The media is full of positive economic news in the U.S. Unemployment is low, the country’s Gross National Product grew splendidly in the second quarter of 2018, and real median household income has finally entered positive territory: the latest data from 2016 shows an annual increase of $347 since 1999. Admittedly, $20 per year is not much, but at least it’s positive growth.
Then where is all the malaise hanging over U.S. society coming from? Why aren’t more people benefiting?
One place to look for answers is at the state level, by comparing the median income in different states across the country. For the purposes of comparison here, the change in income by state was calculated using data from the past two decades, starting just before the recession of 2001 and running through the end of 2016. Fully half of the states experienced a decline in real median household income during this period.
The average decline was $4,578 (weighted by the state’s population). The greatest declines in income were in Michigan, Delaware and Nevada.
Then there are 24 states, plus the District of Columbia, that have experienced positive income growth in the past two decades.
The increases have been mostly modest, but Washington, D.C., and three states — Montana, North Dakota and New Hampshire — did exceptionally well, with income increases of nearly $10,000 or more. Of course, those are sparsely populated states. Large-population states like New Yorker, Texas and Pennsylvania also did fairly well.
By census regions, New England and the Mid-Atlantic did well, but the West North Central, South Atlantic, and East South Central regions did not. The Rust Belt states of East North Central — Illinois, Indiana, Michigan, Ohio and Wisconsin — did the worst. It was the only region in which every state experienced a decline in income.
Averaging the states by population yields a net decline of $1,386 from the late 1990s through 2016. This is not a very reassuring pattern.
Other data on household income shows a similar pattern of anemic growth.
Consider income by educational attainment, to cite just one other metric. The income of every educational group has declined since the end of the 20th century; those with a high school diploma experienced the largest drop at 18 percent.
This is the new normal. The sooner we accept it, the better, because we can then accommodate our expectations to it.