Bacon's Rebellion

Democracy Thrives in Sunlight

NoVa Prosperity Under Pressure

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by

James A. Bacon
in

Northern Virginia remains the economic engine of the state but it faces major challenges.  Job creation isn’t keeping up with population growth and income inequality is growing, concludes the Commonwealth Institute in a new report, “Under Pressure: The State of Working Northern Virginia.”

Employment grew at a strong pace in 2011: The region added 25,000 jobs, a job-creation rate of 1.9%. But the “jobs gap” — the number of jobs needed to return to a pre-recession unemployment rate — stood at almost 100,000 in 2011.

Graphic credit: Commonwealth Institute. Click on graph for more legible image.

More highly educated Northern Virginians have weathered the recession in better shape. Those with a graduate or professional degree experienced a 3.67% decline in real earnings between 2007 and 2010, compared to a 17.5% decline for workers with less than a high school degree.

In 2010, the median household income in Northern Virginia was $98,700, about 60% above the statewide median, but it was still below the pre-recession peak of $102,600. Moreover, high incomes don’t necessarily translate into high living standards. It took an income of $63,000 in 2010, says CI, for a family of four to maintain a minimal standard of living without public assistance. Meanwhile, income disparity has increased. In 2007, top income-quintile households earned 7.6 times the income of bottom-quintile households. By 2010, the ratio had increased to 8.3%.

Graphic credit: Commonwealth Institute. Click on graph for more legible image.

The most interesting finding for those interested in metropolitan dynamics can be seen in this chart showing how wage increases varied by political jurisdiction. Arlington, Alexandria and Fairfax — closest to the metropolitan core — saw the greatest wage increases, while localities on the periphery — Spotsylvania and Loudoun — actually saw declines in inflation-adjusted average weekly wages between 2007 and 2010. This is more anecdotal evidence that growth and development (perhaps we should say “growth and re-development”) is shifting back to the urban core, leaving weakened jurisdictions on the metropolitan periphery.

— JAB

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  1. Hydra Avatar
    Hydra

    Income inequaltiy is growing?

    That is a good thing, right? It means we are getting more “job creators”?

    That is a bad graph. Showing the % change without any reference to the base is bad policy. for all we can tell Loudoun might have gone down by 1% and still be 15% higher than the district.

  2. Hydra Avatar
    Hydra

    It took an income of $63,000 in 2010, says CI, for a family of four to maintain a minimal standard of living without public assistance.

    How about a chart that shows the median income by area vs the amount required to live without public assistance? The difference would be a measure of how much is avaialble to “live well”. we have already seen for example that a family in Houston with the same income as as Family in Queens will have far more take home pay after taxes.

  3. larryg Avatar
    larryg

    I was curious about what the price of an “affordable house” is in the region and how many can afford it.

    the Spotsylvania data looks a big strange to me.

    Believe it or not there are NoVa commuters to the SOUTH of Spotsylvania in Caroline county but Spotsy is pretty much at the farthest point that most folks will commute to NoVa and we have been hurt fairly badly by the housing meltdown which I think has resulted in people moving closer to work if they have to rent anyhow.

    People are no longer Geographically Mobile. You cannot count on selling your home quickly for a profit or break-even. If your job changes and your house is underwater… something has to give and most folks choose food over shelter.

    It’s been a real boon for teachers and deputies – the first time in years they can actually afford a house.

  4. DJRippert Avatar
    DJRippert

    Sounds like pretty typical results for a long U-shaped recession. Employment increasing but below pre-recession levels. The “drive ’till you qualify” homes on the periphery of the MSA are no longer in such high demand because you don’t have to drive so far to qualify anymore now that the housing bubble burst.

    Income disparity increases as better educated and higher paid employees tend to keep their jobs or get bac to work sooner. The large number of jobs attached to the home construction industry melt away with the housing bubble’s burst.

    All in all …. very little news here. It might be noteworthy if there was a pronounced difference between Northern Virginia and other urban and suburban areas but I don’t see any indication of a difference.

    The biggest “ah ha” is the vast disparity between Northern Virginia and Virginia in terms of recovery. NoVa has +2.75% job growth since the recession while Virginia has a -1.75%: a big difference. Meanwhile, I assume that Northern Virginia is in the Virginia overall numbers making the results for “Virginia, outside Northern Virginia” pretty bleak. It will be interesting to see how this gets spun in the evolving governor’s race. Kind of hard for Bill “the jobs guy” Bolling to hang his hat on those numbers.

  5. Hydra Avatar
    Hydra

    http://www.housingvirginia.org/tc.aspx?PID=346

    In spotsylvania the housing affordability index is 18% of income required. It is based on a composite of rentals and purchased homes. If you work in the Metro area and earn the ZMetro median income then onely 15% of income is required to buy or rent in Spotsy.

    In Fairfax county it is 24.6%, so the question becomes how far are you willing to drive for 10% of your income, especially given that you will probably have to support a car anyway.

    In Fauquier it is 19.7%, but the cash difference is even worse because the 24.6% in Fairfaxis based on a Median income of $106,000 while in Fauquier it is only $88,000, and in Spotsy it is $74,998.

    Loudoun comes in at 20.6% HAI at a median income of $124, 143.

    30 years ago the median income in Fauquier and Loudoun were identical, so Fauquiers antigrowth policies are now costing its residents $36,000 a year in lost income, which is a helluva price to pay for saving $500 a year in taxes. And it points out the folly of the % gain graph, as I noted above.

    1. James A. Bacon Avatar
      James A. Bacon

      You said, “30 years ago the median income in Fauquier and Loudoun were identical, so Fauquiers antigrowth policies are now costing its residents $36,000 a year in lost income.”

