Virginia’s Skewed Prosperity

by James A. Bacon

In its latest study, “Unbalanced, Unequal and Undercut: The State of Working Virginia,” the Commonwealth Institute (CI) has picked a timely topic,  conducted some excellent research, displayed some fascinating Virginia-specific data…. and created a terribly misleading impression.

The center-left think tank reports that wages in Virginia have rebounded from the recession more robustly than in other states. Median individual wages increased to $17.83 an hour in 2010, roughly 11% above the national average and the 8th highest of any state. Moreover, since the start of the downturn in 2007, median wages have increased by about 5% in real terms — the fourth highest increase in the nation.

The good news… Virginia wages are rising faster

Why has Virginia out-performed the nation? That might make interesting reading. But CI chooses to pursue a different story line: how the gap between high- and low-wage workers in the Old Dominion is wide and getting wider. In 2010, the top 10% of wage earners in Virginia earned about 5.7 times the wages of the bottom 10% — the widest gap of any state, save New Jersey.

The bad news… Income gains are going to the highest paid workers

Moreover, while wages may be picking up in the current business cycle, almost all the gains are going to people with more education and in higher-paying industries. “Between 1980 and 2010, the real wages of the top 10 percent of workers in Virginia increased by more than 52 percent,” write the authors. “Median wages, on the other hand, grew by just over half that much (27 percent) — and wages for the bottom 10 percent of workers increased by just five  percent.”

Clearly, when viewed as a statewide phenomenon, the wage gap is alive and well in Virginia. But what does it all mean? Here’s what CI says:

The nature of these imbalances represent major setbacks for large segments of working Virginia, creating significant and growing distance between poverty and prosperity in the state. While it is encouraging that Virginia is adding more high-wage jobs, the high concentration of job losses in mid-wage industries since the start of the recession presents real challenges for Virginia’s middle class workers and should inform the discussion around what policies to implement in order to expand this critical segment of Virginia’s economy.

Maybe, maybe not. As CI also notes, average weekly wages vary widely across Virginia — from a  high of $1,264 in Northern Virginia to a low of $611 in Danville. Moreover, wages have been recovering significantly faster in Northern Virginia than in the rest of the state (excepting only the Winchester and Bristol metropolitan statistical areas). As CI concedes, Northern Virginia with its huge and wealthy population “distorts” the statewide average weekly wage.

I would put it differently: It is silly to look at Virginia as a single, unified labor market and bemoan the income disparities within it. A huge amount of the statewide disparity — and the increase in that disparity — can be attributed to different regional income dynamics. Northern Virginia is one of the highest-income regions of the entire country. No other Virginia region comes close. At the same time, Northern Virginia is also the most expensive region in Virginia in which to live. Adjusted for cost of living, the disparity in living standard between NoVa and Danville is significantly less than two to one. But CI’s metrics don’t account for cost of living.

CI could have emphasized a very different narrative: Northern Virginia, where incomes (and the cost of living) is highest, is creating more jobs than other regions of the state. Because these jobs tend to require higher levels of education and more demanding technical skills, they pay more. As a result, the growing statewide disparity in incomes is to some considerable degree explained by Northern Virginia’s success, not a growing disparity within regions. Is Northern Virginia’s triumph a bad thing for downstate Virginians? It’s not as if the region’s prosperity comes at the Rest of Virginia’s expense. In fact, NoVa contributes disproportionately to the cost of running state government. RoVa residents have every reason to be thankful.

The Commonwealth Institute study is well worth perusing. It contains loads of data useful for understanding the wealth gap in Virginia, such as it is. Just don’t get sucked into its woe-is-me worldview.

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6 responses to “Virginia’s Skewed Prosperity”

  1. “What good all that money, it no go round and round?”

    Jesus, illiterate Mexican laborer.

  2. Groveton Avatar

    An excellent post by Jim Bacon. What’s the story behind the superficial numbers? Always the right question to ask.

    “Moreover, while wages may be picking up in the current business cycle, almost all the gains are going to people with more education and in higher-paying industries. “.

    This quote gets both the Duh! and No Kidding! Awards.

    Better educated people in fast growing industries do better. It’s almost as if The Clown Show in Richmond could do something with this newly uncovered fact.

