Income Ladder Is Difficult to Climb for US Metro Areas

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Jun 02, 2023

Income Ladder Is Difficult to Climb for US Metro Areas

In 1949, the list of the country’s most affluent metropolitan areas was dominated by Midwestern industrial cities. Many of those places aren’t so affluent anymore, relatively speaking. I assembled a

In 1949, the list of the country’s most affluent metropolitan areas was dominated by Midwestern industrial cities.

Many of those places aren’t so affluent anymore, relatively speaking. I assembled a version of this chart for a column a few weeks ago about the fortunes of San Francisco and Detroit, and it engendered much commentary on social media about the fleeting nature of regional economic success.

But what about the poorest metropolitan areas in 1949? How did things go for them?(1)

The good news is that these places haven’t become poorer. Adjusted for inflation, median household incomes have more than doubled in most, and the increases are somewhat understated because I’ve used the national consumer price index to do the adjusting, and these areas have probably experienced price increases below the national average, especially for housing, since 1949.(2)

Still, most of these areas remain near the bottom of the income rankings. I used the 2017-2021 five-year estimates from the Census Bureau’s American Community Survey because they’re more accurate than the one-year estimates (the 2018-2022 estimates won’t be out until December) and set a population cutoff of 1 million to get roughly the same number of metro areas as the Census Bureau’s cutoff of 250,000 did in 1949. Six of the least affluent metro areas from 1949 are still in the bottom 15, while Johnstown, Scranton, Wilkes-Barre and Utica-Rome all have low enough incomes to qualify but not enough people.

Only three of the 15 most affluent metro areas in 1949 (San Francisco, New York and Washington) are still in the top 15, two (Buffalo and Cleveland) have fallen into the bottom 15 and four (Toledo, Dayton, Akron and Youngstown) have median incomes low enough to make the bottom 15 but not enough inhabitants to qualify. So there seems to be a lot more persistence at the bottom than the top. There’s also regional persistence, with Southern metros in the majority on the least affluent list in 1949 and now.

That local poverty tends to persist is not news. A 2014 City Observatory study found that three-quarters of 1970 high-poverty US urban neighborhoods were still poor in 2010. On a regional level, things weren’t always so static — from 1929 until the 1970s, there was a lot of convergence in the US Bureau of Economic Analysis’s estimates of state and regional per-capita personal income (that is, average income, as opposed to the median incomes shown in the above tables). But they stopped coming together after that, and the Southeast and Southwest were the country’s poorest regions in 2022 just as they were in 1929. (In the BEA’s taxonomy, the Southeast stretches from Virginia and West Virginia at one end to Arkansas and Louisiana at the other, and the Southwest is Arizona, New Mexico, Oklahoma and Texas.)

This may all seem a bit strange, given all the attention paid these days to pandemic-accelerated shifts of people and economic activity toward the South and to a lesser extent the Mountain West. The 2017-2021 median household income numbers are old enough that they may just be missing some of those shifts, but the per-capita income numbers are available through the first quarter of this year and continue to show the Southeast and Southwest in last place and not really gaining ground.

Why aren’t they rising up the income ranks? One key reason is, paradoxically, that people keep moving there. In an influential 2017 paper, economists Peter Ganong and Daniel Shoag proposed that incomes stopped converging across states in the US after 1980 because constraints on residential construction in high-income places drove housing prices so high that it no longer made sense for low-income workers to migrate to these places in search of opportunity:

Through most of the twentieth century, both janitors and lawyers earned considerably more in the tri-state New York area (NY, NJ, CT) than their colleagues in the Deep South (AL, AR, GA, MS, SC). This was true in both nominal terms, and after adjusting for differences in housing prices. Migration responded to these differences, and this labor reallocation reduced income gaps over time.

Today, though nominal premiums to being in the New York area are large for these two occupations, the high costs of housing in the New York area have changed this calculus. Lawyers continue to earn much more in the New York area in both nominal terms and net of housing costs, but janitors now earn less in the New York area after subtracting housing costs than they do in the Deep South.

In short, people with lower-income jobs were being incentivized to move to lower-income areas, and those with higher-income jobs to move to higher-income areas — which locked existing regional inequalities in place.

Then came the Covid-19 pandemic, and a sudden shift to remote work seemed to offer a new path for white-collar workers. If they could keep earning New York salaries while living somewhere else, their already high real earnings would shoot even higher. Luring them, of course, presented an opportunity for lower-income metro areas to rise up the income ladder.

As remote work is supplanted by hybrid work with some office presence required, it could be that the main effect will be within regions — as seen in the “Donut Effect” of suburban property values rising relative to those closer to downtown — rather than between them. Then again, a recent New York Times analysis of Census data found that even before the pandemic, the most expensive metropolitan areas had begun to experience a net outflow of college graduates, with less-expensive large metros getting most of the inflows.

In other words, something may well be afoot, and it could be too early to expect the income statistics to reflect it. Those statistics do teach, though, that breaking out of the low-income ranks isn’t easy. Baltimore was the only metro area to make the leap from the least affluent 15 in 1949 to the most affluent now, and it was able to ride the coattails of the post-World War II economic juggernaut next door, metro Washington.

Metropolitan Raleigh, North Carolina, which was too small to have its median household income measured in 1949, seems likely to have been below the bottom-15 income cutoff then, too. And four other metros from the 1949 least affluent list — Nashville, Norfolk, Atlanta and Richmond — now have household incomes above the 2017-2021 national median of $69,021. Breaking out of the bottom ranks isn’t impossible. It’s just a lot harder than falling from the top.

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Income Ladder Is Difficult to Climb for US Metro Areas