      It’s possible that Fauquier’s antigrowth policies prevented an influx of high wage earners, thus depressing the average income. But it does not follow that, had the county allowed more growth, the original residents would have seen their incomes increase by $36,000 a household.

  6. Hydra Avatar
    Hydra

    30 years ago the median home price in Fauquier and loudoun were also identical. Which means in addition to the lost income, you would have missed out in a gain in the equity on your median home of over $247,000.

    Of course you can live in Fauquier or Spotsy and work in another jurisdiction to get the income gain, but you lose out on the equity gain.

  7. Hydra Avatar
    Hydra

    But it does not follow that, had the county allowed more growth, the original residents would have seen their incomes increase by $36,000 a household.

    ==============================================

    Actually, to a large degree it probably does. Even if you are a tradesman, the fact of more homes and more high end homes probably increases your income, teachers get paid more, there is more opportunity all around: it is that concentration effect you mentioned in your story on Vegas.

    Your point is well taken though: some of the income gain would be from newcomers and not accrue to the original residents, I don’ t think that is the point though. One government presided over a system that made its residents much better off than the other: whether they turn out to be the same residents is another issue. To a large degee the original residents may take what TMT would call “unearned windfall profits” and go someplace else, but the end result is more prosperous residents AND a more prosperous government, which can then do more things to benefit the residents, and their businesses.

    All I know is that there is no reason I could not do similar work to what I have inside of Fauquier county except that Fauquier policies would run off any sizeable business that tried to locate there. Imagine if Volkswagen or Rolls Royce, or Boeing tried to put a plant, or even a large office there. It is laughable: if an opportunity like that fell in their laps the supervisors would probably explode with apoplexy.

  8. Hydra Avatar
    Hydra

    As for money to current residents, Consider as an example my tree guy. I had him come over and drop a large tree that was about to fall and block my access to the back forty. Normally I would just cut it down, but this thing looked dangerous. Since all he had to do was drop it in the woods, the job was not expensive. But if he was in Loudoun and had to drop it between two $700,000 homes, he would have charged a lot more.

  9. larryg Avatar
    larryg

    People who live AND work locally in Spotsylvania do not make enough money to buy the typical home that commuters who work in NoVa can buy and as a result house prices in general escalate to what those who work in NoVa are willing to pay.

    As a result, many local workers like deputies and teachers have a difficult time affording a home.

    anytime you have a large percentage of commuters who earn higher salaries, it has a tendency to make the cost-of-living more expensive.

    I note that not only does Fairfax get supplemental money for cost-of-living stipends for teachers from the state but so does Spotsylvania.

  10. Hydra Avatar
    Hydra

    It can be looked at another way: Fauquier has retained some irreplaceable bucolic charm and environmental benefits. But far from saving money, these wonderful things actually cost around $13 billion.

  11. Hydra Avatar
    Hydra

    As a result, many local workers like deputies and teachers have a difficult time affording a home.

    ===============================================

    Nonsense. I would build a home a deputy or teacher could afford tomorrow, if the county would just let me. if it wasn’t illegal to do so, I would even guarantee to rent it only to county employees, in exchange for the building permit.

    If there is a market failure of the kind you describe, it is caused by government policy, not by an “influx of foreigners”.

    That is the same old dumb TMT argument: the newcomers used up all the street and sewer and school, and housing capacity. Nonsense: the increased demand is equally attributable to you not moving out as it is to them moving in.

  12. larryg Avatar
    larryg

    Hydra.. what did you say the affordability index was for Spotsy – and the median income?

    A deputy in Spotsy starts at about 40K and teacher about the same.

    Most of the deputies and single teachers in Spotsy rent apartments or live in double-wides on their family land when the housing market is “hot”.

    Of late, we have a lot of short sales… and the deputies and teachers are cleaning up….

  13. Hydra Avatar
    Hydra

    “Boomers are leaving the workforce in droves. Given how lousy the economy has been the last few years, I found this a surprising retirement planning phenomenon. My guess would have been that most people would look at their diminished savings and conclude, given the continuing economic uncertainty, to stay on the job. But according to a new MetLife survey, that’s just not the way it is.

    MetLife found that 45 percent of 65-year-old boomers are now fully retired, up from 19 percent in 2008. Another 14 percent say they are officially retired but working part time or seasonally.

    Of those people older than 65 and still working, about 50 percent anticipate being able to retire before they turn 70 years old, with 37 percent saying they plan to retire in 2012. On average, these respondents say they hope to retire by age 68.5.”

    ==========================================

    Of those retiring 51% said they were retiring sooner than planned. Of those 37% cited health reasons, 16% cited loss of job or opportunity, and only 1% cited elegibility for social security as a reason. 36% said they had reached retirement age and werereadyto quit.

    Only 8% said they were retiring later than planned and of them, 43% cited financial reasons.

    Maybe prosperity is under pressure for demographic reasons and we need more imports.

    Read more: Boomers calling it quits by 65 | Bankrate.com http://www.bankrate.com/financing/retirement/boomers-calling-it-quits-by-65/#ixzz1uJHpu5jx

  14. Hydra Avatar
    Hydra

    Plus, if you retire now you will get at least part of your social security before it goes away.

  15. Hydra Avatar
    Hydra

    The affordability index includes a rental component. But if a deputy makes $40k he is earning only 54% of the median income. He is getting screwed by the people he serves who earn much more and who expect their goods and persons to be protected by him.

    This is a recipe for graft and inside burglaries.

  16. larryg Avatar
    larryg

    well getting screwed or not..this is a typical starting salary for many RoVa deputies.

    re: social security

    until FICA goes away, it will generate about a trillion a year for the next 75 years and then some… you’ll get benefits..but not 100%

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