Category Archives: Economy

Retirement, Not Jobs, Pushing Virginians Out of State

Virginia has been losing population to domestic out-migration for the past five years. Most people (including me) have assumed that the reason for the exodus (well, not really an exodus, more of a drip… drip… drip… leakage) can be attributed to sub-par economic growth. In other words, more people are leaving than coming because more jobs are being created elsewhere than here.

But the latest data from United Van Lines calls that assumption into question. United’s data roughly tracks that of the Internal Revenue Service taxpayer change-of-address data in noting that for every 100 moves in and out of Virginia 53% were outbound compared to only 47% being inbound.

But get this: Two-thirds of the reasons cited for moving into Virginia were jobs, while only a little more than half were so cited for moving out. The widest outbound-over-inbound gap was for retirement, the second widest for family. Virginia also suffered smaller gaps for health and lifestyle.

Why would there be such a large retirement gap? Our 5.75% top income tax bracket? Hellish traffic in Northern Virginia? Too many polar vortexes? Perhaps readers can chime in with their speculations.

Farewell Parade

Don’t mess with Virginia.

by Stephen D. Haner

I was very flattered that the U.S. Navy arranged that parade of ships just to mark my departure from Newport News Shipbuilding last month.

I’m kidding, of course, because the recent demonstration of naval firepower out in the Pacific (pictured above) was arranged for Dear Leader Kim and his friends Vladimir and Xi. But it is such a magnificent image I had to share it. I don’t think enough Virginians know that all three of those nuke carriers were built right here in the Old Dominion, along with the other eight in the fleet.  And many of the nuclear submarines submerged around that task force are also Virignia-built.

Virginia’s most famous product is not peanuts or tobacco.

Virginia builds naval supremacy.

Shipbuilders come and go from the shipyard every day – most with far more than my 12 years of service — and a lobbyist is far less important and far easier to replace than a nuclear-qualified welder.  I stole that line from the CEO, who is fond of saying even his job is easier to fill than some of the specialty jobs on the waterfront.

When I started, they issued me a Blackberry, and I joked that it was a leash.  “No,” the vice president dryly responded. “This is a nautical company. That’s a tether.” The tether later became a smartphone, but it has never been more than a few feet away in the past 12 years except for two trips overseas. It has been gone almost a month now and I still reach for it.

And it was a tether. My relationship with Bacon’s Rebellion started long before I got hired by the yard, but I quickly discovered that the yard was off limits for my commentary. As a former reporter and political communicator my lobbying style has always involved working with the media, and in my first session I had a routine discussion with a local reporter about a routine bill. When my quotes appeared in the Daily Press, the negative reaction was swift and instructive.

So I have never discussed the shipyard on Bacon’s Rebellion and rarely mentioned it. Now that I’m an ex-shipbuilder that may change a bit, at least with regard to its general operations and its products and its importance to the Virginia economy. Somebody else will be responsible for communicating its views to the General Assembly and the state executive branch. I may use this space from time to time to share with you some of the things I learned working in that marvelous place with so many dedicated people building the most complicated machines in the world.

Reports of my retirement are like the reports of Twain’s death – premature.  I may handle a few more clients in the coming years. But the shipyard is fading from sight off the fantail.

Stephen D. Haner, principal of Black Walnut Strategies, is a Richmond-based lobbyist.

The GOP’s Hail Mary Pass

House Speaker Paul Ryan savors his biggest legislative victory.

Faced with a chronically slow-growth economy, expanding deficits, mounting federal debt, and a looming funding crisis for the U.S. welfare state, Republican congressmen are, to borrow a football metaphor, throwing a hail Mary pass into the end zone in the desperate hope of scoring a winning touchdown. They are gambling that tax cuts combined with President Trump’s deregulation agenda will boost economic growth from roughly 2% per year to 3% or more, reducing the tax burden for millions of Americans, creating new jobs, boosting wages, and bending the curve on long-term deficit projections.

Convinced that the tax cuts will prove to be a disaster for everyone but the rich, Democrats and the mainstream media have subjected the tax plan to relentless, unremitting attacks. Viewed in terms of static economic analysis, we are told, the tax cuts will inflate federal deficits by a cumulative $1.5 trillion over the next ten years. Suddenly, deficits matter!

Republicans respond that measures in the bill — accelerating write-offs for business investment, encouraging the repatriation of hundreds of billions of dollars in corporate profits to the U.S., and making the corporate tax rate more competitive internationally — will stimulate economic growth. Unlike the Democrats, I think that much will prove to be true. My question is: Will faster economic growth generate enough new tax revenue to offset that $1.5 trillion? Longer term, will it avert Boomergeddon?

