by James A. Bacon
Virginia’s economy, dependent upon federal spending, has under-performed the national economy since 2010, and will continue to do so in 2016, according to the Virginia Chamber of Commerce’s 2015 State of the Commonwealth Report. But lead author James V. Koch, president emeritus of Old Dominion University, does find a silver lining:
Once we adjust for differences in the cost of living, the spendable “real” income of most Virginians exceeds that earned by typical residents of the cities along the East Coast to whom we are frequently compared. Our dollars go further and our money has more purchasing power than that of our competitors. The moral to the story: If you’re concerned about your standard of living, there’s hardly any better place to live than Virginia.
The most common yardstick for standard of living is median household income, in which 50% of households earn more and 50% earn less. But that indicator misses a lot. As Koch points out, it does not take into account the cost of living. Thus, median household incomes in New York City are high — but so is the cost of living, canceling the advantage of higher incomes. As Koch also notes, median household income doesn’t tell us how equally those incomes are distributed. If incomes are hogged by the so-called top “1%,” that’s not much comfort to the other 99% of the population.
The Virginia Chamber and the Strome College of Business at ODU present the report with the idea that “thoughtful discussion of the challenges confronting Virginia can make it even a better place to live.” So, kudos to Koch for contributing to a deeper understanding of how to measure a community’s quality of life.
But the State of the Commonwealth report is only a first step. I would argue that further adjustments to quality-of-life metrics are needed to create a meaningful basis for comparing communities.
- Adjust for taxes. We should be looking at disposable income — income after taxes. Higher incomes push households into higher federal income tax brackets. Also, some states and localities soak up a much larger share of personal income than others. Virginia state/local government imposes a moderate-low level of taxation as a percentage of income upon its residents, making more disposable income available. This data is readily available and should be relatively easy to calculate.
- Adjust for transportation. Some regions have more efficient land use patterns than other, allowing for more varied transportation options, such as walking, biking and mass transit. As a consequence people in some communities spend a much larger percentage of their income on the cost of owning and operating automobiles without adding to their quality of life. Sprawling development in Virginia detracts from the standard of living. The H&T Index (housing & transportation) attempts to measure this effect. Perhaps there is a way to incorporate it into a more comprehensive quality-of-life measure.
- Adjust for time. People assign a monetary value to the time they spend commuting, which is time they could be doing something more productive or enjoyable. Localities vary widely in the amount of time residents burn moving from location to location. The Census Bureau captures this metric and a value assigned to peoples’ time.
- Adjust for education. Although government pays for most K-12 education in the United States by means of the public school system, Americans attach a monetary value to the quality of education, as seen by the vast sums they expend on private schools or the premiums they pay to live in better better school districts. Thus, the high quality of schools in, say, Northern Virginia would offset to a significant degree the frustration of longer commutes and higher transportation costs.
The conversation could be expanded even beyond those measures to include quality-of-life metrics relating to arts, entertainment and culture; the affordability and accessibility of higher education; and the comprehensiveness of the social safety net.
As we think about how to build more prosperous, livable and sustainable communities, it is important to expand the conversation beyond maximizing income, as desirable as that is, to moderating taxes, creating more efficient human settlement patterns, and improving the quality of education, with all the complex trade-offs those objectives entail.