas significantly worsened last year, according to a measure of inequality compiled by the U.S. Census Bureau.

Texas was one of just nine states in which the gap between rich and poor widened in 2018, according to the Gini index, a measure of income distribution across a population. The index uses zero (0.0) to represent perfect equality, with each household receiving the same amount of income, and one (1.0) to represent perfect inequality, with one household receiving all the income.

While Texas’ level of income inequality was trending down over the last four years, it increased last year, almost reaching the level of 2014, the highest over the past decade. The state’s Gini index rose to 0.482 in 2018 from 0.478 in 2017. It remained below the national measure of 0.485, however.

At the same time, Texas’ unemployment rate is sitting at a historic low of 3.4 percent, and firms are still hiring at a healthy pace. Job growth in the state last year was up more than 2 percent from 2017, with Texas employers adding around 275,00 jobs.

On HoustonChronicle.com: Houston region’s poverty rate increases in 2018 as household income flattens

The widening gap between rich and poor indicates that benefits of the strong economy are not being shared evenly, analysts said. Income inequality has been on the rise nationally for decades, so an increase in income inequality in Texas is not surprising, said Jonathan Rothbaum, the Census Bureau chief of income statistics.

“I don’t think of this year as an outlier,” Rothbaum said. “Generally, since the 1970s, income inequality has been increasing in the U.S.”

The Gini index compiled by the Census measures pretax income, meaning that wealth growth at the top of the income distribution — such as increases in stock market assets or housing — are not included. Rothbaum said wealth disparity in the U.S. is often wider than this measure of income disparity.

The Houston area saw a decline in income inequality last year, despite a slight uptick in the individual poverty rate and stagnant income and wage growth. The Gini index for the Houston metro region was 0.486 — higher than both Texas and the nation, but down from the 2017 level of 0.488. In the San Antonio metro area, the Gini index was 0.475, up from 0.464 in 2017.

Population at play

Analysts said part of the reason for the rise in the disparity here is due to the changing demographics of the state. Texas has in recent years attracted more people with either very high or very low earnings.

“Essentially you have an emptying out of the middle,” said Lloyd Potter, the Texas state demographer.

Research by Pia Orrenius of the Federal Reserve Bank of Dallas and Madeline Zavodny of the University of Florida, however, found that migration has played a minor role in role in rising income and wage inequality. Orrennius said, moreso than migration, the key factor is technological change, which has wiped out higher paying jobs in industries such as manufacturing and forced workers into lower-paying occupations.

The erosion of the minimum wage and decline of unions have also played a role, she said.

The long-run risk

In the short run, the Gini index tends to follow the business cycle: rising when the economy is expanding, and falling when the economy is contracting, economists said, since expansions typically lead to leaps in earnings for the upper end of the income distribution. If earnings growth for middle-income workers doesn’t keep pace, then the disparity worsens.

Rising income inequality in the state and in the nation could be partially attributed to the slow growth in wages and incomes for most workers. In 2018, U.S. median household income barely grew, increasing by just 0.2 percent to $61,937 after adjusting for inflation. In Houston, adjusted median household income was essentially flat, rising by only $34 to $65,394, according to the Census.

Texas Inc.: Get the best of business news sent directly to your inbox

With the Texas economy quickly adding jobs in 2018, a rise in income inequality in and of itself is not necessarily cause for alarm, Orrenius said. But over time, increasing income inequality can pose a risk to economic growth, she added, because with fewer people in the middle class, there’s less consumer spending, which acounts for about 70 percent of U.S. economic activity. Middle income households tend to spend the most on housing and consumer goods.

“What’s more concerning to me is that the long-run trend has not been reversed, and we are becoming more and more unequal,” Orrenius said. “A lot of people are being left behind. It becomes a segmented society.”

Matt Dempsey contributed.

erin.douglas@chron.com

Twitter.com/erinmdouglas23