Regional household incomes have risen and fallen in sync with the expansion and contraction of the region’s economy over the past four decades. Over the long term, however, incomes have remained remarkably close to an inflation-adjusted average of $85,000 per household, as measured in 2015 dollars. Although the latest economic boom has resulted in an uptick in median regional incomes, this is not due to higher worker pay. Instead, it reflects the reentry of workers into the labor force as additional members join in supporting their household and from higher capital gains, and to some extent higher dividends, as the stock market recovered.
Household income is a key measurement of economic trends, the monetary well-being of Bay Area households, and the standard of living. Household income is determined not only by trends in wage levels, but also by how the overall composition of households change. In addition to salary or wage increases, household income grows when additional household members join the ranks of workers – which often aligns with times of economic prosperity, just as it typically shrinks when household members retire from the workforce.
While the trend for median regional income seems to indicate stable household incomes over time, income trends by percentile tells a different story. In fact, the income gap between the rich and poor has widened, especially since 1990. Between 1970 and 2015, incomes for the poorest households grew 15 percent, a pace similar to the regional median. During the same period, the wealthiest households saw a much larger 42 percent growth in inflation-adjusted income.
This trend is most evident in San Francisco, where households at the 60th and 80th percentile have seen double and triple the income increases since 1970, respectively, compared to households at the 20th percentile income. Much of this change has occurred during the short five-year period since 2010, with the influx of high-wage workers moving to the city. In 2015, household income at the 80th percentile in San Francisco exceeded $200,000 while household income at the 20th percentile remains the lowest in the region. The city’s efforts to provide affordable housing have allowed some of the poorest residents in subsidized residences to stay, while other low- and middle-income earners move to less expensive parts of the region or beyond.
Along with Marin County, Santa Clara and San Mateo counties have the highest household incomes among Bay Area counties. Median household incomes in these counties are above $90,000 – over 50 percent greater than the region’s poorest county (Sonoma County). This holds true at the city level as well. Of the five wealthiest cities in the region, only Piedmont is located outside of Silicon Valley.
As incomes for Silicon Valley rise, changing demographics have resulted in declining median income in Contra Costa, Napa, Solano, and Sonoma counties. Contra Costa County’s median household income has fallen an inflation-adjusted seven percent since 1970. Suburban development of naturally-affordable housing in East Contra Costa County in the 1990s and early 2000s drew less affluent households, resulting in the county’s median household income now being on par with Alameda County.
2015 Median Household Income by Neighborhood
Washington D.C. is the only major metro area in the country with a higher median household income than the Bay Area. The typical Bay Area household has an income 76 percent higher than a typical household does in Miami, for example– reflecting a significant income gap between the nation’s richest and poorest major metro areas. Moreover, while many other major metro areas have seen slight increases or declines in inflation-adjusted median household income since 1970 – including a 12 percent decline in Chicago – the Bay Area recorded a 13 percent growth over the same period.
In recent years, while some economic indicators suggest a full recovery from the Great Recession, the majority of the largest metro areas have recorded declines in their median household incomes. Household incomes in Atlanta and Miami, for example, experienced the worst declines during the recession. Household incomes in these metro areas remain five and ten percent below pre-recession levels, respectively. Houston and Dallas have seen growth in household incomes during periods of strength in the Texas oil and gas industry.
U.S Census Bureau: Decennial Census
Count 4H – https://nhgis.org (1970)
Form STF3 – https://nhgis.org (1980-1990)
Form SF3a – https://nhgis.org (2000)
U.S. Census Bureau: American Community Survey
Form B19013 (2006-2015; place of residence)
Form B19001 (2006-2015; place of residence)
Form B19080 (2006-2015; place of residence)
Form B08521 (2006-2015; place of employment)
Form B08519 (2006-2015; place of employment)
Bureau of Labor Statistics: Consumer Price Index
All Urban Consumers Data Table (1970-2015; specific to each metro area)
Image: Flickr (Creative Commons license), Photographer: Chris Potter (StockMonkeys.com)
Total income is the sum of wage or salary income; net self-employment income; interest, dividends, or net rental or royalty income or income from estates and trusts; Social Security or Railroad Retirement income; Supplemental Security Income (SSI); public assistance or welfare payments; retirement, survivor, or disability pensions; and all other income. Receipts from the following sources are not included as income: capital gains, money received from the sale of property (unless the recipient was engaged in the business of selling such property); the value of income “in kind” from food stamps, public housing subsidies, medical care, employer contributions for individuals, etc; withdrawal of bank deposits; money borrowed; tax refunds; exchange of money between relatives living in the same household; gifts and lump-sum inheritances, insurance payments, and other type of lump-sum receipts. Income data reported in a given year reflects the income in the prior year (decennial Census) or in the prior 12 months (American Community Survey); note that this inconsistency has a minor effect on historical comparisons (for more information, go to: http://www.census.gov/acs/www/Downloads/methodology/ASA_nelson.pdf). American Community Survey 1-year data is used for larger geographies – metropolitan areas and counties – while smaller geographies rely upon 5-year rolling average data due to their smaller sample sizes. Median income for 1970 and quintile income for 1970-2000 is imputed from Decennial Census data using methodology a developed by the California Department of Finance (for more information, go to: http://www.dof.ca.gov/Forecasting/Demographics/Census_Data_Center_Networ...). Bay Area income is the population weighted average of county-level income. Worker earnings is one component of household income. Worker earnings are the sum of wage or salary income and net income from self-employment. “Earnings” represent the amount of income received regularly for people 16 years old and over before deductions for personal income taxes, Social Security, bond purchases, union dues, Medicare deductions, etc. The U.S. Census has upper-limit thresholds for reporting income data. The dataset may not accurately represent median and quintile household income above the threshold. For example, in 2015 the threshold was $250,000. A city with an 80th percentile household income of $300,000 will have an 80th percentile household income of $250,001 in the dataset since $300,000 is above the upper threshold of $250,000. The threshold in reporting year dollars for each year is the following: 1970 - $25,000; 1980 - $75,000; 1990 - $150,000; 2000 - $200,000; 2006 to 2015 - $250,000. Income has been inflated using the Consumer Price Index specific to each metro area; however, some metro areas lack metro-specific CPI data back to 1970 and therefore adjusted data is unavailable for some historical data points. Note that current MSA boundaries were used for historical comparison by identifying counties included in today’s metro areas.