Let’s dig into the numbers. The Congressional Budget Office’s current 10-year budget forecast assumes a modest 2.1% annual growth rate over the next ten years, a slight uptick from the trend established during the Obama years. But economic growth has accelerated to roughly 3% in the past couple of quarters, and the Trump administration’s deregulation + tax cuts strategy could nudge it even higher. Let us assume for purposes of discussion that, thanks to the tax cuts, the U.S. can grow the economy at a sustainable rate of 3.1% annually. What does an extra percentage point in economic growth get us in deficit fighting?

Well, the latest CBO federal revenue forecast for the next ten years is $43 trillion. A 1% boost in federal revenues will yield $430 billion, not nearly enough to close the $1.5 trillion gap. The analysis gets a bit more complicated because economic growth and higher incomes push Americans into higher tax brackets while a roaring stock market generates massive capital gains. So a 1% increase in economic growth could produce more than a 1% increase in federal revenue. Let’s go for the gusto and double the growth-to-revenue ratio, assuming that federal taxes increase actually increase by $86 billion per year over current projections. That’s still doesn’t close the ten-year $1.5 trillion gap.

Could the economy grow much faster than 3.1% over the decade ahead? I’m skeptical. First, Baby Boomers are retiring in droves, and the working-age population is stagnating. A growing labor force supports economic growth; a stagnant labor force undermines it. Second, the Federal Reserve Board, intent upon unwinding the monetary stimulus of the Obama years, will continue to raise interest rates. It goes without saying that higher interest rates are a damper to economic growth.

In summary, in my untutored opinion, I think that the U.S. will see modestly faster economic growth over the next few years. The Dems have predicted economic Armageddon. They won’t get it. The lives of millions of Americans will improve… in the short run. But Republicans are deluding themselves if they think modestly faster economic growth will reduce the nation’s long-term structural budget deficit. Entitlement spending is still running out of control, and the nation still faces a hideously painful fiscal reckoning. Our 20-year future still looks like Boomergeddon.

The Airbnb Dilemma: Regulate or Not?

Revenue growth in the rental of dwellings in Virginia through Airbnb has outstripped the rental of single rooms. Source: “2017 State of the Commonwealth Report”

Airbnb, the website that allows homeowners to rent rooms and houses for short periods, no longer occupies an obscure niche in the Virginia lodging marketplace. The company is capturing a disproportionate share of growth in lodging industry rooms and revenues, and it depresses the ability of hotels to raise rates during periods of peak demand, concludes the “2017 State of the Commonwealth Report.”

The number of Virginia listings has surged from just over 2,000 in October 2014 to 10,400 in October 2017. Total revenue has increased over the same period from $1.52 million to $17.4 million. Airbnb share of the lodging market rose from less than a half percent to nearly 4.7%.

“While the Airbnb rental sector may be smaller than the traditional lodging sector, Airbnb is a rising competitor,” write Robert M. McNabb and James V. Koch, the lead authors of the report.

The image most people have of Airbnb participants is of homeowners renting out a spare room for pin money. But the data suggest that it’s becoming an increasingly big business in which property owners are renting entire dwellings. While private room revenues increased sixfold over the three-year period studied, the rental of entire places increased thirteenfold, as seen in the chart above.

That reality has implications for how Airbnb should be regulated. Whole-house oceanfront rentals in Virginia Beach have generated numerous complaints regarding unruly behavior, illegal parking, and trash. The lodging industry has argued that Airbnb rentals should be taxed on the same basis and should meet the same regulatory standards as hotels and motels are.

McNabb and Koch are sympathetic to Airbnb to a degree.

It is not the job of government to protect existing firms and industries from new, more efficient or more attractive competitors that would serve consumers better and do so at lower prices. … Enabling citizen consumers to spend their dollars where they wish is a welfare-maximizing stance for government to adopt. … As a rule, challenging competing firms to meet “the market test” — that is offer goods and services at prices and levels of quality that are attractive consumers… — not only is an equitable approach that treats all citizens and firms the same, but also generates the best overall results for the citizenry.

However, they add an important caveat: Government should not intervene as long as the use of Airbnb “does not generate undesirable side effects such as pollution, noise, traffic congestion, crime, unsanitary conditions that impact the public health, and the like.”

