Posted on Wed, Aug. 30, 2006
Rising cost of gas and health care tends to negate paycheck gains
Pioneer Press

Your paycheck might be fatter than it used to be, but it probably doesn't seem that way.

Higher price tags for gasoline, health care and many other goods and services essentially have wiped out income increases in recent years for the average consumer in Minnesota and many other parts of the country.

New data released Tuesday shows Minnesota's median household income last year was $52,024. This key barometer of the economic health of the average consumer means half of the state's households have incomes above that mark and half below. In raw dollars, that's more than the $47,111 figure reported from the 2000 Census. But after adjusting for inflation, it's about 6 percent lower.

Despite this gloomy news, Minnesotans are relatively well off. The state ranked 11th among other states in median income and was among only three Midwest states with incomes above the national average. The state's poverty rate crept up, but still was fifth lowest in the country.

These cheery comparisons may be cold comfort to Minnesotans watching their paychecks disappear.

"The point is that average wages have not been keeping up with the cost of living," said Tom Gillaspy, Minnesota's state demographer.

The figures released Tuesday come from the U.S. Census Bureau's American Community Survey, a nationwide annual survey that collects information on demographic, socio-economic and housing characteristics. Selected households fill out a questionnaire that asks, among other questions, how much money household members earned in the previous 12 months.

One local economist voiced skepticism about the survey.

Art Rolnick, research director for the Federal Reserve Bank of Minneapolis, said the census figures don't gibe with other indicators, especially the gross domestic product calculated by the U.S. Commerce Department. Rolnick suggested people surveyed by the census bureau might be underestimating their incomes.

"I'm speculating on this thing," Rolnick said. "What I do know is there's a huge discrepancy between the census numbers and the commerce numbers. The census has to defend this. It's systematically wrong. The bottom line is, this economy is growing."

But Nan Madden, Minnesota Budget Project Director at the Minnesota Council of Nonprofits, said the census figures are consistent with other studies showing stagnant wages across all income and education levels in the state.

"The census figures clearly show that the effects of the economic recovery are still not being felt by most Minnesotans," Madden said in a statement. "Economic growth makes possible, but does not guarantee, that all those who contribute to the economy receive the benefits of economic growth."

Other survey findings include:

• Women in both Minnesota and Wisconsin earned 75 percent of what men made in 2005, slightly below the national average.

• Income for Minnesota workers born abroad lagged those born in the state by 21 percent.

• Minnesota's poverty rate was about 9 percent in 2005, a slight increase over 2004. Minnesota had three of the lowest-poverty counties in the nation. Both Scott and Carver counties had poverty rates of about 2 percent, and Washington County's was slightly under 4 percent.

Gillaspy said Minnesota continued to stand out last year for its low unemployment and poverty rates. "Basically, Minnesota is really a state of workaholics," Gillaspy said.

Meanwhile, the rising cost of health care likely explains why the number of Minnesotans with private health insurance dropped to about 81 percent in 2005, the lowest estimate since 1997.

Fewer people bought their own private health benefits or received benefits through their employers. Minnesota still had the nation's lowest uninsured rate — about 8 percent — but that largely was because of the growing number of people accessing government-subsidized health benefits for the poor, disabled and elderly, according to the census figures.

The census count estimated that about 9 percent of Minnesotans received state-subsidized Medicaid benefits in 2005, an increase of about 1 percentage point from 2004.

Jeremy Olson also contributed to this story.

Rick Linsk can be reached at or 651-228-5371. Staff writer