Tuesday, July 25, 2017

Real Median Income Questions aka Texas: WTF?

The latest State Median Income numbers are out from the BLS, along with the state Cost of Living and Income Tax adjustments* that allow us to transform it into Real Median Income (RMI) and make an 'apples to apples' comparison between the various states to determine which states do the "best" for their average (aka: median) citizen. And it is critical that we take into account the variation in racial and ethnic mix of each state because different races and ethnicities possess differing levels of human capital that is the raw material that generates personal income. It's quite obvious from racial breakdowns that the more privileged races (European white, Asian) have an earning advantage over their less privileged (African American, Latino) neighbors. So if I tell you the racial composition of a state it should help predict its relative prosperity - aka: Real Median Income.

I've plotted the 50 states by their Income Tax Adjusted RMI versus the proportion of their populations that are European White and Asian (aka 'privileged'). I've also made the circle size reflect population and mischievously colored the 'bubbles' according to whether they voted 'Trump' (Orange) or 'Clinton' (Blue). If you put your pointer over the chart it should get big enough to read. Or if you're on a smartphone, open the chart in another window and expand. Incidentally, some of the 'red' states are obscured by all the other states. The raw data I used to plot the chart is at the bottom along with notes on where I got the data and my methodology*.

So what does this tell us?
  • First of all Hawaii is really poor, which I guess shouldn't surprise anyone, given its remote geography and politics that are hostile towards commerce.
  • There are geographical "clumps" for Trump Southern and Midwestern states but no geographical clumping for blue states - unless  you consider upper New England to be a (particularly poverty stricken) clump.
  • 14 of the 19 'blue' states have RMIs below the national average  (about $33, 415 - not exactly because this is a weighted mean of the state medians, not an overall US median. But this number is certainly within 1% of actual) while only 6 of the 31 'red' states do.  I tried a chart that broke out 'purple' swing states but it made the remaining 'blue' states look so much worse (three of the 5 above average "blue" states are in fact 'swing' or 'purple' states while only MI falls out of the top ten 'red' state ranks) and didn't affect the red state outcome much so I gave up on it.
  • If you look at the top performing "blue" states  you see a bunch of oddities: they're either purple 'swing' states that recently were red:VA and CO, a state living on past policy glory: IL, a state justly recognized for its combination of good government and homogeneity but that gave a majority of its votes to "red" Presidential candidates in 2016: MN and finally, WA: a 'blue' state with a 'red' fiscal policy: its lack of an income tax is the single key differentiator with next door 'poverty champ' Oregon who has no sales tax but far and away the highest income tax on the median earner of any state in the Union.
  • Indeed, lest you think this is all all 'blue' vs. 'red', WA and OR illustrate the immense chasm between state median incomes and therefore state economic policy. WA is a not very diverse (in the real sense) place that has the second highest RMI in the land, while OR, with the same geography and demographics is the poorest state in the continental US. Crossing a bridge gets you from richest to poorest. Wonder what the difference is? One might say "well WA has Microsoft and Amazon and Oregon doesn't" but that just begs the question: Oregon is a beautiful state with high earning demographics smack dab between the two greatest centers of wealth generation in the history of the world and it's scraping the bottom of the barrel. What gives?
  • There's a major difference in the concentrations of Blue and Red populations. The blue states with almost half of all blue state population have RMI's in the bottom quintile, while virtually no red staters are stuck in such a low income position.  

  • There is a correlation between the proportion of 'privileged' ethnicities in a state and RMI...for Clinton States, but not for Trump states. Unless you take away TX. Then the relationship returns - albeit it's a much weaker one (see above for my eyeballed lines). 

  • Then there are the "Big Four": First of all FL is a bit of an anomaly because its huge number of retirees distort the data downward somewhat but it still falls in the range of other big Red southern states. But if you compare the other three: CA and NY are among the poorest states in RMI terms in the nation while TX, with the least advantaged ethnic mix save New Mexico is among the very richest. 
  • So to put it succinctly:  What the Heck (I'm sorry but my mom might read this), Texas?  How in the hell does a polity founded by slavers, with a constitution written by libertarians and (we are told continually by the 'elite' media) run by yahoos, cretins and (until recently) Rick Perry (but I repeat myself) deliver a so much higher standard of living for regular people?
Texas is an enormous challenge to the racialist and statist narrative. Indeed, this entire chart is. Which is why it took a pro consumer website* economist to raise the issue. Academic economists are heavily on the left at least socially if not economically and analyses that present their valhallas in a bad light particularly when compared to the  "Trump Loving" world are "not done" or at least not published in the hallowed ivy halls of academe. Doesn't comport with the 'narrative'.

