Comparing the Wealth of U.S. Geographic Regions Over Time

Comparing the Wealth of U.S. Geographic Regions Over Time

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Every year, the average American takes home about $51,600 in personal income.

Of course, what you make each year depends on factors like your job, work ethic, education, and personal circumstances – but it also varies significantly over geography.

The Geographical Wage Gap

Today’s chart uses data from the Brookings Institute, and it focuses on the geographical wage gap, or the difference in per capita income that exists between various U.S. regions.

Interestingly, it’s a gap that has historically narrowed over time.

Just after the Great Depression, income per capita in the Mideast was 50% higher than the average American, and roughly three times higher than in the Southeast. Over the next 50 years, this gap would continue to narrow until reaching its smallest differential by the mid-1980s.

In the last couple of decades, however, the geographical wage gap has shown signs of a potential reversal: per capita incomes in New England, Mideast, and Far West have been increasing relative to the average American wage, while other regions are remaining more stagnant.

The Vitality Index

Wages are just one factor in measuring prosperity, and the Brookings Institute has attempted to create a more well-rounded approach to this with the Vitality Index.

The Vitality Index is comprised of the following variables:

• Median household income – 45%
• Poverty rate – 24%
• Life expectancy – 13%
• Prime-age employment-to-population ratio – 9%
• Housing vacancy rate – 5%
• Unemployment rate – 4%

The following map is directly from the aforementioned report, and it shows the Vitality Index by county, using recent data from the U.S. Census Bureau:

Which areas have seen the biggest increases and decreases in vitality?

The Great Lakes region, which relies heavily on manufacturing, has seen the most significant drop between 1980-2016, while the Mideast has seen the biggest rise over that same 26 year period.

Cost of Living

One fair point of objection to the analysis of the Vitality Index – or any measure of economic differences between geographic regions – is that cost of living is not taken directly into account.

Here is what the researchers had to say on this:

It would be reasonable to adjust median household income for cost of living, but we opted to not do this for two reasons. First, cost-of-living estimates that are comparable across places are not available for 1980. Second, cost of living may vary for reasons that are directly related to the county vitality we seek to measure. For example, a place with stronger labor demand or better local public goods could attract in-migration that contributes to higher housing prices. Finally, cost of living may reflect the amenity value of a place, and not simply inflated prices for the same goods and services.

No analysis is perfect, but the Vitality Index and historical data on per capita income are interesting to consider when framing any analysis on wages, prosperity, and economic inequality in America.