    “What good all that money, it no go round and round?”

    All right, Hydra. I’ve tolerated this cutesy, pootsey comment long enough.

    Are people burying the money in coffee cans in the back-yard?

    Spare me.

    Low risk investments pay nothing thanks to the Federal Reserve.

    The money is aggressively invested. It’s just not aggressively invested in companies which hire Americans.

    Not a day goes by without some “ever so clever” person telling me that I should hire Indians or Chinese or Pakistanis (I am not making this up) to do the software development at my company.

    Note: Jim Bacon will have to either pardon my French or delete this comment. Either is acceptable to me….

    My response to those who say I MUST go offshore for my product development needs?

    Shove it up your ass.

    I’d rather be bankrupt than a traitor.

  3. My take is that they were pointing out the increasing gap between people in urbanized areas and the industries they work in verses people in rural areas and the industries that they work in.

    I think you might make a similar distinction in Ohio or Kentucky or Texas, etc.

    it’s actually a pretty big indication of how we are in exodus from the industrial revolution…. now in it’s final stages….with the further and further diminution of manual labor-based manufacturing.

    Groveton does not believe that NoVa (or places like NoVa) should subsidize those atrophying areas – a point I don’t strongly disagree with …..

    but people with minimal educations cannot solve this problem by moving to the urban areas to live and work… not with the cost of living the way it is in NoVa.

    The key is to get the kids out – and the only real way to do that is to ensure they get a competitive 21st education and for that we do have to subsidize or else just continue to pay welfare and unemployment for generations.

    that should be our number 1 goal in Va…. to build our education so that Groveton and others like him have a viable alternative to offshoring.

    the key is education and the horrible truth is that despite the huge amount of money that we spend on a per child basis – we are not producing an employable workforce – but instead – significant numbers of working poor or unemployable that will require people like Groveton (and others) to pay taxes to provide them with entitlements and welfare, etc.

    Virginia should resolve itself to have an education system that competes head-to-head with the best in Europe and Asia… and to emulate them when it comes to equipping the non-college bound – with superior world-class technical educations that will get those kids employed – perhaps at businesses like Groveton’s.

  4. off opic except for the point about the high cost of living.

    “Who are we to tell people who have been grandfathered in that they don’t have the right to a newer and better home for their family on a piece of land that they own,” said Carney.

    The situation here is that a historic conservation district was imposed, in order to save the historical company owned mill homes in an area. the conservation district banned mobile homes, but one resident had an existing mobile home that was run down and he wanted to replace it.

    This goes to Bacon’s comment about the cost of living in various areas, and how government regulation drives it.

  5. Groveton Avatar

    “Groveton does not believe that NoVa (or places like NoVa) should subsidize those atrophying areas – a point I don’t strongly disagree with …..”.

    I actually have no problem subsidizing an area if there is a legitimate hope that the area can become economically self-sufficient over the mid term (let’s say 20 years).

    I have a problem with permanent welfare regions which will never be economically self-sufficient – especially when the antidote is to move within the state.

    In fact, I find it ironic that many of the people in economically depressed parts of Virginia once ranted and raged about Welfare Moms and the culture of dependency in the inner cities. Now those same people seem only too willing to take a perpetual handut from other areas of the state.

    Waiting for the kids to move out is a non-starter to me. That should take 18 years but it hasn’t happened. I am afraid that the only thing that will get those places de-populated is to demand that the localities pay their own way for everything. The quality of life will suffer and people will move. It’s not a difficult problem but it’s not an easy answer either.

  6. I do not think you can “save” someone who is 50 years old by “educating” them “better” and/or getting them to leave a double wide that costs them next to nothing to move to an apt in an unsafe neighborhood to make a living as a custodian or whatever.

    You CAN save the kids by giving them a good education that will allow them to go to college and/or get technical training and then moving to NoVa to start a career.

    your “tough love” is to force the kids out because of terrible local conditions – no matter whether they have a good education or not.

    give them a chance … with a reasonable opportunity.

    instead of paying welfare and medicaid to both the child and the parents… pay for the parents and equip the kid to not need it.

    common sense… especially if NoVa is going to have to pay for RoVa anyhow… put the money where it counts.

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