Virginia is growing poorer and its most affluent region is to blame.
Meanwhile, a part of the state that’s seen decades of hard luck and bad luck is now posting some of the biggest income gains in the state.
That may seem a contradiction in terms, but the changing demographics of Virginia are unlike the ones we’ve been accustomed to. The region whose economy should be of most concern right now is Northern Virginia, while the region with the most hopeful positive changes is Martinsville and Henry County.
All of that’s contained in the new round of data that the U.S. Census Bureau recently released. One headline from that: The median household income in the country is declining.
That is not a data point that Democrats will find helpful as they head into a presidential election year, although the answer is not quite as clear-cut as it was in 1980 when Ronald Reagan posed his devastatingly simple question in a debate against President Jimmy Carter: “Are you better off today than you were four years ago?”
What happens if we re-ask Reagan’s question today? The Census Bureau puts the nation’s median household income at $74,580, a decline from a pre-pandemic high of $78,250. However, the Census Bureau attributes part of the decrease to the end of multiple pandemic-era programs:
“In 2022, several policies enacted by the American Rescue Plan Act (ARPA) expired, including an expansion of the Earned Income Tax Credit (EITC) for filers without children and full refundability of the Child Tax Credit (CTC) and Child and Dependent Care Tax Credit (CDCTC). ARPA also increased the maximum amount of CTC.
“In 2020 and 2021, most households also received Economic Impact Payments (EIP) that were no longer issued in 2022.
“The rollback of these tax policies had the largest effect on post-tax income among the nation’s lowest-income households.”
That’s a lot to explain to voters, and the general rule of politics is if you’re explaining, you’re losing.
We have plenty of time to deal with the politics, though. Today, let’s look at the changing economics and demographics of Virginia.
The report found only 14 states where median household income has gone up from 2021 to 2022, mostly in two clusters — one in the Southeast, the other in the Rocky Mountains states. In some of those states, the change was quite small: In Colorado, the median household income was up by just $40. By contrast, it was up $5,026 in Delaware.
In any case, Virginia was not among those lucky 14. In Virginia, the median household income fell from $87,861 to $85,873, a decline of 2.3%.
We should note that in Virginia’s two neighbors to the south — North Carolina and Tennessee — the median household income grew. Not by much, but it still grew. Gov. Glenn Youngkin often points to North Carolina as an economic competitor; he will not like these statistics. Nor should anybody in Virginia.
So why did Virginia’s numbers go down? The reasons the Census Bureau cites for the national decline apply here, as well. But so does something else: the state’s continuing out-migration.
Youngkin is the first governor I’ve seen who has talked about this, and he’s talked about it a lot: Ever since 2013, more people have moved out of Virginia than have moved in. The state’s population is still growing, because births outnumber both deaths and that net out-migration. However, birth rates are falling everywhere, so Virginia’s population growth is slowing. In theory, if Virginia’s birth rate fell more, the state could find itself losing population. Regardless, Youngkin has asked why Virginians are, to employ another Reagan phrase, “voting with their feet.” Why are so many people moving out?
I’ve devoted previous columns to this subject, so I’ll just hit the high points. This out-migration once was confined to older age cohorts — baby boomers retiring and moving farther south. It’s hard to turn back that tide. In recent years, though, we’ve seen out-migration in every age cohort, which is far more worrisome to the governor. We’re not only exporting our retirees, we’re exporting our younger workers, too. It’s hard to build the “rip-roaring economy” that Youngkin promised.
Let’s look closer at who’s moving out: It’s higher-income Virginians.
For at least 16 years — the Internal Revenue Service database on migration and income only goes back that far — the people moving out of the state have made more money than the people moving in. And that gap is widening. In 2011, those moving out of Virginia made only $1,466 a year more than those moving in. By 2020, the gap was $6,082 a year. With each moving van, Virginia is losing money.
I’ve also pointed out in previous columns that Virginia’s out-migration is driven primarily by Northern Virginia and, to a lesser extent, Hampton Roads. Most of rural Virginia now sees more people moving in than out (although localities may still be losing population because, in an aging county, deaths outnumber births and net in-migration). This is, of course, a complete turnaround from what most of us have known.
Furthermore, the Weldon Cooper Center for Public Service at the University of Virginia reported earlier that this year that Northern Virginia isn’t simply seeing net out-migration, it’s losing population altogether. Let me say that again, louder and more specifically, for the people in the back: Fairfax County is now losing population. That hasn’t happened since the 1820s. That’s how profound a demographic shift this is.
