Slower Growth in Median Household Incomes Could Provide Challenges

By Dr. Kelley Cullen

Throughout most of the last decade (2010-19), the Walla Walla Metropolitan Statistical Area (MSA) which includes the counties of Walla Walla & Columbia, experienced strong growth in median household income - above both the state and national averages. So a few years of slower, below average, growth in the early 2020s might not be unexpected, but  still warrants some monitoring. 

Median household income (MHI) captures all sources of income, from wages and salaries to investments, rents, proprietors’ income, pensions and transfer payments as well. As such, MHI is a commonly used indicator that speaks to the health of the local economy and  the community more broadly. Obviously, median household income can be used to help understand economic growth, but it is also closely related to poverty and public health. 

Walla Walla Trends 1.1.2 Median Household Income provides US Census Bureau data from the American Community Survey (ACS,) starting in 2013 when Walla Walla & Columbia Counties became officially recognized as an MSA. Because of the onset of the global pandemic in 2020, a pre-Covid (2013-19) and post-Covid comparison seems to make sense. 

In 2022, median household income in the Walla Walla MSA was just over $65,000, remaining unchanged from the previous year. This implies that half of the households in the MSA incomes above $65,000. In comparison, the US median was $75,000 and the Washington median was just over $90,000. Because income distributions are skewed right (upward), the median is a better measure of central tendency (the middle) than the average. 

As high earnings in the more populous counties on the west side of the state such as King County tend to pull up the state median, it is  informative to look at  nearby MSAs in eastern Washington. The Kennewick-Richland-Pasco MSA has a higher median household income of $83,000 and the Spokane-Spokane Valley MSA has a median household income just above the Walla Walla MSA, at $69,000. 

In the pre-Covid period 2013-19, the Walla Walla MSA saw median household income grow at nearly 5% per year, faster than the compound annual growth rate for both the state (4.4%) and US (2.2%). However, since 2019, including the pandemic and its recovery, local MHI only increased 1.6% per year – less than half the compound annual growth rate of the state (3.8%) and the US (3.3%). 

Even though the growth in median household income across the Walla Walla MSA has recently slowed, the compound annual growth rate over the decade from 2013-22 of 4% still outpaced both the Kennewick-Richland-Pasco MSA (3.5%) and the Spokane-Spokane Valley MSA (3.8%). It is possible that the recent leveling off could just be a short-term response to previous robust growth. But continued monitoring and a  look at some other indicators might help understand what might be going on. 

One of the benefits of Walla Walla Trends is that policymakers and residents can track how their local community is performing across a variety of socio-economic indicators. No one single indicator should be considered solely on its own as there are often interdependencies at work. While median household income is an important economic indicator,   looking at per capita incomes and average annual wage offers a more complete picture 

Whereas  MHI is calculated from survey data, Walla Walla Trends 1.1.1 Per Capita Personal Income comes from administrative data compiled by the Bureau of Economic Analysis (BEA) at the US Department of Commerce. Local per capita personal income continues to show strong growth of just over 6% annually, matching the US average. 

Walla Walla Trends 1.1.4 Overall Average Annual Wage provides another snapshot of the financial health of local workers. This indicator uses data from the Quarterly Census of Employment & Wages (QCEW) provided by the Washington State Employment Security Department. A quick look back shows that the average annual wage for Walla Walla County has increased steadily at a 4.5% compound annual growth rate over the past decade (2013-22). 

With per capita personal income and average annual wage not showing signs of slowing down, the recent sluggish behavior of median household income might not be too much of a concern. Rising incomes provide more spending on goods and services along with increased tax revenues to support local governments. 

On the other hand, if the flattening of median household income growth suggests a widening gap between higher income households seeing significant increases in wages and lower income households facing more moderate wage increases,   this could create poverty and public health challenges. Additionally, if median household incomes are increasing at a slower pace than median home resale prices, some homeowners could become more housing cost burdened – see the associated article in this newsletter about this topic. 

For now, the recent leveling off the MHI in the greater Walla Walla MSA should raise some eyebrows and cause local policymakers and residents to pay close heed to what happens this year and next with the MHI and other closely related indicators.