Exploring Esri's Wealth Index

"Esri's wealth index provides a holistic view of an area's financial well being that builds upon Esri's powerful suite of demographic and socioeconomic characteristics." - Kyle R. Cassal, Esri Chief Demographer

The word "wealth" invokes different meaning to everyone. Wealth is the accumulation of resources - typically large amounts of money or physical possessions. A deeper understanding of wealth points to its staying power. Riches can come and go, whereas wealth persists once a householder's earning power is gone. Wealth, as defined by Esri is the product of multiple financial indicators including income and net worth that contribute to the financial well-being and sustainability of a household.

The wealth index is designed not to evaluate worth, but rather to capture the standard of living and financial stability of area households. Esri's wealth index represents a scale of an area's wealth relative to the national level. An index of 100 represents wealth on par with the national average. An area with a wealth index below 100 has lower than average wealth, while an index above 100 identifies areas with above average wealth.

Wealth is generally found in major centers (areas with high employment), retirement communities or older established areas. Take a look at the map of the wealth index below. The dark green represents very wealthy areas, while the dark blue areas are the least wealthy relative to the national level.

Wealth can be attributed to inheritance (older established communities), employment (technology hubs), and of course life stage (older households have accrued more assets). Neighborhoods with lower than average wealth are abundant in rural non-metropolitan areas of the country and in larger cities with diverse neighborhoods, such as the greater New York metropolitan area. The chart below classifies New York ZIP Codes into seven wealth buckets. Though most neighborhoods are above the national average, over 8 percent of ZIP Codes show below average wealth.

The path to wealth is different for every household, city, metropolitan area and even generation. Take a look at the following treemap of Tapestry segments of wealthy neighborhoods in Houston, TX verses Hartford, CT. With 25 percent of wealthy households in Houston, TX, belonging to the Boomburbs segment and another 14 percent to Professional Pride, wealth here is driven by employment opportunity.

On the other hand, wealthy households in Hartford, CT live in well-established older neighborhoods: 41 percent are Savvy Suburbanites and 9 percent each belong to the Comfortable Empty Nesters and Exurbanites segments. Learn more about  Tapestry Segments .

Wealth is highly correlated to consumer expenditures and purchasing behaviors. Businesses can benefit from understanding and learning where the wealthiest areas are concentrated. This data can be used anywhere from evaluating areas with low housing affordability to marketing to high end retail customers who purchase luxury goods such as boats, designer clothing, or other luxury type of services such as fine dining establishments.

Wealth is also strongly linked to health outcomes, educational attainment, and access to goods, services, and recreation. This data can be a valuable addition to any social science or urban planning analysis.

Esri's wealth index adds more value to your analysis and provides a complementary socioeconomic measure. The strength of any index as an analytical tool is the ability to compare areas on the same scale. Taking region and urbanicity of a neighborhood into consideration, the wealth index can help urban planners and social service administrators target programs. The wealth index of an area relative to the county, metropolitan area or state, is a stronger indicator of need than the wealth index alone. Re-scaling the wealth index for a local area analysis better captures the spread of wealth in the study area. Let's explore the concept of re-scaling:

If WI represents the wealth index, and WIa represents the wealth index of the study area, the scaled wealth index is calculated as:

For example, the chart below shows the wealth index and re-scaled index for the top five and bottom five neighborhoods by wealth in the Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Area. The area as a whole shows a wealth index of 169, or 69 percent above the national average. Drilling down to ZIP Code area neighborhoods, the wealthiest ZIP Code is Great Falls, VA (22066) with a wealth index of 467 or 4.6 times the wealth of the country. However, the wealth of this ZIP Code is only 2.7 times the wealth of the metropolitan area.

The wealth index provides insight into the wealth distribution of U.S. households and opens the door for interesting analyses. Use the index to find wealthy communities, find high spenders or even identify areas that are best poised to weather the next recession. Or the reverse; use the index to find less wealthy communities and understand if geography or demographic characteristics are contributing factors.

This data can also be used to help identify retirement destinations and help answer questions like:

• Are these wealthy retirement communities

or

• Are these affordable retirement destinations?

To demonstrate this type of wealth analysis let's take a look at Southern Florida and San Francisco.

Another way that can help with data analysis and answer location-based questions is to create  Infographics . Infographics summarize and visualize data in a graphic, interactive way that can make data analysis easier and quicker to understand.

Displayed below, we ran the Population Trends and Key Indicators infographic to show the wealth index. Besides the wealth index, it also uses other relevant demographic indicators such as housing, age, and income. There are several  new infographic templates  to choose from, or you can create your own to enhance your analysis.

Ready to use the Wealth Index in your next analysis project? Here are 2 ways to get started:

If you need help deciding what type of data best fits your application, email your request to: datasales@esri.com or call: 800-292-2224.

Access the wealth index, along with thousands of other data by signing up for a free  Business Analyst Web App  trial. Business Analyst applies GIS technology to extensive demographic, consumer spending, lifestyle, and business data to deliver on-demand analysis, presentation-ready reports, infographics, and maps.

Led by chief demographer Kyle R. Cassal, Esri's data development team has a 35-year history of excellence in market intelligence. The team's economists, statisticians, demographers, geographers, and analysts produce independent small-area demographic and socioeconomic estimates and forecasts for the United States.

The team develops exclusive demographic models and methodologies to create market-proven datasets, many of which are now industry benchmarks such as Tapestry™ Segmentation, Consumer Spending, Market Potential, and annual Updated Demographics.

Esri demographics powers the ArcGIS® platform through dynamic web maps, data enrichment, reports, and infographics.