While some Airbnb hosts have consciously evaded city regulations and taxes, it does not necessarily follow that localities should devote substantial resources to cracking down on them. Single-room hosts account for a small percentage of rooms, revenues and taxes, and they are rarely the source of behavioral problems. They go in and out of the market, and they’re difficult to identify and force to comply. The payoff for local governments is low.

Cities would do better to devote scarce enforcement sources going after Airbnb hosts offering their entire place for rent. “Plainly speaking, this is where the revenue is and evidence suggests that any behavioral problems that Airbnb generates are concentrated among these properties as well.”

Meanwhile, the authors advise hotels operators to re-evaluate their pricing and quality strategies. “Airbnb and similar rental hosting firms are not going to go away.”

The Economic Cost of Virginia’s Opioid Epidemic

Source: “2017 State of the Commonwealth” report

The rate of drug overdose-related deaths is lower than Virginia than it is in the United States as a whole — 16.5 deaths per 100,000 compared to 19.8 nationally — but that is about the only morsel of consolation that can be derived from a special focus on the opioid crisis in the 2017 State of the Commonwealth Report.

The number of opioid deaths in Virginia was relatively stable between 2007 and 2010, after which it began climbing sharply as the epidemic spread, reaching 1,138 in 2016. Aside from the personal tragedies of overdose victims and their families, the economic cost has snowballed as state and local governments has spent more on emergency response and substance abuse treatment, and as drug addicts have dropped out of the workforce.

“The consensus is that opioid addiction causes individuals to drop out of the labor force by making them less ambitious, more lackadaisical and even unresponsive to ordinary labor market incentives,” states the report, written by Robert M. McNabb and James V. Koch with the Center for Economic Analysis and Policy at Old Dominion University.

Labor force participation in the U.S. has been on decline for many years, reaching a 40-year low in May 2015. As of Sept. 2016, 11.4 million men between the ages of 25 and 54 were not working or seeking work. Forty-four percent of men not in the labor force were taking painkillers daily; by contrast only 20% of working men and 19% of unemployment men took painkillers. A Federal Reserve Bank of Boston-sponsored study estimated that 20% of the decline in labor force participation could be attributed to opioid use and abuse.

What is the cost of such behavior to the Virginia economy? This is not easy to measure. If, however, labor force participation rate data in Virginia have declined 3 percent due to opioid addiction, then the Commonwealth has experienced between $4.5 billion and $7.6 billion in lost productivity. To put it another way, the lost productivity is at least equal to 1 percent of the Commonwealth’s gross domestic product for 2017 and may be as high as 1.6 percent.

In addition, in 2008, untreated substance abuse resulted in $613 million in public safety expenditures (police, jail, prison) and health car services by local and regional governmental units, according to a Joint Legislative Audit and Review Commission (JLARC) study. In 2010, the average hospital stay for drug abuse patients was 3.8 days, and the treatment cost was almost $30,000. “No doubt these numbers are higher today,” the authors write.

What is to be done? While the opioid epidemic has become a top-of-mind, national issue, some physicians are insufficiently trained in how to prescribe opioids while managing chronic patient pain. “Both physician and pharmacy education are in order.” McNabb and Koch also recommend researching nonaddictive painkillers, creating a national prescription registry to catch abusers who obtain multiple prescriptions from multiple physicians, and funding the use of methadone to wean users from their addiction and naxalone to reverse the effects of overdoses.

But there are no magic solutions. “Opiate misuse and abuse ultimately reflect our society — the values attitudes, laws, geography and range of economic opportunities that together make us who we are. Hence, one cannot press a single button and eliminate the scourge of opiate addiction because this wave of abuse represents the conjunction of a set of complex phenomena deep within us.”

Virginia’s New Metropolitan Growth Leaders

Northern Virginia has set the pace for economic growth in Virginia for so long, it’s hard to remember when any other region led the way. But this decade’s contraction of the defense industry has hit the NoVa regional economy hard. Inflation-adjusted growth in the Gross Domestic Product between 2010 and 2016 averaged only 1.2% in Northern Virginia, according to the 2017 State of the Commonwealth Report. Thanks to the innovation capacity of NoVa’s technology sector, the growth rate could have been far worse. Hampton Roads, also dependent upon military spending, experienced essentially zero growth over the same period.

Economic growth leadership for the past several years has shifted to the Richmond, Charlottesville and Blacksburg metropolitan areas. Richmond experienced 2.0% growth, while the home towns of the Hoos and Hokies racked up 1.8% annualized growth. Not one metro area matched the U.S. average growth rate of 2.1%, however. The economies of Staunton, Harrisonburg and Lynchburg actually contracted. (The figures don’t tell us about non-metropolitan Virginia, but the picture probably wasn’t pretty.)

