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Article Highlights
- Since the 2010s, incomes of individuals on tribal lands have grown less quickly than incomes elsewhere
- Sources of Native household income adjusted to help offset labor income losses during Great Recession
- Indigenous perspectives shed light on different types of employment in tribal areas
Over the past four decades, tribal economies have experienced remarkable economic growth. The exercise of sovereignty, empowered by the 1975 Indian Self-Determination and Education Assistance Act, provided new opportunities for employment in Native communities, harnessing the expertise of tribal leaders to align economic development with the goals and needs of the local population. Tribes developed new revenue streams from gaming operations, federal contracting, and natural resource extraction.
Despite these profound gains, income disparities persist between Native and non-Native individuals. To chart a path toward greater prosperity, policymakers and tribal leaders need reliable information on diverse groups of Native earners—how have the highest-income individuals fared, for instance, compared with lower earners? Has this expanded opportunity been unique to those living in tribal areas, or shared among Native populations throughout the U.S.? Yet detailed data has been difficult to access, in part because Native communities are not well represented in public data sources. Researchers and policymakers have tended to rely on data from the American Community Survey (ACS), which has key limitations. The ACS can only approximate whether respondents live in a tribal area, lumping together other individuals in adjacent towns and communities. While the ACS is larger than most alternatives, it is still difficult to zoom in on the experience of small subgroups—workers aged 25–34, for instance, or high-income Native women. And it is not possible with this data to follow the same individuals over time in order to track how their income changes.
New data from Income Distributions and Dynamics in America (IDDA) help fill this gap, providing over 70,000 summary statistics related to income levels, income mobility, and migration for individuals living in Native areas as defined by the Census Bureau. The IDDA statistics are constructed from administrative tax records linked to detailed demographic information from the Census Bureau, including residential addresses. Because IDDA is built from all tax returns filed with the IRS from 1998 to 2019, we can use its statistics to zero in on different parts of the income distribution in Native areas and to follow individual filers over time.
Using IDDA to take a closer look at income growth in Native areas uncovers several concerning trends. Following a period of economic growth, since the 2010s, both Native and non-Native incomes in tribal areas have fallen relative to the U.S. economy. This offers researchers and policymakers a starting point to analyze how economic policies and circumstances have affected Native communities over the last 10-plus years.
Two decades and three phases of Native income growth
According to the IDDA statistics, in 1998, the median income among Native individuals living in Native areas was $46,626—64 percent of the median income in the overall U.S. population.1 Figure 1 shows how this ratio, called “relative income,” changed over the following two decades for Native and non-Native individuals living in tribal areas. The chart also plots relative median income for non-Hispanic American Indian and Alaska Native (AIAN) people in the U.S., including those living both inside and outside of tribal areas. Together, these comparisons help break apart trends that are affecting Native people from those that are affecting tribal lands. For example, if the lines for Native individuals in tribal areas and for all AIAN individuals move in parallel but the line for non-Native individuals in tribal areas does not, that suggests a phenomenon where Native identity plays an important role but place is less central.
Figure 2 reproduces the same three comparisons at the 90th percentile. Each point shows the 90th percentile of income among the given group of individuals divided by the 90th percentile of income in the U.S. population. Income is measured using household-level adjusted gross income, which totals wage earnings, self-employment income, and other nonwage income reported on IRS Form 1040.
Figures 1 and 2 both follow an inverted-U shape: Between 1998 and 2009, incomes for all three groups—Native individuals in tribal areas, non-Native individuals in tribal areas, and all AIAN individuals—converged relative to the U.S. population. Native people living in tribal areas experienced the largest initial disparity, but they also showed the strongest relative income growth, closing the income gap by almost 10 percentage points at the median and at the 90th percentile.
The years after 2009 paint a very different picture. From 2009 to 2013, relative incomes leveled off for all three groups. Since 2013, relative incomes have fallen for individuals living in tribal areas. This decline is shared among Native and non-Native individuals and is even more pronounced at the top of the income distribution than at the median. From 2013 to 2019, relative incomes at the 90th percentile fell by 7 percentage points for Native individuals and 8 percentage points for non-Native individuals in tribal areas. Relative incomes also declined among AIAN individuals, but the change is less pronounced.
Income divergence in a growing economy
Using the drop-down menu on figures 1 and 2, we can explore the trends in terms of real income at the median and 90th percentiles. Looking at income in dollar-value terms adds some important detail. While income disparities between tribal lands and non-tribal lands widened after 2013, tribal lands themselves have seen a slow but steady upward trend in real income since 2009.
From 2009 to 2018, real median income for Native people on tribal lands grew from $54,030 to $61,575, a 14 percent increase. For non-Native people on tribal lands, median income rose from $62,433 to $70,100, a 12 percent increase. At the top of the income distribution, the 90th percentile, Native incomes on tribal lands rose from $138,727 to $159,545 and non-Native incomes rose from $157,076 to $181,163. This means the fall in relative income in tribal areas occurred in a period of overall economic growth—prosperity that was not shared evenly with tribal communities.
Another consequence of these patterns is that income disparities within tribal areas have persisted. Median Native incomes have hovered around 87 percent of median non-Native incomes since 2001, for more than 15 years—through both sides of the inverted-U in Figure 1. The persistence of that gap highlights privileges that people who don’t identify as Native might experience in very local economic landscapes. It brings to the forefront questions such as, What jobs do non-Native people hold in tribal areas? If we were to group together these two populations in Figure 1—non-Native and Native people in tribal areas—that would hide these layered dynamics.
