Tech boom fuels income growth as rural America lags

The average American household is making nearly as much money every year as before the recession, but income inequality is on the rise as wealthy urban centers increasingly leave struggling parts of rural America behind. 

The median American household took home just over $59,000 in 2016, the highest figure ever measured by the U.S. Census Bureau and the second consecutive year of strong growth. 

{mosads}But much of that growth came in the wealthiest cities in America, which have benefited from robust job growth and a booming tech sector that are fueling a rapid rise in wages. 

San Francisco and San Jose, home of Silicon Valley, have seen the most robust income growth in the past few years. The median household income in San Francisco is more than $96,000 a year, an 18 percent increase from 2013 when adjusted for inflation, according to an analysis of new data released by the Census Bureau.

Median income has grown by more than 10 percent since 2013 in other tech hubs around the country, including Seattle, Denver, San Diego, Portland, Ore., and Charlotte, N.C. 

“This is very much about tech, but also about the movements of skilled millennial workers and the rewards they are enjoying in urban business positions,” said Mark Muro, policy director at the Brookings Institution’s Metropolitan Policy Program. “Those metros are reveling in a tech boom but also the concentration in desirable, high-amenity cities of millennial managers who are flocking there.”

Cities where tech jobs are a smaller faction of the economy have seen slower, but still steady, economic growth.

Washington, D.C., has the second-highest median income in America at almost $96,000 a year, but wages have grown by just 3 percent since 2013, likely due to small salary increases for government workers.

Among the nation’s 25 largest metropolitan areas, the median income rose by an average of 8.4 percentage points between 2013 and 2016, when adjusted for inflation.

According to an analysis by Brookings Institution demographer William Frey, among the 51 largest metropolitan areas in the country, those with populations north of 1 million, the median income fell in only three: Virginia Beach, Va.; Memphis, Tenn.; and New Orleans. 

But growth has been decidedly slower in rural America. Among those who live outside Census-designated metropolitan areas, the median income stood at just $45,295 in 2016, an increase of only 5.3 percent since 2013. 

“The rural result is indicative of structural shifts that have been ongoing that have to do with where the jobs are,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and a former top economic advisor to former Vice President Joe Biden. 

The slow growth in rural America in the wake of the worst recession in modern history has contributed to the political earthquake that elected President Trump last November. Hundreds of counties across the country which backed President Obama in 2008 and 2012 chose Trump in 2016 — including more than 30 counties in Iowa, all in rural areas.

The new Census data show income inequality is on the rise across the nation, sped in part by an unequal economic recovery benefiting the very wealthy and urban Americans while leaving behind lower-income households and rural areas. 

The Gini coefficient, a measure economists use to chart income inequality over time, has grown by a statistically significant margin since the depths of the recession, though its growth has slowed in recent years. Inequality tends to be highest in wealthy urban centers, where a few high earners make much more than blue collar or service sector workers.

Manhattan has the highest Gini number in the nation, meaning its income distribution is the most uneven, according to the new Census figures. It is followed by cities like New Orleans, Richmond, Va., the District of Columbia and New York’s wealthy suburbs of Fairfield County, Conn., and Westchester County, N.Y.

“Inequality has been steadily rising for decades in the U.S.,” said Greg Acs, director of the Income and Benefits Policy Center at the Urban Institute. “Inequality begets more inequality.”

Bernstein said cities are more likely to have high rates of inequality because “you’ve got a geographic concentration of people who are making a killing in finance, and people who are serving them lunch and doing their dry cleaning.”

Income inequality tends to be lowest in low-income rural counties in the South and Midwest, and in some counties in the Washington, D.C., region where the median income is among the highest in the nation. The wealthiest county in America, Virginia’s Loudoun County, has the sixth-lowest Gini number in the country.

At the same time, some of the places with the highest levels of income inequality are homes of flagship universities in rural areas, where well-paid academics live alongside lower income workers in manufacturing and agriculture industries. The home counties of West Virginia University, Oklahoma State University, Seton Hall and Virginia Commonwealth University are all among the 10 counties with the highest rates of income inequality in America.

“Universities in low-income areas can skew these numbers,” Acs said.