For now, let’s just deal with out-migration and not larger demographic trends: The average income of those moving out of Fairfax County is $106,356. In Arlington, $112,206. In Loudoun County, $115,254. Virginia is losing its highest-income residents. If you subscribe to the “Eat the Rich” theory, you can count that as a good thing. If you like your public schools in rural Virginia funded, it’s not, because most rural schools receive most of their funding from the state. With affluent residents leaving the state, Virginia is losing taxable income. We can debate what that tax rate ought to be, but the Virginia tax rate on those who leave the state is obviously zero.
This is a big reason why Virginia’s median household income has declined, says Hamilton Lombard, a demographer with the Weldon Cooper Center. “The out-migration of high income people from Northern Virginia or those who if they had stayed would have seen their income grow, is definitely a factor,” he tells me by email. “In recent decades Northern Virginia has been both Virginia’s wealthiest and fastest growing region, but since 2020 Northern Virginia has seen very little growth, while less wealthy parts of the state are growing, likely helping pull down Virginia’s overall income numbers further.”
The Census Bureau also issued figures on average monthly wages for private sector workers. This data isn’t available on a locality-by-locality basis, but it is available on the level of metropolitan statistical areas and micropolitan statistical areas, which is close enough for our purposes.
From 2021 to 2022, the fastest wage growth in the state came in some of the least affluent areas — the Martinsville and Big Stone Gap micropolitan areas tied for first at 12%, followed by the Virginia part of Kingsport-Bristol at 10%.
Meanwhile, the slowest wage growth during that came came in Northern Virginia — 5%.
|Metro or micropolitan area||Wage growth 2021-2022|
|Big Stone Gap||12%|
When we look at a wider time frame to measure 2019 to 2022 — from before the pandemic to last year — we see similiar patterns. The single fastest wage growth during that came in Martinsville, at 24%. But Northern Virginia was near the bottom at 17%.
|Metro or micropolitan area||Wage growth 2019-2022|
|Big Stone Gap||16%|
Northern Virginia is an economic behemoth. When its economic growth slows down, we should all pay attention. I am reminded of the famous quote from the late Canadian Prime Minister Pierre Trudeau (father of the current PM), who described living next to the United States like this: “Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt.” The same applies to Northern Virginia and the rest of the state. Right now we should all be paying attention to its economic (and demographic) twitching and grunting.
The micropolitan area with Martinsville and Henry County has the statistical advantage of lower wages overall, so it’s easier to show a bigger percentage increase. Still, these are the numbers. It’s been a long time since the Martinsville-Henry County area — which in 2000 saw the collapse of the textile industry — has been at the top of any chart of good statistics. It is now, so we’re all in need of some attitude adjustment.
The actual dollar figure increases in Martinsville and Henry County are impressive, too: an increase of $377 a month. Only Richmond, Winchester and Northern Virginia, in that order, have seen bigger ones. That also shows just how wide the income gap in Virginia remains: An extra $396 a month in Northern Virginia translates into a slow increase, an extra $377 a month in Martinsville translates into the biggest percentage growth in the state.
“Martinsville had the lowest reported income in [first quarter] data for any metro or micro area but the larger income gains allowed it to inch up relative to Northern Virginia,” Lombard says. “Martinsville’s larger income gains are likely related to the fact that there has been a manufacturing boom nationally in recent years and among Virginia’s metro and micro areas, Martinsville has the largest share of its workforce employed in manufacturing (nearly one in five workers).”
Furthermore, after adjusting for inflation, the only places in Virginia to experience income gains from 2021 to 2022 were in the southern and western parts of the state, Lombard says. “This trend is very much in line with national trends, which have seen lower income and blue collar workers see larger income gains or smaller declines on average than most higher income and white collar workers,” he says.
A report by the Federal Reserve Bank in Dallas tells us the pandemic has been good for lower-income workers: “Before the pandemic, growth in nominal earnings was comparable across all five earnings quintiles. But once the pandemic struck, the lowest quintile of earners saw the fastest rate of growth in earnings.”
Different people might answer that “Are you better off?” question different ways.
But wait, there’s more good news: “The higher wages also appear to be pulling more southern Virginians into the workforce,” Lombard says. “Even though the 20 to 65 population is declining in the Martinsville region, the number of private sector employees has not declined, causing labor force participation rates to rise. This is a positive change, particularly when you consider that over the past decade, parts of Southwest Virginia have had over three-fifths of adults not employed or looking for work, compared to one-fifths or one quarter in Northern Virginia.”
So, here’s something to celebrate in Martinsville. It may be McLean we need to worry more about.
Want to read more about Virginia’s changing demographics? We’ve collected all our demographic coverage here.