-Boom did little for typical families
Study finds median income in state off 10%; fears rise of growing gap
By Naomi Aoki, Globe Staff, 3/27/2001
decade of unprecedented economic expansion did little to help the typical Massachusetts family, according to a study of household income by MassINC, a local think tank, and The Center for Labor Market Studies of Northeastern University.
While housing prices and the cost of living climbed, the study found that the state's median income fell 10 percent between 1989 and 1999, eroding the financial advantage Massachusetts residents once enjoyed over other areas of the country.
Of particular concern, the study reported, was the increase in the average household income as opposed to the decrease in the median income, signaling a growing divide between the richest segments of society and the middle to lower classes.
The average state income rose 3 percent, carried by the tremendous increases among top wage earners. But the median income - meaning the income level at which half of Massachusetts residents fall above, and half below - can provide a more accurate picture of how the typical household is doing.
Several other Northeastern states showed a similar trend, posting declines that ranged from Connecticut's nearly 14 percent slide to Maine's less than 1 percent drop. Nationwide, the median income climbed about 5 percent with even greater increases in the Midwest (more than 10 percent) and the South (nearly 8 percent).
''Two things worry me about these numbers,'' said Barry Bluestone, director of the Center for Urban and Regional Policy at Northeastern. ''If this is true when the economy is red hot, what happens if it slows down now? The second concern is that these numbers reflect a dramatic increase in inequality.''
The income data, collected by the US Census Bureau from 47,000 American households, was adjusted for inflation. It was analyzed by researchers at MassINC - formally known as the Massachusetts Institute for a New Commonwealth - and Northeastern and sponsored by Blue Cross and Blue Shield of Massachusetts as the first installment of a series called the American Dream Project.
Bluestone, who was not part of the study, said he was somewhat surprised by the numbers. He said they may also reflect the surge in the immigrant community in Northeast states. If those immigrants gain skills and move into better jobs, he said, he would expect to see an increase in the median income in coming years.
But if a serious slowdown or recession hits, they and others at the bottom of the economic scale will be hurt. Bluestone said he would recommend an immediate short-term tax cut to boost the economy in lieu of the 10-year plan to cut taxes proposed by President George W. Bush. He also urges more education and training opportunities to help people move up the income ladder.
''A tremendous amount of the economic prosperity fell into the hands of a very small number of people,'' Bluestone said. ''A slowdown would exacerbate that inequality.''
Robert B. Reich, a professor at Brandeis University and former US secretary of labor, called the numbers ''very troubling.'' The high-tech boom in the region created jobs, he said, but many of the jobs were geared toward those with college and advanced degrees.
Many companies replaced other less-skilled workers with hardware, software, or contract laborers from cheaper markets, he said. Add to that the increasing cost of housing, energy and food, he said, and many American households are climbing down the economic ladder.
''The booming '90s passed them by entirely,'' Reich said. ''Now that the economy is slowing, they could get clobbered. We're becoming a Commonwealth with less common wealth.''