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Decline in household incomes raises concerns about VT economy

Posted by Mia Watson on Wednesday, September 26, 2018 - 11:47am

A recent article in the Burlington Free Press highlights Vermont’s stagnating household incomes, raising concerns over the strength of its economy and the ability of its residents to afford housing.

UVM economics professor Art Woolf writes that according to the 2017 estimates recently released by the U.S. Census Bureau, Vermont’s median household income is $57,513, ranking it 27th in the country. However, the Vermont household median income actually decreased by 2.4 percent from 2016, just as the national median household income increased by 2.5 percent.

During the same period that median household income fell, Vermont home prices have been on the rise, increasing 2.4 percent from 2016 to 2017, according to the Vermont Department of Taxes. This trend is pronounced in areas experiencing population growth, including Chittenden County, where primary home sale prices increased 5.7 percent. Chittenden County median gross rents also increased by 7.5 percent from 2016 to 2017, according to Census Bureau estimates. 

This increasing imbalance between the cost of housing and household incomes has negative effects on the Vermont economy at large. A lack of affordable housing can make it difficult for employers to attract skilled workers. In addition, when households spend most of their income on housing, they have less to spend on other goods and services, which reduces overall economic growth.

It is unclear why Vermont incomes are not increasing along with the rest of the nation. Woolf speculates that there could be a variety of factors. Vermont has a higher proportion of seniors and one-person households than other states, both of which tend to have lower household incomes, and which could account for some of the disparity. However, it is also possible that despite Vermont’s low unemployment rate, the employment growth may not be occurring in high wage jobs.

Due to the complexity of our economy, it is difficult for policy makers to implement programs that directly increase incomes. However, investing in affordable housing programs such as VHFA’s mortgage programs and rental housing development has been demonstrated to contribute to economic growth by increasing spending and employment, providing a stable base of tax revenue for local governments, and by increasing the financial stability and earning potential of individual households.