December caps off what is traditionally the biggest spending season for Americans. The American Research Group estimates that shoppers will spend an average of $646 on gifts this year. According to the National Retail Federation, that will add up to a record-breaking $469.1 billion between Thanksgiving and New Year's.
But which U.S. metro areas will have the most to spend? According to a new measure I developed with my colleagues at the Martin Prosperity Institute, greater Washington, D.C., tops the list of America’s most economically advantaged metros. San Jose, at the heart of California’s fabled Silicon Valley, is second; Bridgeport-Stamford, Connecticut, is third; San Francisco is fourth; with Boston and Trenton-Ewing (which includes Princeton), New Jersey, tied for fifth.
Our Metro Economic Advantage Index, developed with my MPI colleague Charlotta Mellander, includes three measures of regional productivity and wealth: median household income, per capita income and average wages and salaries. While resort and second home capitals like Martha’s Vineyard and Naples, Florida, may have high income levels, I previously noted that they mainly import wealth generated elsewhere. Wages and salaries are a better indicator of a place’s intrinsic productivity. Our index accounts for this and covers 360 American metro regions. We also looked at the factors associated with metro economic advantage. Of course correlation does not mean causation. Still, the associations are telling.
Economic advantage is pretty much a bi-coastal affair, with 15 of the top 20 metros located on the East and West Coasts, including all of the major metros that make up the corridor between Boston and Washington. This includes New York, Baltimore and Philadelphia, as well as Hartford, Conn., and Manchester, N.H.
The West Coast winners include Seattle, Napa, and Oxnard-Thousand Oaks, Calif. The five inland metros that make the top 20 are Boulder and Denver, Colo., Minneapolis-St. Paul and Rochester, Minn., and Anchorage, Alaska.
The map below by Zara Matheson shows how U.S. metros stack up on our index.
Metros that rank highly on our index have more highly educated and more highly skilled populations – or what economists refer to as higher levels of human capital (the correlation is .69). The same is true of metros with a larger share of knowledge-based, professional and creative jobs (the correlation is .61). Metro economic advantage is also associated with the concentration of high-tech industry (.68) and the level of technological innovation measured as patents per capita (.56). Metros that rank highly on our index have higher levels of openness and diversity – whether in terms of the share of new immigrants (.32) or of gays and lesbians (.43). More economically advantaged metros, not surprisingly, are also happier (with a correlation of .54).
The most advantaged metros do not appear to be more unequal than others. There is no significant correlation between our Index of Metro Economic Advantage and income inequality measured by the standard Gini coefficient. That said, America’s economic geography is becoming spikier, more unequal and more divided between and across metros. Income inequality and the gap separating the regions with the highest and lowest incomes is substantial. With a median household income of more than $84,523, average wages of $61,579, and per capita income of $40,528, Greater Washington, D.C.'s overall level of economic advantage is more than double those of America's lowest income metros.
Americans’ economic prospects are increasingly divided by where they live. This gap is only likely to worsen as human capital, high-tech industries, and high-paying jobs continue to concentrate much more in some regions than others.
Photo credit: Gus Ruelas/Reuters
|Rank||Metro Area||Economic Advantage Index|
|2.||San Jose-Sunnyvale-Santa Clara, CA||0.994|
|4.||San Francisco-Oakland-Fremont, CA||0.991|
|9.||New York-Northern New Jersey-Long Island, NY-NJ-PA||0.965|
|10.||Hartford-West Hartford-East Hartford, CT||0.964|
|15.||Oxnard-Thousand Oaks-Ventura, CA||0.948|
|16.||Minneapolis-St. Paul-Bloomington, MN-WI||0.947|
|18.||New Haven-Milford, CT||0.932|