Art Woolf is a columnist for VTDigger. He recently retired as an associate professor of economics at the University of Vermont.
The median income for a married-couple family in Vermont was $86,939 in 2018, according to my calculations of data just released by the Vermont Tax Department. That means that half of Vermont married couples — with or without children, recently married, retired, or anywhere in between — earned less and half earned more.
Moreover, median income, adjusted for inflation, has increased more than 90% since 1975. If incomes keep growing at their current pace, half of all married-couple families in Vermont will earn more than $100,000 by 2022.
As it is, nearly 48,000 Vermont married-couple families already earn over $100,000 as do 10,000 other tax filers.
Median income has not risen at a steady pace. Income falls during recessions, as it did during the recessions of the early 1980s, the late 1980s and early 1990s, and more recently during the Great Recession of 2007-2009. That’s one important reason to favor growth-enhancing policies.
Incomes have been climbing steadily since the end of the recession in 2009 and we’ve seen record-high income every year for the last six years. We know that 2019 was a good year for Vermont’s economy and when 2019 tax information (the tax forms you are filling out right now) becomes available, I predict we will have another record-breaking year for Vermont family income, with median income at nearly $90,000.
Given this growth, why do we hear so much about stagnant income, a shrinking middle class, and other claims of an economy that’s not working for a majority of Americans?
One is the difficulty of accurately measuring and accounting for inflation over long periods of time. That’s a technical, but important issue in analyzing long-term trends.
Second is that these numbers refer to married-couple families. Over the past four decades, an increasing number of Americans, and Vermonters, live outside of that traditional structure, although 60% of Vermonters still live in a dual-spouse household.
Compared to 1975 a lot more people live by themselves and in single-parent households. That’s a function of a number of social changes: More divorces, more 20-somethings living alone rather than with their parents, and more seniors living by themselves rather than with their children. That so many people who used to live with others now live alone is a sign of wealth — housing is expensive — not poverty.
In 1980, 20% of all the housing units in Vermont had only one inhabitant. Today, nearly 30% of all houses and apartments in the state have only one resident.
Those changing social trends, not economic factors, reduce measured household income. Take as an example a couple who each earn $50,000. They get divorced. There are now two households when there used to be one, and average household income for those two people, which used to be $100,000, falls to $50,000. That decline doesn’t represent any failure or shortcoming of the economy to deliver a rising standard of living.
We have more single person households and single parent households than we used to. Those households have lower average incomes than married couple families. When we look only at married couple families, we can better see the impact of economic changes only rather than a combination of economic and social changes.
In addition, my estimate of the near doubling of family income since the mid-1970s doesn’t consider the increasing share of people’s compensation that consists of non-wage benefits, especially health insurance. Most Vermont families receive health insurance from their employers. They may pay for some of the premium cost, but nowhere near the total $20,000 per family cost.
The middle class in Vermont is doing better each year. A near-doubling of income over 43 years translates into a growth rate of 1.5% per year, which may not seem large, but over time the miracle of compounding has led to a near doubling since 1975. However small 1.5% may seem, given Vermont’s demographic future and policies that restrict growth, it may be hard to match that rate in coming decades.
Small changes matter. If growth had averaged only 1.0% since 1975, median income would be $17,000 less than today’s level. If it had averaged 2.0%, income today would be $115,000. I doubt any family would turn that down. A nice side benefit is the additional tax revenues the state would receive to help solve a host of social and environmental problems.
