note that essentially none of those income gains went to rural areas. That meant a 7.4% wage gain for larger cities — does the raise the import of the case for deregulating building?
I think that he took his figures from the Census report, but I cannot be sure. I think that “wage gain” should be “income gain,” but again I cannot be sure.
I would ask different questions:
1. Does it raise the import of the case for looking carefully at making cost of living adjustments that differ by location? If the cost of living fell in rural areas, then they had some real income gains. If the cost of living soared in larger cities, then they had less real income gains than are reported if one uses an aggregate price index as the denominator in a real income estimate.
2. In which location–rural areas or large cities–are government transfer payments a larger share of household income? My guess is that transfers make up a larger share in rural areas. In that case, in spite of (1), the report may under-estimate the relative economic strength of larger cities.
Like most government economic data it is best to understand it is generally correct but not down to the penny. The high increase in 2015 comes from both the drop in 2014 and fall in commodities, especially oil prices. Yes the fall in oil prices started in 2014 but it was in ~June and was rising in early 2014. Also the fall in oil prices probably had a significant secondary effect that lowered a lot of goods in 2015. (Food really was lower in 2015.)
However, America rural depends a lot more on commodity prices so that explains the lower wages in 2015. (My guess energy producing rural areas are the primary reason for the drop.) In terms of Trump popularity in 2015/2016, many very red states (without energy) have had the economic bounceback in Obama’s 2nd term.
Probably the one Obama policy that helped the most here was the Iran nuclear deal because it short term hurt Saudia Arabia’s dominance of the oil markets. After the deal the Saudia were hurt by both US & Iran production and you can see prices took a long dip in summer 2015.
This one heck of a peace dividend and I wish it was stated louder in the media.
Not sure why an administration that has nominally prioritized investments in “clean” energy would want to tout facilitation of increased use of fossil fuels.
Well, changes in oil prices has had more impact on the economy than clean energy. It is best for Obama Administration to have cheaper gas for higher real wages.
Anyway, I think a foreign policy based on diplomacy and increasing free trade helped our economy more than any other policy. (Also pointing out that the unpopular deal had real benefits to the average American.)
If the cost of living of an area rises, then there is some margin of people who were (1) just barely affording it before, and (2) didn’t get proportional gains in income.
If they drop our of the city as a consequence, the resulting average income could be higher from pure composition effects. And if they flee to rural areas that were once on par with the city, that would bring the rural average down too.
Since there is a lot of churn in the location of populations, and bigger, non-random forces at work besides, that signal is hard to extract from the noise.
My guess is that this is not a huge deal, but
Faster rising prices, especially real estate prices, in urban areas could be a sign of rising amenities that are not captured in the earnings data. Adjusting for price differences between urban and rural areas may not help, at least when using CPI measures.
My guess is the transfer payment issue is complex. For instance cities have lots of high earners that tend to pay transfers, but they also have lots of low earners that rely a lot of transfer payments (ghettos).
Baltimore for instance receives massive transfer payments for education from the state (it only provides about 20% of its own education funding, people in the suburbs pay for the rest). Also, federal programs like Medicaid are tricky. Let’s say we expand medicaid and this results in less uncompensated care at John’s Hopkins for all those patients. The incomes of doctors, many of which live in the city, go up and they pay more taxes. However, those medicaid dollars have to come from somewhere so again maybe its the taxes of middle class suburban dwellers.
Cities seem to me a very high low situation, with lots of state and federal subsidies going to pay for the low to receive services from the high (especially education and medical care). Are they really big net contributors? The median household income in Baltimore is $41,000, while the median household income in Bel Air, which I’m routinely told is “farm country” is $80,000. Whose contributing more in net taxes? I have no doubt there are lots of JHU doctors, executives, and corporations in the white L that pay a lot of taxes, but still.
Something statistic like (tax revenue – services cost for federal/state/local programs) for each county/zip would go a long way.