Incomes in the Two Counties Reached Parity with the U.S. in 2018

by Dr. Patrick Jones

In the world of income measures, there could be a far worse outcome than for an Eastern Washington community to find itself at the U.S. average. With the latest release of estimates from Census, that is essentially the 2018 story for the greater Wenatchee area. More specifically, the 2018 story adopts another calculation of the “middle” value - the median. In 2018 Census put median household income, or MHI, in the counties of Chelan and Douglas at $61,714. The same measure for the U.S.:  $61,937. Statistically, the estimates are equivalent, and can been viewed in Trend 2.1.2.

Of all the measures of economic progress, median household income, along with employment, gives a quick assessment. MHI typically used to rank communities across the U.S. And for municipal governments, MHI plays a key role in the underwriting of local public debt.

What is MHI? First, it’s the middle value of a distribution that evenly divides all numbers into two equal halves. For income distribution measures, most economists regard a median as providing a better sense of the “middle,” since very high values in the distribution can dramatically move an average. In the era of the 1%, this is not uncommon.

Second, personal income rests on three legs. The most important one consists of earnings from wages and salaries. The second consists of investment income. The third leg depends on federal transfer payments from a large group of U.S. programs such as social security, Medicare & Medicaid, Veterans Affairs, and USDA, among others. In 2018 data from the U.S. Bureau of Economic Analysis for the two counties put earnings from work at 55% of total personal income, investment income at 25% and federal transfer payments at 20%.

Finally, the unit in MHI is the household. In some cases, this is an individual living alone. In most cases, however, a household consist of more than person. Very often, this a family, nuclear or extended. Regardless whether household inhabitants are related or not, it is often the case that more than one member has a job. So, the concept of median household income gives a good sense of the middle of living “units” in a community.

Beyond 2018, MHI in the greater Wenatchee area has done well over the past dozen years, compared to the U.S. Cumulatively, from 2005-2018, median incomes have increased by 53%. In the U.S., a similar calculation yields 34%. The experience in the two counties even bested the growth in Washington state, one of the best performing states for income, at 50%.

Yet, as the graph reveals, there is still quite a gap to narrow between the greater Wenatchee area and the state. In 2018, it stood at over $12,000. Nonetheless, among Eastern Washington metros, the greater Wenatchee area ranked second, after the Tri Cities.

What could be the drivers of this strong growth? First, consider wages. From 2005-2018, the average annual wage in Chelan & Douglas Counties climbed 46% cumulatively. So most of the increase can be explained by wages. Still, as one can observe in Trend 2.1.3, a yawning distance still characterizes wages here and statewide. In 2018, the average annual wage here was nearly $40,000; that of Washington state was slightly over $66,000.

Another could be the second leg - investment income. 2018 data from the BEA put investment income at nearly $12,500 per person for the greater Wenatchee area. That represents a 240% increase since 2005. This steep growth reinforces the notion that the two counties are becoming more of a magnet for retirees (and their assets).

A third explanation lies in the “job intensity” of greater Wenatchee households. If a spouse or a member of an extended family starts work, then this will bump up the income for the entire household. In fact, that seems to have happened here over the past dozen years. In 2005, Census estimated that about 34% of the households had two or more members in the workforce; by 2018, that share had increased to 43%. Think of this trend as the phenomenon of both spouses working, or in general a household with at least people two participating in the workforce.

A final reason could rest in the number of people who have moved to the metro area but continue to get their paychecks outside of the two counties. On the Map, a Census tool that looks at the flows of workers in and out of counties, offers some insights. About 6% of the workforce in Chelan County reported their employers to be in Seattle or Bellevue in 2017. The share was slightly less in Douglas County in 2017. It could be that workers are physically present in King County or that their assignments are virtual. In any case, the presumption is that these residents of the two counties see King County-sized paychecks. Due to the limitations of the database, however, don’t know how much this work arrangement for residents has changed over time. So, the contribution of remote workers to rising MHI remains, for now, conjecture.

A combination, then, of rising wages, greater flows of investment income and a higher participation by household members in the workforce have come together to push incomes here higher. As of last year, this measure, median household income, was a statistical match to the U.S. It’s likely that residents in the two counties would live to believe like, in the words of Garrison Keillor of A Prairie Home Companion fame, that their community should be above average (or as in the case here, median).

Of course it’s mathematically impossible for everyone in the two counties to be above these marks. But in the aggregate, the greater Wenatchee area may join Lake Wobegon’s inhabitants when the 2019 income estimates roll in.