Where incomes have risen most

The '90s boom pushed American incomes to new highs and poverty to new lows.

By the end of 1999, the typical household earned $41,994, according to just-released census figures. That's the biggest increase since the '60s. Poverty, meanwhile, fell to levels not seen in 20 years.

But the real story of the '90s involves the winds of economic change that bypassed traditional powerhouses such as California and New York and filled the sails of other regions. Especially, of all places, the Midwest.

For example: Which state saw the biggest percentage increase in median household income? South Dakota. Which city made the most startling jump in economic prosperity, moving past San Diego and Charlotte, N.C.? The prize goes to Detroit. According to a census analysis, by 1999 the Midwest had become the most prosperous region in the US.

The Midwest's surprising rebound and other regional variations suggest the nation has entered the current, so far more troubled, decade at different speeds. Despite recession and the dotcom collapse, the Midwest and South have rolled into the new millennium with considerable momentum. That may mitigate some of the effects of the downturn. Meanwhile, the Northeast and California performed sluggishly during the '90s and may take longer to emerge from their current spate of troubles.

"In the 1980s, New York and Los Angeles were the global capitals of America, and they were leading the way toward prosperity in the world economy," says John Logan, director of the Lewis Mumford Center for Comparative Urban and Regional Research. "In the 1990s, rather than leading the nation, they're falling behind." The Mumford Center, in Albany, N.Y., issued the new census analysis, which pinpointed variations by region and metropolitan area.

Likely factors behind the shifts: an increase of immigrants in some areas, a healthy jump in women's earnings, and a booming '90s economy that shrank the rolls of the unemployed.

Instead of a bicoastal economy, which powered the US during the 1980s, the new jet-stream economy runs from the Pacific Northwest, through the heartland, and down to the South.

Other areas are getting left behind. Consider California. While household income for the entire US climbed 7.7 percent during the go-go '90s (adjusting for inflation), the Golden State looked positively dull with a paltry 2.2 percent rise.

Meanwhile, states from Washington through Georgia sprinted forward. South Dakota led the pack with a 20.8 percent income boost, closely followed by Colorado (20.7 percent), Mississippi (19.9 percent), and Utah (19.6 percent). Illinois, the highest-income state in the Midwest, saw an 11.3 percent boost.

With the low value of the dollar and global markets expanding, "we were well placed to capture a lot of manufacturing activity," says Fred Giertz, economics professor at the University of Illinois at Urbana.

The metropolitan data is even more telling. While northern California blossomed (at least before the collapse of several high-tech industries), southern California wilted in the 1990s. According to the Mumford index, which ranks areas according to various census measures including income, poverty, home ownership, and education, San Jose and San Francisco saw median income jump more than $10,000 during the decade. Meanwhile, Los Angeles suffered the largest decline in median income of any of the nation's 331 metro areas.

While the nation's poverty declined, the southern California metropolis saw its poverty rate grow 3 percent. Another poor performer: San Diego. Among the 50 largest metro areas, San Diego experienced the largest decline in the Mumford rankings: from No. 19 in 1990 to No. 36 in 2000.

Since then, the high-tech debacle and the national recession have weakened the state further. "We are just beginning to recover, but the decline was so large that it will probably take another six months before we get to some period of normality," says Mario Belotti, an economics professor at Santa Clara University, in the heart of California's Silicon Valley.

Even northern California hasn't escaped unscathed. In a little over a year, Santa Clara County has seen its unemployment skyrocket from 1.6 percent to 7.4 percent, Dr. Belotti says. The county's unemployment rate now stands above the national average, a statistic unthinkable for most of the '90s.

The decade also proved difficult for metro areas in the Northeast. Nassau-Suffolk, N.Y.; Bergen-Passaic, N.J.; Newark, N.J.; and New York City and its suburbs all fell in the Mumford rankings.

Meanwhile, metro areas in the Midwest and the South prospered. Detroit and its suburbs jumped from the 36th spot to No. 21 in the Mumford index. Even the city itself, despite losing population in the '90s, saw significant increases in income and reductions in poverty.

More impressive – though perhaps less startling – was Austin, Texas. It notched the highest increase in median income of any of the nation's 50 largest metro areas. It also recorded the largest drop in poverty. On the Mumford index, Austin's ranking rose from No. 40 to No. 15.

What made the 1990s relatively healthy economically for many states was its broadly based prosperity. True, the rich got richer: During the decade, the number of households earning (roughly) $200,000 or more a year rose by 40 percent or more in all but two states. But this time, the benefits began to trickle down to the poor. Abundant jobs boosted their incomes, especially near the end of the decade, and pushed many out of poverty.

In the upper Midwest, in particular, states saw dramatic declines in family poverty, according to the new census data. Iowa, Minnesota, North Dakota, and Wisconsin saw their rates fall by at least two percentage points – a huge decrease. Michigan topped them all with nearly a three-point drop: 10.2 percent to 7.4 percent.

But in other areas, despite the rise in incomes, the poverty rate went up. Rhode Island showed a huge 2.1-point increase (6.8 to 8.9). Hawaii's rate jumped 1.6 points; California, 1.3 points. Even fast-growing Nevada saw a slight increase.

These increases explain why the US poverty rate for families dropped less than a point (from 10.0 percent to 9.2 percent) – a modest decline at a time when the economy was doing so well.

In New York City, a shift toward lower-paid workers in the private sector and on city payrolls meant the division between rich and poor grew even wider.

"The top went through the roof, and the bottom went through the floor," says Moshe Adler, senior economist with the nonprofit Fiscal Policy Institute in Manhattan.