Here’s the State of the Commonwealth report’s breakdown of GDP growth by metropolitan area (click for more legible image):

Somewhat different story for wage growth: Here Charlottesville and Roanoke led the way. Northern Virginia was the state laggard.

And one more measure, taxable sales, where Richmond and Lynchburg blazed new paths to consumer excess:

Sluggish Economic Growth May Pick up in 2018

The decline in Department of Defense contracts (red line) has hit Virginia hard since 2011. Source: 2017 State of the Commonwealth Report

Economic growth in Virginia has under-performed the national average since the beginning of the business cycle, and will continue to do so in 2018, concludes the 2017 State of the Commonwealth Report. Proposed increases in defense spending could boost growth and job creation by the second half of the next year, but the Old Dominion faces long-term challenges in stimulating the creation of new and innovative business enterprises.

The report, authored by Robert M. McNab and James V. Koch, economists with the Center for Economic Analysis and Policy at Old Dominion University, updates an all-too-familiar story — lagging growth caused by the contraction in defense spending under the Budget Control Act, most commonly known as sequestration.

Virginia depends upon Defense Department (DoD) spending more than any other state, and the dollar volume of DoD contracts fell 21% between FY 2008 and FY 2016, while the number of active-duty military personnel declined more than 25%. Those fall-offs crimped growth in Northern Virginia and Hampton Roads. Meanwhile, Virginia’s smaller metropolitan areas and rural areas suffered from a declining of mining and manufacturing. Even Virginia’s top-performing metros between 2010 and 2016 — Richmond, followed by Charlottesville and Blacksburg — fell slightly short of the national compounded annual growth rate in Gross Domestic Product for the nation as a whole.

Fortunately for Virginia, there is widespread sentiment in both Congress and the Trump administration that the United States needs to invest more in the defense budget, say McNab and Koch, so there is a good chance that military spending will give the Virginia economy a positive jolt by the second half of 2018.

GDP is just one measure of economic health. If the metric is unemployment, Virginia fares somewhat better: Despite sup-par growth, the unemployment rate here remains lower than the national average. But the report gives even this positive news a gloomy footnote. Traditionally, Virginia’s unemployment rate has ranged around 1.5% lower than the national average; the differential has shrunk to 0.7%. “Could this signal a new economic era for Virginia?” the authors ask. “Perhaps.”

Another measure of economic vitality is labor force participation — the percentage of adults actively working or seeking work. Almost 66% of all Virginians participated in the workforce in 2017 compared to 63% nationally. But the figure varies widely by geographic region, as seen in this map:

While three-quarters or more of adults are in the labor force in Northern Virginia and much of the Richmond metro, the participation rate is less than 50% in the coalfield counties of the far Southwest.

Yet another metric is weekly earnings. Virginians’ earnings growth outpaced that of other Americans 3.4% to 2.6% in 2016, but had fallen behind to less than 2.0% this year.

A disturbing underlying trend, write McNabb and Koch, has been the lack of vigor in the small and medium-sized business (SME) sector. For most of the 21st century, net new business formations (business births exceeding deaths) by SMEs has trailed that of the U.S., although the numbers have surged in the past couple of years.

The report doesn’t offer an explanation for the uncharacteristic leap in SME business formations in 2015. Whatever the reason and however lasting the trend, the authors suggest that Virginia public policy should give closer attention to business formations and deaths. “It is not enough to proclaim the number of startups as a measure of success,” they write. “Reducing the mortality rate of these firms is important to retain the newly created jobs and create economic growth in the Commonwealth. Redirecting scarce public funds from grandiose development efforts to services that sustain small firms is a step in the right direction.”

Speaking of those “grandiose development efforts,” McNabb and Koch contend that dedicating economic investment dollars to “showpiece hotels, arenas, and other visible structures” beloved by elected officials is a poor idea. Abundant evidence shows that the rate of return on such public investments is “impressively low, or even negative.”

Instead, Virginia needs to make long-term investments in infrastructure, K-12 education, “ed-med” (educational-medical) activities, and SME business promotion, the authors say.

The Great Migration Breakdown

Historically, a source of American prosperity has been the willingness of workers to move from regions with poor economic prospects to regions with better economic prospects. Think Depression-era Okies fleeing the Dust Bowl to California. Think Jim Crow-era African-American sharecroppers migrating from the rural South to booming Northern industrial centers.

