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Decline in per-capita income halts

March 10th, 2013

News Coverage:

Last updated: March 10, 2013 5:13 p.m.

Decline in per-capita income halts

Experts encouraged, say increase likely to soon begin

Dan Stockman | The Journal Gazette

FORT WAYNE – For more than a decade, officials have bemoaned its decline, saying the drop in per-capita income in northeast Indiana indicates – and causes much of – what’s economically wrong with the region.

But recently, the federal government released numbers showing that slide has stopped and local officials say there are signs it may soon begin making gains.

It’s the biggest news you’ve never heard.

“I would rate it up there with the top two or three most important measures in a region’s economy,” said John Stafford, director of IPFW’s Community Research Institute. “Per-capita income, employment change and gross domestic product are kind of the three-legged stool of how you’re doing.”

Here’s what it means: In 1994, the per-capita income in northeast Indiana was 96.2 percent of the national per-capita income. Both numbers are the total amount of money earned in a given area divided by everyone living there. So in 1994, people living in the 10-county region made 96.2 percent of what Americans overall made, which is pretty good considering the national number includes high-wage, high-cost-of-living areas while the cost of living here was relatively low.

But then that number began falling, hitting 79.1 percent in 2008. And while our earnings were falling, our cost of living was not, at least not to the same degree. Those complicated statistics have a simple, real-world effect – we were earning less, and things were costing more.

“We’re in the pot they keep raising the temperature on, so we’re accustomed to the decline,” said John Sampson, president of the Northeast Indiana Regional Partnership, the region’s economic development group.

The statistics may be obscure, Sampson said, but they measure how much money you’re making, which goes into whether you go on vacation, or buy a new home, or go out to eat tonight or hope that pair of jeans can last another season.

“All those decisions are affected by this,” he said.

Which is why it is such big news that the decline in our per-capita income relative to the national number appears to have stopped.

And the slide does appear to have stopped: After hitting 79.1 percent in 2008, it has hovered close to that ever since, rising to 79.9 percent in 2011, the latest year for which data are available.

A 1 percent change in the number is worth about $500 in income – and that’s $500 for every man, woman and child in the region, not just those earning wages.

“We didn’t have to give them a check, they earned it in the marketplace. That’s a real difference in somebody’s income,” Sampson said. “This matters to people at a personal level.”

Looking long term

The issue is so important the Lilly Endowment in 2009 made a $20 million grant to create a 10-county regional program focused on education and training initiatives in science, technology, engineering and mathematics, called the Talent Initiative. All of those millions are focused on reversing the decline in per-capita income.

“Clearly, the leveling off is a big deal,” IPFW’s Stafford said. And since the region made employment gains in 2012 faster than most of the rest of the nation, Stafford said there is reason to believe the 2012 per-capita income number will show a gain, especially since a per-capita number counts everyone, working or not.

“Everybody who’s employed this year who was not employed last year helps,” Stafford said.

The question at the heart of the matter, of course, is how to change the number.

“How much of this is a community or a region able to influence? And how much of it is that you’re a captive of where you are and what your employment is?” Stafford asked.

In the short run, Stafford said, there’s not much that can be done. Things such as incentives and tax breaks help, but other communities offer them too, making them not much of a factor, he said.

But long-term efforts can pay off: Factors such as the quality of life in an area, the tax climate, infrastructure and the talent pool – none of which can be changed overnight – can make a big difference in drawing high-wage jobs.

The reason that’s true, many believe, is that high-wage jobs now follow the workers with the talent to perform them. Gone are the days when workers would follow jobs. Now industries follow talent, Stafford said, which is why efforts such as the Lilly program and the Regional Partnership’s Vision 2020, which also focuses on developing talent, are so critical.