The Coasts Keep Getting Richer

(Bloomberg View) -- It took 17 years, but the median household income in the U.S. last year finally topped the inflation-adjusted record set in 1999.

This bit of happy news was contained in the Census Bureau's annual reports on income, poverty and health insurance coverage in the U.S., which came out Tuesday. When you annualize the median income gains since 1999, they really don't amount to much -- just 0.04 percent a year, compared with a 1.2 percent growth rate over the previous 17 years. Also, a 2013 change in the income questions asked by the Census Bureau boosted the median somewhat, meaning that in reality incomes may still be slightly lower than in 1999. Still, the ground lost has for the most part been recovered, and the increase since 2013 (3.3 percent a year) has been pretty impressive.

It's been much more impressive in some parts of the country than others, though. When you look at median household incomes in the Census Bureau's four regions, the differences are pretty striking.

In the Northeast and West, median household incomes are now markedly higher than they were in 1999 and 2000. In the South, the median income is about the same. In the Midwest, it's still well below its 2000 peak. Over the long run, the Midwest has gone from being similar in affluence to the Northeast and West to significantly poorer. And the always-poorer South is actually a little bit further behind the coasts now than it was in the mid-1970s. The sharp income recovery since 2013 hasn't alleviated these differences, with median incomes growing fastest in the Northeast and at a similar pace in the other regions.

These regions encompass some very different state and metropolitan economies -- the most populous, the South, stretches from Texas to Delaware -- so the comparisons here are painted with a pretty broad brush. But I think they tell us something important about the trajectory of the U.S. economy over the past couple of decades that isn't fully reflected in other indicators.

The South and the West are the country's growth regions, with population up 22 percent and 21.3 percent, respectively, since 2000, and job growth similarly robust. The Midwest and Northeast are the tortoises, with population growth of 5.5 percent and 4.9 percent. That clearly does not match up with the differing paths of median incomes.

Housing prices do. They're a lot higher in the West and Northeast than in the South and Midwest. The direction of causality surely runs mostly from incomes to prices, but it is worth noting that such regional differences in the cost of living eat up some of the income advantage of the coasts.

A more significant match may be that, of the 14 states with the most manufacturing-dependent economies (as measured by manufacturing's share of total payroll employment in July), seven are in the Midwest and seven are in the South.  On the whole, the years since 2000 have been tough on U.S. manufacturers and even tougher on manufacturing jobs. The Midwest and South have suffered from it. The coasts, not so much. And so far, there's not much sign in the median income data that the regions' relative fortunes are changing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

  1. Also, as researcher Scott Winship has argued again and again and again and again part of what's going on here is that households have gotten smaller. Families are having fewer kids, more people are living on their own. As a result, living standards have probably risen faster than the slow pace indicated by the metric of median household income.

  2. Annualized growth of percent in the Northeast, percent in the Midwest and percent in the South and West.

  3. They are, in descending order, Indiana, Wisconsin, Michigan, Iowa, Alabama, Kentucky, Arkansas, Mississippi, Ohio, South Carolina, Tennessee, Kansas, Minnesota and North Carolina. Numbers 15 and 16 are Oregon and New Hampshire.

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