Posted by: Josh Lehner | December 7, 2022

Oregon’s Income Distribution

At times data can be confusing, or at least our interpretation can be confusing when there are seemingly different messages about the same subject. Look no further than Oregon incomes. On one hand our per capita personal income is about 4 percent lower than the nation. On the other hand our median household income is nearly 3 percent higher than the nation. So which is it? Are our incomes higher, or lower than the US? They’re actually both. Or rather it depends upon which metric you are talking about and that is due not neccesarily to different data sources, but different math calculations. In the case of per capita personal income, that is the average per person, or taking every dollar earned in Oregon and dividing by the total population. In the case of median household income, that lines up all households in the state from poorest to richest and finds the mid-point. And when the median and the average tell seemingly different stories that points toward a skew in the distribution of the data. Let’s dive in with a focus on the newly released 2021 ACS data.

This first chart compares incomes across the distribution here in Oregon relative to the U.S. Positive values mean Oregonians at that point in the distribution earn higher incomes than their national counterparts, negative values mean Oregonians earn lower incomes. What stands out here is that Oregonians in the bottom 70% of the distribution have higher incomes. This means for households earning up to $106,000 per year, relative incomes are higher in Oregon than elsewhere in the nation. The vast majority of us are doing relatively better. It does not necessarily mean we are doing well, or that we are not struggling to make ends meet. It just means we are doing comparatively better than our national peers for the majority of households. For those of us in the 70-89 percentile range, $106,000 to $181,000 annually, Oregonian incomes are lower than the nation by a percent or two. Where the gap really widens is in the Top 10% and really the Top 5% where local incomes are 8-9% below the nation. We will come back to this.

Now, I can already hear you saying this, it is true our cost of living is higher. According to the BEA’s regional price parities Oregon is the 13th most expensive state to live in and is 2.6% above the national average. If we were to adjust this distribution for cost of living, it would shift the line down and cross 0% at the 50th percentile. As such that means the typical household in Oregon on a cost of living adjusted basis earns just as much as their national counterpart. Households in the Bottom 50% outearn the nation on a cost of living adjusted basis, while households in the Top 50% earn comparatively less.

For much of the 1980s through the mid-2010s, Oregon household incomes were lower than the nation for the vast majority of us. This next chart compares what the relative incomes in Oregon look like today with what they were back in the 1980 Census, or just before the timber industry restructured and the severe early 1980s recession hammered our regional economy. What’s interesting to see here is that relative incomes for most households are in a better position today than they were back then. Again, that does not mean everything is rosy, it just means relative economic performance in Oregon in the past decade has more than regained the ground lost decades ago.

The third and final chart today takes the 2021 income distributions and instead of looking at the percent difference in incomes, looks at dollar difference in incomes. Specifically I scale down the number of households nationwide to match Oregon’s, so we can do a straight dollar calculation. This chart is striking. What it really shows is how skewed income is in this country, and how large income inequality is.

While 70% of us outearn our national peers it’s a bit hard to see in the chart as the blue bars look relatively small. But as you go up the income distribution you can see how Oregon’s relatively lower incomes here really add up in dollar terms. In fact, incomes are so large here that they add up quickly in an aggregate sense. So much so that even as most of us outearn the nation, Oregon’s relatively lower incomes in the Top 5% more than offset that strength, and drag our average incomes below the nation. That’s what’s going on when it comes to the seemingly different stories about whether Oregon’s incomes are higher or lower than the nation. For the vast majority of us, they are higher. However given our comparatively lower incomes at the top, it makes our averages fall below the U.S.

Two final thoughts.

1. If Oregon’s median is higher, but average is lower than the nation it means income inequality locally is a little bit better than it is nationally. According to the Census our GINI coefficient is about 5% smaller. Now, Oregon has certainly followed the rise of inequality in recent decades, it’s just we are bit more equal than the U.S.

2. Why are Oregonian incomes at the top lower than the nation? I do not have a definite answer. But a few factors at play are things like our lack of old money, our industrial structure and lack of financial institutions, our lack of big corporate headquarters, and our tax structure of higher personal income taxes. These factors are not mutually exclusive and likely interrelate. And to the extent these are actual problems or not can be somewhat in the eye of the beholder but we do need to recognize these differences are real.

Stay tuned for a look at regional incomes across the distribution. These changes have not been uniform across the state. This was actually a historical data project I was finishing up back in February 2020 that got shelved during the pandemic. With the new data I have dusted it off and am in the process of updating and finishing.


Responses

  1. Excellent work, Josh!! This is really enlightening!

    Sent from my iPhone

  2. Josh – is there any data on the difference between a sales tax vs state income tax?

    One question- does a couple earning 75k per year benefit from not having a sales tax but having to pay an income tax? I imagine the research would be hard since there would have to be assumptions on how much the couple would purchase and at what sales tax rate.

    Sent from my iPhone


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