October 15, 2018

Be cautious in assessing changes in median income

David Lewis Schaefer

Worcester Business Journal's story on Oct. 1 headlined "Worcester median income drops nearly 6%," as well as the explanation offered by a local economist relating the drop to a national increase in income inequality is seriously misleading in several respects.

First, the U.S. Census Bureau data cited do not take account of possible differences in the rate of immigration to Worcester as compared with other Massachusetts communities. Since a large fraction of immigrants to the city in recent decades has consisted of poorer people seeking to make a better life for themselves in this country, it is inevitable that so long as Worcester experiences a higher rate of immigration than other communities, that fact alone will tend to lower the average household income in any comparison with those communities. (This is not a knock at immigrants, who contribute to our economy in important ways, but simply a statement of fact to be taken into account in interpreting the growth or decline of median incomes.)

Second, since the census data refer to cash income alone, they do not include possible increases in fringe benefits, notably the rising cost of health care, a substantial portion of which is often covered by local employers. Such increased benefits are no less a form of income than cash payments.

Third, the fact that, as the story reports, the proportion of Worcester households earning more than $75,000 declined considerably over the past year, from 44.8 percent of the population to 27.9 percent, directly contradicts the claim that Worcester is suffering from increased income inequality. Quite the contrary: That substantial decline in the percentage of upper-income households must have contributed substantially to the overall decline in median household incomes. In other words, Worcester may really be experiencing an exodus of wealthier people, the cause(s) of which (since they constitute a significant portion of our tax base, homeowners and employers) bear looking into.

Fourth, to compare the rise or decline of median household income in Worcester with the situation in the rest of Massachusetts amounts to comparing apples and oranges, since it mixes together all sorts of communities from major cities to often-wealthy suburbs to rural areas. Indeed, the article's last sentence acknowledges that median household incomes in Springfield and Hartford – two comparably-sized Central New England cities – fell by 6.8 percent and 8.9 percent, respectively, last year. In other words, both did significantly worse than Worcester!

Much caution needs to be exercised in interpreting figures regarding supposed changes in local income, especially (as Worcester Regional Research Bureau director Tim McGourthy properly points out) given that the reported one-year change is based on a relatively small sample size of respondents as well as a very limited time frame.

David Lewis Schaefer is professor of political science at the College of the Holy Cross in Worcester.


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