Virginia’s median household income takes hit, census data indicate

September 19, 2013

Virginia’s median household income fell more than 2 percent last year, the most significant drop in the country at a time when most states saw their incomes go flat, according to Census Bureau figures.

Several economists said the declining figure is the result of budget cutting in Washington that rippled across the state even before the sequestration-mandated cuts took effect this year.

The median income for Virginia households fell in a single year by $1,400, to less than $62,000, the Census Bureau said. Adjusting for inflation, that is almost $1,000 less than it was in 2000.

Median household income is considered a broad measure of economic well-being, and Virginia’s loss stood out in a year in which, according to the Census Bureau, incomes and poverty rates finally leveled off after four straight years of decline during the recession and an uneven recovery.

A Washington Post analysis of census data by county shows that almost every region in Virginia experienced a decline in that critical yardstick. In every county in Northern Virginia, the median income slipped, just as it did in most counties and cities around Hampton Roads and the areas around Richmond and Roanoke.

Household income around the U.S.

In contrast, the median household income plateaued in Maryland, which has the highest median figure in the country. It rose in the District and in Montgomery County, and it fell in Prince George’s County. Among big cities, the Washington area has the nation’s highest median income, $88,000.

The federal government spends about $17,000 in Virginia for every resident in the state, one of the highest per capita levels in the country and almost double the national average. About one in 10 state workers is employed by the federal government.

“Virginia is very vulnerable to cuts in federal spending because roughly a third of its economy is tied to the federal government,” said Stephen Fuller, who is director of the Center for Regional Analysis at George Mason University. “Whether it’s the Budget Control Act of 2011 or the pullback from Iraq and Afghanistan or the reduction in federal contracting, we’re going to feel it.”

Conflicting indicators

Still, other bits of economic evidence suggest that incomes in Virginia were flat or were rising last year, before deeper federal budget cuts and furloughs hit this spring.

Average weekly wages in the state were unchanged from 2011 to 2012 after adjusting for inflation, according to Labor Department data. Real per capita income rose from 2011 to 2012, the Commerce Department reported.

Virginia’s finance secretary said last month that state income-tax collections grew by 2.2 percent in fiscal 2013, which includes the second half of 2012 and the first half of 2013.

Some economists who study the state said it is important to keep these conflicting income indicators in mind when weighing the new census data from the American Community Survey, which is an estimate based on a random sampling of households across the country and has a margin of error.

“When you look at the underlying growth in employment, and the growth in wages and salaries, there’s been growth in both from 2011 to 2012,” said Ann Battle ­Macheras, vice president of regional research at the Federal Reserve Bank of Richmond. “So it would be a little surprising that median household income fell.”

But other indicators suggest that Virginia’s economy has been struggling, especially in contracting. The state’s economy grew by 1.1 percent in 2012, less than half the rate of such neighbors as Maryland and North Carolina.

State income taxes collected from federal contracting workers fell by 1.7 percent in fiscal 2012 and by 2.6 percent in fiscal 2013, even before adjusting for inflation.

Many federal contractors in Northern Virginia have been paring back, said Gino Antonelli, founder and chief operating officer of Spear, a Vienna-based company that provides information technology services to the government.

“A lot of large organizations are having to cut their overhead,” he said. “It means folks are losing positions. It’s been a progressive annual decline — 2012 was worse than 2011.”

Many people who have lost jobs are support staff — such as maintenance employees — whose work cannot be billed directly to the government, Antonelli said. Often, the cuts have led to less work for subcontractors, he added.

Michael Cassidy, president of the Commonwealth Institute for Fiscal Analysis in Richmond, said federal spending in Virginia has more than doubled since 2000.

“When you see retrenchment going on at the federal level, you’re starting to see how disproportionately it impacts a state like Virginia,” he said.

Erosion of high-paying jobs

Fuller said the economy in Northern Virginia, in particular, is undergoing a structural change. Jobs that pay higher salaries were growing through the recession even as the rest of the nation faltered. But federal spending peaked in 2010. Since then, Fuller said, good-paying jobs have been eroding while there has been growth in lower-paying jobs in the hospitality, retail, health and education sectors. And a growing number of older people have retired, replaced by employees with lower salaries.

Fewer high-paying jobs and more low-paying jobs add up to a lower median household income.

“Our bread-and-butter sectors have been pulled back,” Fuller said. “It isn’t too hard to move that middle point if you just cut the top off.”

Vinod Agarwal, an Old Dominion University economist who analyzes the Hampton Roads economy, said squabbling between Congress and the White House created a climate of uncertainty that prompted businesses and individuals to trim spending in 2012.

“It’s not merely what actually happens,” he said, citing the way the sequestration deadline kept getting delayed and modified. “It’s the uncertainty it creates in the minds of businesses. They can’t hire people, they can’t plan anything, because they don’t know what will happen. People who can’t plan their spending can’t plan their lives. If they’re afraid they’re going to lose their jobs, they don’t spend money.”

The debt-ceiling debate in Washington strikes Agarwal as a similar situation, with a possible government shutdown looming.

“The uncertainty created at the federal level in the last three years has not helped this economy,” he said. “Right now, if you see what’s happening to the fiscal budget for 2014 and the debt-ceiling business, I say, ‘Here we go again.’ ”

Jim Tankersley is the editor of Storyline, where he explains complex public policies and illuminates their human impact.
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