Since the 2008 recession, the rate of inter-state migration has slowed dramatically, observe Kyle F. Herkenoff, Lee E. Ohanian, and Edward C. Prescott in a new paper, “Tarnishing the Golden and Empire States: Land Use Restrictions and the U.S. Economic Slowdown,” published by the National Bureau of Economic Research.

Sluggish geographic labor mobility has coincided with three other trends: a spike in real estate prices in California and New York, an end to the population booms in California and New York, and a slowdown in the convergence in incomes between states. The authors think those trends are intertwined.

“U.S. economic growth has gone hand-in-hand with the regional reallocation of labor and capital,” write the authors. “The pace of resource allocation, however, has slowed. This decline has coincided with lower productivity and output growth, as well as growing home premia in high income states, including California and New York.”

Here is what they think is going on: Land use regulations create housing shortages, which drive up housing prices. Sky-high housing prices price lower-income residents out of the housing market in high-productivity metropolitan regions like San Francisco-San Jose and New York. Despite the superior work opportunities, people leave and people from lower-productivity regions are discouraged from moving in. Millions of Americans remain trapped in lower-productivity labor markets.

Herkenoff et al build an elaborate econometric model designed to gauge the effect of land-use regulations. (The model is way too complex to describe here — I’ll confess, the methodology is beyond my ken.) After running the numbers through their black box, here’s what they conclude:

Reforming land use regulations would generate substantial reallocation of labor and capital across U.S. regions, and would significantly increase investment, output, productivity, and welfare. The results indicate that too few people are located in the highly productive states of California and New York. In particular, we find that deregulating just California and New York back to their 1980 land-use regulation levels would raise aggregate productivity by as much as 7 percent and consumption by as much as 5 percent.

Deregulating all U.S. regions would raise labor productivity by 10% and consumption by 9%.

Under various deregulation scenarios, the authors noted that the “Mid-Atlantic” region, which includes Virginia, would, with California and New York, see the greatest population gains.

Bacon’s bottom line: This is an important paper. I firmly believe that the links described by Herkenoff et al are real — land use regulations restrict the housing supply, which drives up housing prices, which hinders geographic mobility, which hurts productivity gains and economic growth.

These linkages shed light on a two ongoing debates about American society.

Slowing rate of economic growth. Economic growth in the Obama business cycle was the slowest in the post-World War II era. The debate over the reasons for the slowdown has almost totally ignored the land use-housing shortage-migration connection. Economists look for national reasons — aging workforce, dearth of breakthrough technologies — to explain national economic phenomena such as national economic growth. Land use is a local phenomena, so it tends to be overlooked. If Herkenoff et al are right, it will be difficult for the U.S. economy to resume a 3% to 4% annual growth rate, no matter how Congress reforms taxes and the Trump administration prunes national-level regulations. (I’m not defending the status quo in taxes and regulation, just acknowledging that they address only a part of what ails the economy.)

Income inequality. The debate over income inequality in the U.S. has largely overlooked the malign effects of land use regulation. Insofar as incomes have become more unequal in the U.S. in recent decades — I think the extent has been exaggerated, but that’s another debate for another time — the slowdown in the migration of Americans from low-productivity (and low paying) regions to high-productivity (and high paying) regions has played a major role.

Land use is the most overlooked and least understood driver of the American economy. The influence of land use upon the economy is even more pervasive and complex than described in the Herkenoff et al econometric model. But their article is a good place to start the discussion.

Virginia Job Trends — Positive but Fuzzy

Image source: Richmond Times-Dispatch

The Richmond Times-Dispatch ran a striking chart in its Sunday edition contrasting the growth rate for different metropolitan statistical regions in Virginia. The main thrust of the article was to show that the Richmond region, after years of sub-par job creation, is growing smartly these days, creating almost as many jobs over the past 12 months as Northern Virginia. Indeed, if you adjust for the fact that Northern Virginia has roughly twice the population, Richmond’s performance is all the more remarkable.

(If you infer that Richmond has an inferiority complex regarding Northern Virginia, you’re right. As a Richmonder, I confess that it feels really good to sport a stronger economy, even if only for a brief moment in time.)

While the Times-Dispatch did not dwell on the point, the chart reinforces a post I made a couple of months ago pointing out that Hampton Roads is the main drag on Virginia’s economy this year.