Responding to labor market churn
Figures 1 and 2 show that relative incomes in tribal areas evolved in three phases: convergence toward the U.S. population, a period of little change, and divergence. These patterns are clear, but they are not intuitive. Relative incomes grew slightly during both the 2001 and 2008 recessions, a pattern that might seem surprising if, for example, lower-paying jobs are more impacted by recessions. In the period from 2009 to 2013, relative incomes were flat, even though research has documented large disruptions to tribal economies over this period. In fact, the IDDA statistics show individual earnings—that is, wages from formal employment reported on W-2 tax forms—fell for Native workers in tribal areas beginning in 2010. In that year alone, median earnings among Native men in tribal areas declined by 5 percentage points relative to all men in the U.S. population. How did tribal communities offset these impacts so that the relative income gap stayed flat during this four-year period?
We can look more closely at this puzzle by examining movement out of wage employment. The longitudinal dimension of IDDA shows the likelihood that an individual who starts in a particular earnings quartile does not receive a W-2 the following year. This is different from looking at overall employment or labor force participation in tribal areas, because it zeroes in on the flow of individuals who receive earnings from an employer in one year, then shift into nonemployment or self-employment the next.
Figure 3 plots movement out of wage employment for Native and non-Native workers in tribal areas compared with the range of “exit rates” across U.S. states. Workers in the lowest earnings quartile, shown in the left panel, are more likely than high earners to move out of wage employment from year to year (see panel at right). Both Native and non-Native earners in tribal areas tend to move out of wage employment more often than workers with comparable earnings levels across U.S. states. For example, from 2005 to 2006, just over 25 percent of low-earning Native workers in tribal areas exited the W-2 sample, compared with 18 percent of low earners in the median state.
Source: Income Distributions and Dynamics in America, Federal Reserve Bank of Minneapolis.
As the Great Recession hit, movement out of wage employment increased for low earners inside and outside of tribal areas. However, this increase was more persistent in tribal areas than in the overall population. Exit rates declined slowly in U.S. states beginning in 2009, ultimately reaching their pre-recession levels. But in tribal areas, movement out of the W-2 sample rose again in 2012 and 2013 and remained elevated in 2018.
The employment volatility experienced in tribal areas from 2009 to 2013 is even more distinct for high earners. Across U.S. states, one-year exit rates from the top earnings quartile were low, ranging from 1 to 3 percent, and flat. In contrast, exit rates among high earners in tribal areas increased from less than 5 percent in 2009 to about 10 percent in 2013 (and higher for Native individuals). The data show a churn in the tribal labor market that contrasts with the steadiness of relative household incomes from 2009 to 2013.
Understanding these patterns requires a recognition of how Native cultures and tribal homelands are unique. Research from sociologists and anthropologists highlight how Native cultures can be understood through their nonparticipation in the wage economy and instead an intentional focus on “subsistence economies.” A study of Alaska Native peoples by Lucas Trout, Lisa Wexler, and Joshua Moses determined that young people feel disconnected from their culture by participating in a wage economy, “and in many cases, [they] consider oneself ‘whitened’ or ‘domesticated’ by the work.” Subsistence economies are a recognized segment of tribal lands and AIAN cultures. A separate ethnographic study published in Social Service Review described how AIAN households that were “living off the land” did so not only for cultural reasons, but also to “offset the economic strain of purchasing food.”
The fact that individuals living in tribal areas moved out of formal employment at such high rates could reflect the strength of subsistence alternatives, especially in times of uncertainty. It could also indicate shifts into self-employment and entrepreneurship. Analysis of a subsample of the IRS records suggests AIAN individuals are more likely than the overall population to live in a household where at least one earner is listed on a Form 1099-MISC for miscellaneous information (29 percent of AIAN individuals versus 20 percent in the overall population in 2012). The high number of 1099s can reflect self-employment income or be a product of how some tribes provide per capita payments to tribal members—a payment of casino revenues on a per capita basis. Entrepreneurship is another important component of tribal economies that is shaped by Indigenous worldviews.
The magazine of the opportunity & Inclusive Growth institute
The disparity between tribal lands and non-tribal lands needs more research
Although incomes in Native areas increased following the Great Recession, they fell relative to the U.S. economy. The divergence between incomes in Native areas and overall U.S. incomes appears broad-based and structural. There are many potential explanations for this. Long-term infrastructure projects from the American Recovery and Reinvestment Act of 2009 may have started to see results in non-tribal communities in the early 2010s. Infrastructure projects, however, take longer to complete on tribal lands. For instance, St. Regis Mohawk Tribe used recovery funding to build Internet network infrastructure, but the project was not completed until 2015. It could also be that opportunities for earning nonwage income have shifted in recent years.
Whatever the explanation, the fact remains that tribal lands are being left behind. Both Native and non-Native individuals on tribal lands are seeing the same decline in relative incomes. More research is needed to tease out the root of this rising inequality.
The IDDA resource and statistics are available to help researchers find such answers. Additionally, the Center for Indian Country Development has a Reservation Profiles dashboard where researchers can find statistics about specific reservations across the U.S. To learn more about how we define Native individuals and tribal lands, see this note from the IDDA team, as well as the Center for Indian Country Development’s “What is Indian Country?” resource page. We welcome new research into this area.
Endnote
1 Income is measured using household-level adjusted gross income, which sums up all taxable income reported on Forms 1040 filed by individuals residing at the same address. This household-level total is then assigned to each adult household member. Thus, the household-level income statistics in IDDA should be interpreted as measures of total household resources available for individuals.
This article is featured in the spring 2024 issue of For All, the magazine of the Opportunity & Inclusive Growth Institute
H Trostle is a senior policy analyst for the Federal Reserve’s Center for Indian Country Development (CICD), where their work draws connections between infrastructure and economic development on tribal lands. H’s areas of expertise include tribal broadband deployment and land-use planning.
