A recent article in The Economist magazine contained data that was so alarming I had to look into it further. According to the article, U.S. median household income adjusted for inflation fell 7.1% from 1999 to 2009. In several states, including Rustbelt Michigan, Indiana and Ohio and previously booming Sunbelt North Carolina and Georgia, the decrease was 12.9% to 21.3%. This, of course, was not a fair comparison, since 1999 was a near peak economic year and 2009 was a severe recession year. So I downloaded recent Census Bureau data – the readily available data was for the average of 2008 and 2009 – and compared it with data from another weak economic year, 2003 data from the Statistical Abstract of the United States. This is still not the right comparison, because the median household income in 2009 is apparently lower than the 2008 to 2009 average. But it does make for another interesting comparison. From 2003 to 2008/09, median household income in the U.S. was basically unchanged. But in New York State, it fell about 5 percent.
Before going further, let me remind the reader of the difference between the mean and the median as a measure of typical income. Mean or per capita income simply adds up everyone’s income and divides it by the total number of people or households. By this measure, New York is a wealthy state. Why? Imagine nine poor households each with an annual income of $15,000, and one rich household with an income of $20 million. The total income of these ten households would be $20,135,000. The mean income would be that figure divided by ten, or $2,135,000. So the “average” household among that group, as measured by the mean, would have an annual income of more than $2 million.
Regardless of how much the typical New York State resident earns and lives, in other words, New York States average household income as measured by the mean is pulled up by the large number of very wealthy people who live in the state, most of them in Manhattan or one of the downstate suburban counties.
The median household income is the income of the household in the middle if all the households are ranked in order. In the example above that would be $2 million, $15,000, $15,000, $15,000, $15,000, $15,000, $15,000, $15,000, $15,000, $15,000. So the typical average income as measured by the median would be just $15,000.
By this measure, New York State has never been a particularly wealthy place. That is because the majority of state residents are not wealthy people living in Manhattan or the Downstate Suburbs; they are less well off people in the Outer Boroughs and Upstate. In the early 1990s recession (which hit harder here than elsewhere), in fact, New York was poorer than average as measured by median household income. It later became somewhat better off than average. Given that the data used to calculate this is from a survey, and might be off a little in either direction from the true number, in 2008/2009 New York State was about average. And getting poorer compared with 2003.
Other states with median household income decreases of 2.0% or more between those years include Northeastern states New Jersey (minus 3.1%), Rhode Island (6.3%), Delaware (11.3%??), Massachusetts (2.6%) and Maryland (2.5%). Rustbelt states Michigan (5.9%), Indiana (5.8%), Illinois (3.5%), Minnesota (3.3%), and Ohio (2.1%). Sunbelt boomstates Georgia (8.6%), Tennessee (8.5%), and North Carolina (3.2%). And deep south low income states South Carolina (5.6%) Arkansas (3.0%) and Mississippi (3.9%). You have states with high and low taxes, states with growing and declining populations, Red States, Blue States, manufacturing states, finance states. Sunbelt states that had been doing better for a long time.
Among the states where median household income went up, it is also hard to discern a pattern. At first glace I’d say that the loser states gained most of their income from the private sector, while the winner states have lots of government, natural resources, or both. But I’m not sure Pennsylvania and Maine fit that description, aside from having among the highest percentage of their population that were senior citizens (those now 55 and over are the wealthiest generations in U.S. history, and are supported by government spending).
A better reading of what has happened would compare 2009 as a single year with 2003, or perhaps 2002. Or better yet, those years with 1991 and 1982 as well. All very bad years for the economy, and thus comparable with each other. Perhaps someone getting paid to do this sort of work could put together a table. I’d love to see it.
What one can conclude, however, is that if you are a New Yorker who doesn’t control the institutions that set your pay, either a top executive with control of a company, a retired or near retired public employee with control of state and local government, or a member of Generation Greed in control of the federal government, you are getting poorer even when the business cycle is removed from consideration. You have become five percent worse off, and are expected to pay more to and accept less from those who have a better deal. Lots of other states are in the same situation, so a net transfer of funds from the federal government is not in the cards.