Wisconsin Households Gain in 2015

Noah Williams, UW-Madison nmwilliams@wisc.edu

Recently data from the Census Bureau show that 2015 was a good year for Wisconsin households. This confirms the strong macroeconomic data which have come in over the past year, showing that the tight labor market and continuing economic growth have translated into growth in household incomes. (For more background and a comparsion to Minnestoa, see my report "Who's Really Winning the Border War".)

The table below reports median household incomes for the past two years from the Census Bureau’s American Community Survey (ACS), with 2014 data converted to real terms. Here we see that real incomes in Wisconsin jumped more than 5.7% in 2015, the 5th largest gain of any state in the country and the largest in the Midwest, nearly two percentage points greater than the national average.

Table 1: Median Household Income (source: Census ACS)
	State	2015	2014	Growth (%)
1	Montana	49509	46328	6.87
2	Tennessee	47275	44361	6.57
3	Oregon	54148	51075	6.02
4	Rhode Island	58073	54891	5.80
5	Wisconsin	55638	52622	5.73
6	New Hampshire	70303	66532	5.67
7	Hawaii	73486	69592	5.60
8	District of Columbia	75628	71648	5.55
9	Wyoming	60214	57055	5.54
10	Kentucky	45215	42958	5.25
	United States	55775	53657	3.95

Moreover, much of the income growth was shared across the distribution. While there are many ways of summarizing the distribution, I follow studies by the Pew Charitable Trusts and focus on the middle class, defined as income between 67% and 200% of the median, along with the high and low incomes outside this range.[1] Table 2 summarizes the distributions of household income in Wisconsin for different years, calculated from the Census Bureau’s Public Use Microdata Sample (PUMS) from the ACS. The Pew study focused on 2000-2013, showing that Wisconsin had experienced the largest declines in the middle class (as measured this way) over that period. Here we see that recent years have reversed that trend.

Table 2: Distribution of Household Income (source: Census PUMS )
year	Low Income	Middle Income	High Income
2015	32.9	50.0	17.1
2013	33.6	48.9	17.5
2011	33.6	49.1	17.3
2009	32.9	50.5	16.6
2007	33.0	50.7	16.3

From 2007-2013 there was a widening of the income distribution, with declines in the percentage of middle class households, and increases in the fractions with low and (especially) high incomes. The distribution stabilized from 2011-2013, as given the sampling variation in the estimates, the distribution was essentially unchanged. However from 2013-2015 we’ve seen a noticeable increase in the middle class, and a reduction in the fraction of low income households. There was also a slight decline in high incomes, suggesting that the growth in incomes was stronger in the middle.

These results from household surveys suggest that many headline economic indicators, such as overall growth in employment and output, fail to capture the experience of typical families in Wisconsin. Population growth in the state has lagged the national averages for many years, so these headline measures which capture the overall size of the economy diverge from per capita and household measures, which better measure living standards. For example, in 2015 real GDP grew by 2.4% nationally but only 1.8% in Wisconsin, suggesting that the state lagged. But in per capita terms, Wisconsin grew slightly faster than the nation, at 1.6% to 1.5%. The faster nationwide growth was entirely due to more rapid population growth. But even these per capita aggregates understate the growth in household incomes over the past year.