NCPA - National Center for Policy Analysis

Rising Economic Tides of 1990s Lifted (almost) All Boats

June 17, 2002

Prosperity increased during the 1990s as incomes rose and poverty declined in most places. But median income actually dropped, poverty rose in a handful of places and inequality increased -- though at a slower pace than in the 1980s.

How could this be?

  • One reason in immigration -- if many people enter at the lower rungs of the wage distribution, there can be a situation in which everyone is prospering, yet the median income is declining.
  • Also, the '90s began with a recession and in some places, like the New York region, recovery did not begin until the second half of the decade.
  • These factors may explain why median income fell in metro New York, in some other Northeastern cities and in swaths of California.
  • Finally, the job base shifted in some places, with lower-wage jobs replacing higher-wage ones - for example in Southern California, where defense and aerospace jobs dwindled, and what took root were jobs in the garment industry and service sector.

Some regional snapshots:

  • Median household income rose in the Northwest, South, Midwest and Southwest with the percentage of families earning less than $25,000 dropping significantly in the second half of the 1990s.
  • On average, according to census data, median household income rose by nearly $3,000 nationally between 1990 and 2000.
  • The states with the biggest increases ranged from Colorado and Oregon to Mississippi.
  • The smallest increases included California, New York, New Jersey, Rhode Island and the District of Columbia.

Economists are left to puzzle whether what the regional variations mean: how much is attributable to demographic shifts and how much to the underlying economy.

Source: Janny Scott, "In Some Pockets, 90's Boom Was a Bust," New York Times, June 17, 2002.

 

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