And it's not oil: over six years before this data was collected, the price of natural gas fell to (and has largely stayed at) the lowest levels in history and four years after that, oil prices fell from upwards of $120 to a little over $40 a barrel. In other words, the Texas data were gathered in the midst of one of the most catastrophic oil and gas depressions in history. While NY and CA's dominant industries were in the middle of major booms.

So once again:  all together now:  "What the (Heck), Texas?"

 Here's the raw data in a form that can be copied and pasted into a spreadsheet so that you can check my math:
State Real Median Income Federal BLS Cost of Living Index 2016 Federal BLS Nominal Median Income (Individual) 2016 Median Income Tax Paid 2016 2017 Estimated Pop. Census  Bureau
WY  $41,250  92.8 $38,280  $0   589,713 
WA  $39,802  106 $42,190  $0   7,384,721 
VA  $38,351  94.5 $38,180  $1,938   8,492,783 
TX  $37,311  92.6 $34,550  $0   28,449,186 
ND   $37,296  101.2 $38,170  $427   790,701 
IL  $37,223  96.5 $37,320  $1,400   12,815,607 
MI  $37,166  91.2 $35,400  $1,505   9,935,116 
OH   $37,080  92.5 $35,030  $731   11,646,273 
CO   $36,314  101.9 $38,800  $1,796   5,658,546 
IN  $36,164  88 $32,910  $1,086   6,663,280 
MN  $36,017  101.5 $38,870  $2,312   5,554,532 
KS  $35,682  90.9 $33,700  $1,265   2,929,909 
TN  $35,238  90.3 $31,820  $0   6,705,339 
NE   $35,075  92.3 $33,840  $1,465   1,922,610 
DE  $35,060  102.8 $37,750  $1,709   965,866 
UT  $34,946  92.4 $33,990  $1,700   3,098,761 
AK  $34,772  133.5 $46,420  $0   741,204 
IA  $34,739  92 $33,650  $1,690   3,152,735 
OK   $34,556  89.7 $32,430  $1,433   3,974,794 
MO   $34,538  91.5 $33,380  $1,778   6,123,362 
GA  $34,476  91.7 $33,430  $1,816   10,450,316 
AZ  $34,179  98.8 $34,680  $911   7,026,629 
KY  $34,054  90 $32,340  $1,692   4,450,042 
PA   $34,020  103 $36,150  $1,110   12,819,975 
WI  $33,853  98.1 $35,110  $1,901   5,795,147 
ID  $33,734  88.2 $31,860  $2,107   1,695,178 
AL  $33,273  90.2 $31,550  $1,538   4,884,115 
MS  $33,174  83.5 $29,000  $1,300   2,990,113 
MA  $33,171  130.4 $45,580  $2,325   6,873,018 
LA  $33,138  93.4 $31,980  $1,029   4,714,192 
MD  $32,968  121.1 $41,860  $1,936   6,068,511 
NC   $32,564  95.8 $33,100  $1,903   10,247,632 
NJ   $32,269  125.6 $41,320  $790   8,996,351 
CT  $31,744  131.8 $43,830  $1,992   3,583,134 
FL  $31,652  100.5 $31,810  $0   21,002,678 
NV   $31,643  106.5 $33,700  $0   2,995,973 
NH   $31,540  118.2 $37,280  $0   1,335,832 
NM   $31,016  100 $32,320  $1,304   2,084,193 
AR  $30,767  91.4 $29,420  $1,299   3,000,942 
RI  $30,483  123.3 $39,050  $1,464   1,059,080 
SC   $30,345  97.5 $31,280  $1,693   5,030,118 
SD  $30,029  102.5 $30,780  $0   868,799 
MT   $29,522  102.7 $31,970  $1,651   1,052,343 
NY   $28,948  135.6 $41,600  $2,346   19,889,657 
VT  $28,857  123.8 $37,040  $1,315   624,592 
CA  $28,651  134.3 $39,830  $1,352   39,849,872 
ME  $28,393  114.7 $34,710  $2,143   1,327,472 
WV  $28,066  103.7 $30,240  $1,136   1,834,882 
OR   $26,238  129.5 $37,080  $3,102   4,144,527 
HI  $21,511  168.6 $38,750  $2,483   1,454,295 
USA  $33,415   325,744,646 

*Bankrate - a website that advises consumers on the best mortgages and other financing made another crucial adjustment that had been skewing these comparisons in the past:  Taxes.  All property and excise taxes are already reflected in the cost of living calculations but the impact of income taxes was being left out. At the extreme it means that that a state like Oregon which has no general sales tax would have its income inaccurately inflated relative to Washington which has no income tax. The population data come from the Census Bureau, the COLA adjustments come from the Bureau of Labor Statistics as do the Nominal Median Income estimates. The Tax Institute provided the Median Income Taxes paid.

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