Pull up a chair and watch the people leave.

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Paychecks in Rural America Are ... About the Same

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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In the mostly very positive report on U.S. income and poverty in 2015 that the Census Bureau released this week, there was one sour note. As the Wall Street Journal reported:

Income gains were spread across nearly all age groups, household types, regions and racial or ethnic groups. One exception: Incomes didn’t rise for households living outside metropolitan areas.

In fact, the Census Bureau reported that the median household income outside the nation's metropolitan areas fell from $45,534 in 2014 to $44,657 (both in 2015 dollars), although it didn't make a big deal out of that because the difference was less than the survey's margin of error. Later it even added a “user note” cautioning that changes in the survey sample made comparisons between 2014 and 2015 “not appropriate,” and pointing to a different survey that shows the median income outside metropolitan areas rising from $42,749 to $44,212.

Just to define things: a metropolitan area, or "metropolitan statistical area," to use the formal term, has a core urban area of 50,000 or more people, and "consists of one or more counties and includes the counties containing the core urban area, as well as any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core."   For some purposes the Census Bureau also divides the country into what it calls urban and rural areas, which don't necessarily follow county lines. But these urban areas include "urban clusters" of as few as 2,500 people, so the metropolitan/nonmetropolitan division seems more reflective of who lives in the orbit of cities and who doesn't. The U.S. Department of Agriculture defines rural America simply as counties that aren't in metropolitan areas. Also, more to the point, that's the divide the Census Bureau uses in its annual income and poverty report.

The initial report of a median income drop outside of metropolitan areas in 2015, even if it wasn't statistically significant or even “appropriate,” made me curious. Given all the bad news we've been hearing about rural and small-town America in recent years, I wondered if the data would show nonmetro median incomes falling further and further behind metro incomes through the years. So I harvested the numbers back to 1994, adjusted them for inflation  and found that the answer is: nope.

The Metropolitan Advantage
Median household income, in 2015 dollars
 
Source: U.S. Census Bureau
Data not available for 2004

The gap between the two hasn't changed much. Since 1994, the median household income of Americans outside of metropolitan areas has averaged about 77 percent of that of Americans inside metropolitan areas. In 2015, it was 75 percent. In 2014, it was 81 percent. In 1994, it was 77 percent. Maybe that 2015 drop will turn out to mean something, or maybe the percentage will just keep oscillating around a pretty flat trend line, as it has for decades.

A trend line that hasn't been flat at all, though, is the percentage of the U.S. population living outside of metropolitan areas. In 1950, it was 44 percent, in 1970 31.4 percent, in 1990 18 percent, in 2000 17.3 percent -- and as of 2015 it was just 14.4 percent. Much of this change through the decades has had to do with more counties being classified as part of metropolitan areas. But since 2010, it's mainly just been about people fleeing rural counties. According to the USDA's most recent "Rural America at a Glance" report, "2010-2014 is the first period of overall population decline on record for rural America as a whole." Rural America isn't exactly dying off -- there were 230,000 more births than deaths in nonmetro counties over that period -- but it is moving out: 346,000 more people moved out of nonmetro counties than moved in.

The relative steadiness of nonmetro median incomes is an indication not so much of economic health, then, as of the continued emptying out of rural America. Those left behind often have some sort of fixed government income -- residents of rural counties are more likely to be 65 or older, and much more likely to be receiving Social Security disability checks, than people in metro areas. The result is that while rural America has definitely been losing ground economically, it doesn't seem to be getting significantly poorer per capita.

(Updates to include new information from the Census Bureau in third and fifth paragraphs of article published Sept. 16.)
  1. In states with big counties this definition can lead to some weird results -- the San Bernardino-Riverside-Ontario metropolitan area in Southern California, for example, covers more land area than Massachusetts, New Jersey, Connecticut and Rhode Island combined, most of which is sparsely inhabited desert.

  2. Using the Consumer Price Index Research Series Using Current Methods, because that's what the Census Bureau uses.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Stacey Shick at sshick@bloomberg.net