As is my wont, I began playing with the numbers. I wondered how non-metropolitan Virginia was faring. By non-metropolitan Virginia, I’m referring to the mill towns and truly rural counties where the economy is thought of as moribund. Non-metro Virginia appears in the gray hatched area below — mostly Southside Virginia, the far Southwest, the western mountains, and the Chesapeake Bay.

I started with the fact that, according to the data in the chart, Virginia created a net 34,000 jobs between September 2016 and Sept. 2017. I netted out the job gains and losses for the metropolitan areas shown in the chart and got a gain of 14,800 jobs that could be attributed to non-metro Virginia. That number suggests, in defiance of all anecdotal evidence to the contrary, that Virginia’s small towns and rural areas are experiencing the biggest job-creation boom of all.

Either the anecdotal evidence is deceiving or the data is wrong. I think the data is wrong, or perhaps missing vital context. The Times-Dispatch attributed the information to the Virginia Chamber Foundation, and I have no doubt that the reporter transcribed the information accurately. Unfortunately, in the time available to me, I could not track down the original source on the Chamber website, so I hit a dead end.

I went to the federal Bureau of Labor Statistics, the most authoritative labor market source I could find. These numbers reflect 12-month job growth from August 2016 to August 2017 — one month earlier than the Chamber data.

These data confirm that Hampton Roads is a drag on the economy. But the region’s economy is in slow-growth mode, not shrinkage mode, which is some consolation. It also confirms that, for a brief shining moment, Richmond is leading the pace in Virginia job creation. Hoo ah! Unfortunately, the Washington data from this source is for the metropolitan area as a whole, not just Northern Virginia, so the job-creation rate should be regarded as only a rough proxy.

Regarding the Washington/Northern Virginia economy, it is natural to assume that tight federal spending is to blame. And perhaps it is. But there’s more to the story. Northern Virginia has an extremely low unemployment rate. In fact, in certain sectors, there is a labor shortage. Consider this Virginia Employment Commission data on where the job openings are (based on online advertising):

Fairfax County — 40,605
Richmond — 11,850
Arlington — 9,899
Loudoun — 8,898
Norfolk — 5,595
Virginia Beach — 5,439
Alexandria — 5,187
Henrico — 4,441
Prince William — 4,014
Albemarle — 3,410

Obviously, there’s a strong correlation between total jobs advertised and the population of the locality. But the numbers indicate that Northern Virginia has nearly 70,000 job openings right now. A worker shortage could be the main constraint on growth, not a weak economy. The data also show that the City of Richmond is cooking with gas — the city and the larger region lost a decade reinventing itself, but the efforts finally seem to be paying off. Finally, for all of Hampton Roads’ job woes, Norfolk and Virginia Beach are still hiring.

Chart of the Day: Median Household Income

Source: Commonwealth Institute

Here’s the latest data on median household income from the Census Bureau, courtesy of the Commonwealth Institute. Nothing much new here: Residents of the Washington Metropolitan Statistical Area make 50% or more than inhabitants of Virginia’s other metros, more than $90,000, just like they always have.

There is a well-defined second tier: Hampton Roads (Virginia Beach-Norfolk), Richmond, Charlottesville and Winchester. I haven’t looked into it, but my porky sense tells me  (if you don’t get the feeble joke, porky sense is Bacon’s analogy to spidey sense) that Charlottesville is on the rise. All those horse country gentry and handsomely paid University of Virginia administrators may be pulling up median incomes.

The smaller metros — Roanoke, Lynchburg, Harrisonburg, Blacksburg, Staunton/Waynesboro — constitute a third income tier. And then there’s non-metro Virginia, which is not included in this chart, which I expect constitutes a fourth tier.

Overall, Virginians’ median income rose 1.8% last year. While incomes in the Old Dominion are relatively high — $68,100 statewide compared to the national median of $57,600 — the growth in income lagged the national average of 2.4%. Sequestration still haunts the commonwealth. Incomes in the Washington metro, only 1.5%, dragged down the state average. Once the highest-income metro in the United States, Washington now lags San Jose and San Francisco.

As an aside… the Commonwealth Institute notes that “communities of color” — African-Americans and Hispanics — tend to have much lower incomes on average, citing “structural barriers” such as poor schools, housing discrimination and employment discrimination. Given the fact that it was citing Census data on household income, the think tank appears to have missed an excellent opportunity to examine the contribution of household size and structure on income levels.

One of the biggest contributors to household income is the number of bread winners in the household. If African-American and Hispanic households are more likely than communities of pallor to consist of single-income households — as, in fact, they are — the breakdown of the family contributes in a direct and measurable way to reduced median household income.