During the recent election campaign, candidates talked about per capita personal income as a measure of our state’s economic success.
Let’s now pretend that our governor-elect, his staff and his legislature all know that Indiana’s per capita personal income, relative to the nation, is slipping.
Let us further fantasize that these men and women also understand what per capita personal income is and is not, why it is the most commonly used measure of economic well-being and why it is the wrong measure.
Finally, let’s imagine that counties are of consequence to Indiana’s new political elite. This is the greatest assumption we’ll make since it would be a reversal of state policy.
Throughout the years, Indiana local governments, including counties, have become less important as their powers have diminished and their responsibilities increased. The legislature plays them like yo-yos, twisting and turning them in strange arcs, yanking them like disobedient tethered dogs.
The story of Indiana’s per capita personal income from 2000 to 2010 begins with a statewide decrease of 2.3 percent after adjusting for inflation. This happened as total personal income grew by 4.1 percent, but population increased by 6.5 percent. Our real income did not grow as fast as the number of people living in the state, hence per capita personal income fell.
Per capita personal income grows when total personal income increases faster than the population does. This happened in just 30 of our 92 counties, including Monroe, Porter, Vanderburgh, Floyd and Jefferson. At the same time, 14 counties — including Hancock, Johnson, Clark, and Lake — had faster population growth than personal income growth. The consequence: Per capita personal income declined despite positive growth in both population and income.
If the rate of population decline is smaller than the rate of increase in personal income, then per capita personal income rises. Between 2000 and 2010, this happened in 18 Indiana counties, including Jay, Sullivan and Knox. A closer look shows Knox County (Vincennes) leading the state in per capita personal income growth (15.4 percent) because it lost 2 percent of its population while increasing its real personal income by 13.1 percent. Is Knox County our model for prosperity?
In sum, real per capita personal income fell in 41 of 92 counties. In 30 counties, real personal income fell; and in 29 counties, population declined. Is the state’s policy with regard to per capita personal income going to be expressed in terms of the whole state? Or, will there be an interest in seeing counties with low per capita personal income increase their position in the state, reducing the disparity between the richest and poorest counties?
In 2000, the wealthiest county, as measured by per capita personal income, was Hamilton at $55,675 in 2010 inflation-adjusted dollars. Two recessions during the decade, plus moderate inflation and the state’s leading population growth rate (49.3 percent) reduced Hamilton County’s per capita personal income to $48,692.
In that decade the wedge between the wealthiest and the poorest counties grew. In 2000, Hamilton stood 2.28 times as wealthy as the poorest county Starke; in 2010 Hamilton’s edge against Lagrange (the new poorest county) was 2.44.
Are our new policy-makers ready to consider hunting with a rifle, that is, county-by-county economic development? Or are they going to continue the long-term practice of shotgun development where we satisfy ourselves with whatever we hit?
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business.