Median Household Income Rose Despite (Because of?) the Pandemic

By Dr. Patrick Jones

The pandemic dealt the collective health of greater Tri Cities a body blow. In 2020, over 9% of all deaths in the two counties were attributable to covid-19, up from zero in 2019. In 2022, the pandemic claimed 13% of all deaths, before receding to 4.2% of all deaths in 2022. With the exception of 2022, these rates were far higher than the Washington state average. 

Yet, the pandemic economy proved surprisingly resilient in Benton & Franklin Counties. For example, the pace of taxable retail sales in the two counties outstripped the state average in 2020 and 2021, while growing slightly less than Washington in 2022. (See Trends indicator 3.2.1.) 

Another key economic indicator is Median Household Income (MHI).  In 2019, MHI in the two counties was approximately $68,300; in 2022, nearly $83,000. That represents as 21% gain and the largest jump in any four-year period featured in indicator 3.1.2. 

For sure, these data are not inflation-adjusted. But even considering inflation, the pandemic increase was noteworthy. After we take account of a gain between 2022 and 2019 in the CPI of 14%, the “real” increase is still 7%. 

What is MHI? 

For most economists, median household income is the preferred measure of the “middle” of an income distribution. In the U.S., average income is heavily influenced by the presence of very high values, pushing up the average compared to the median. And the unit of a household, rather than one person (as in the average) allows for more than income-earner in a living unit. 

Personal income, the object of measuring MHI, consists of three legs: earnings from work, realized returns from investments and federal transfer payments. In most communities, earnings from work is the thickest leg while returns from investments is the thinnest. The greater Tri Cities is no exception. 

The third leg deserves special attention, since it captures the extraordinary federal economic response to the pandemic. Between 2019 and 2022, values for all three legs rose, but federal transfer payments rose by far the fastest. In 2019, wages & salaries amounted to two thirds of total personal income in the two counties, while federal transfer payments were nearly one fifth (19%). 

During the peak of the pandemic (2021), however, the share taken by wages and salaries slipped to 61% while the share provided by federal transfer payments swelled to 25%. In other words, during that year, one out of every four dollars circulating in the local economy came from a federal source. Equivalently, the flow of payments from Washington, D.C. was $4 billion, up from $2.6 billion in 2019. 

As the pandemic has subsided, so has the presence of federal largesse. In 2022, federal transfer payments amounted to 21% of all income here, or $3.3 billion – still much higher numbers than before the pandemic. 

What are federal transfer payments? 

Transfers consist of flows from the government that are not related to current work. Consequently, they exclude payments to employees of PNNL and the various vendors involved with Hanford. A description of all the distinct federal flows would take up another column; suffice to say, they reflect the myriad programs that our society has established over nearly the past century to assist its citizens. 

The current top five contributors to the federal transfer total here are, in order:  social security, Medicaid, Medicare, veterans’ benefits, and the earned income tax credit. This ordering has been in place for a while. The largest changes between pre- and post-pandemic years can be traced to three factors: the expansion of Medicaid benefits, the growth of social security payments (number of recipients and a large bump from inflation adjustments) and the general category of “income maintenance” programs. These include: food stamps (SNAP), nutrition for women & children (WIC), additional child tax credits, among others. 

The relative size of these payments in the overall economy rests, in large part, on the strength of the local economy. The more robust the economy is, the higher wage earnings are and the lower the transfer payment share is. In many rural counties in Washington, for example, the average share taken by federal transfer payments lies between 25-35%. In contrast, the typical share of transfer payments in King County lies around 8%. 

Distribution of MHI within the Two Counties 

It likely comes as no surprise that this measure of personal income is not the same in all corners of the greater Tri Cities. This is readily observable on the Trends by clicking the location radio buttons in the upper right-hand section of the graph. The difference between the counties isn’t too great. The same can’t be said among the cities. 

Of the three large cities, Kennewick, in particular shows much lower median household income than the others, with a 2022 value of about $74,000. Richland, by contrast shows levels of MHI in the high $80s. Pasco lies in the middle.  

MHI levels in the two smaller cities of the two counties provides a set of book-ends. Due to their small size, the estimates are on a rolling five-year basis. For the most recent period (2018-2022), Prosser yielded an estimate of about $64,600. On the other end, West Richland showed the highest overall, at about $118,000. 

Despite these difference, most residents in Benton & Franklin Counties still enjoy median household income levels higher than any part of eastern Washington.