2017 State of Working Massachusetts

Income

For the majority of lower and middle income workers, hourly wages are the principal source of these workers' annual household income. While wage data allows us to gauge how well workers are being compensated on an hourly basis, we must turn to data on income in order to understand how workers are faring in terms of changes in their total annual purchasing power. At both the national and state levels, the data show that incomes for average working households have not fared well during the current economic downturn and weak recovery.

Data from the U.S. Census Bureau's annual American Community Survey (ACS) show that median household income in Massachusetts rose to $65,339 in 2012. This is a statistically significant increase of $1,167 or 1.8 percent from the 2011 level of $64,172 (adjusted to 2012 dollars). For the U.S. as a whole, the ACS data show median household income stood at $51,371 in 2012, essentially unchanged from the 2011 level. Since 2007 (in the final month of which, the nation officially fell into recession), median household income in Massachusetts dropped an inflation-adjusted $3,723 or 5.4 percent. During the same period, U.S. median household income fell $4,818 or 8.6 percent. [For a discussion of the differences between the American Community Survey and the Current Population Survey see the "Methodological Notes" section in the appendices.]

Despite the drop since 2007, Massachusetts's 2012 median household income continued to compare favorably to those of other states, remaining among the highest in the nation. The comparative strength of Massachusetts' median incomes (relative to median incomes in other states) is closely related to the high levels of education seen in Massachusetts' workforce—just as hourly wages are directly linked to educational attainment (further details in the Work & Education section).

Not only is median household income higher in Massachusetts than in most other states, but over the past three decades Massachusetts has seen among the highest percent increases in median household income in the nation. Between 1980 and 2012, median household income in Massachusetts increased by 24 percent (adjusted for inflation). By comparison, the national median household income increased 9 percent during this period.

As is true of hourly wages, median household annual income for Massachusetts began to diverge markedly from the U.S. average back in the late 1970s and early 1980s. In 1980, the Massachusetts median household income was $51,400, which was modestly higher (about 10 percent higher) than the national median household income of $46,868 (adjusted for inflation). Since then, median income in Massachusetts has grown at an average annual rate of about two-thirds of a percent, while for the U.S., median income has grown less than half as quickly, at an average annual rate slightly above one-quarter of a percent. As a result, by 2012 the Massachusetts median household income of $63,656 was $12,639 (or 25 percent) higher than the national median household income of $51,017.1

The data showing an increase in median household income in Massachusetts over the last three decades, however, do not reveal important differences among households at different income levels. In 1980, the difference in income between Massachusetts households with high incomes and those with lower incomes was much smaller than it is today.

Thirty years ago, households in the 90th percentile (i.e., those families whose incomes were higher than 89 percent of other Massachusetts families) had incomes about six times larger than the incomes of households in the 20th percentile (i.e., those families whose incomes were lower than 80 percent of other Massachusetts families). By 2012, these higher income households had incomes that were eight times higher than the incomes of households in the 20th percentile.2

Looking at the differences in the rate of growth of median household incomes tells the same story in clearer terms. From 1980-2012, low-income Massachusetts households (those in the 20th percentile) saw an average income gain of just 0.3 percent each year over that full thirty-two year span (adjusted for inflation).3 Households in the 50th percentile (i.e., those households in the very middle of the income distribution, with half of all households making more and half making less than they do) saw their incomes rise by 0.7 percent each year over the same period.4 By contrast, households in the 90th percentile saw their inflation-adjusted incomes grow by 1.5 percent each year, or five times faster than the rate of income growth experienced by low-income Massachusetts households.


1The median household income figures presented here are derived from U.S. Census Current Population Survey data and therefore differ somewhat from the median household income figures provided in the discussion that opened this section, which drew upon American Community Survey data. For a more detailed discussion of the differences between these two data sets, please see the "Methodological Notes" section in the appendices.

2The median household income figures presented here are derived from U.S. Census Current Population Survey data and therefore differ somewhat from the median household income figures provided in the preceding discussion, which drew upon American Community Survey data. For a more detailed discussion of the differences between these two data sets, please see the "Methodological Notes" section at the end of this report.

3Specifically, this statistic compares the incomes of those households that were in the 20th percentile in 1980 with the incomes of those households that were in the 20th percentile in 2012 (adjusted for inflation). It does not track the same set of households over that 32-year period. It therefore is not necessarily the case that the same households were included in that 20th percentile in both years.

4The median household income figures under analysis here are derived from U.S. Census Current Population Survey data and therefore differ somewhat from the median household income figures provided in the earlier income discussion, which drew upon American Community Survey data. For a more detailed discussion of the differences between these two data sets, please see the "Methodological Notes" section at the end of this report.