It is a truism that economic statistics are easily susceptible to misinterpretation, and this is perhaps especially true of relative rates of per capita personal income growth in different parts of the U.S.
At first glance, a reader of a political magazine such as the Washington Monthly might assume that, if State A’s per capita income has grown more rapidly than State B’s over the past 1o, 20 or 30 years, it is because in State A income earned per employee, employer and investor is growing more rapidly than is the case in State B.
But this assumption is far from necessarily correct in theory, and often turns out to be wrong in practice. The reason is because the “capita” in “per capita” income includes residents of all ages. People aged 17 and under typically earn little or no income. People aged 18-24 earn somewhat more. For our purposes here, ages 25-64 can be defined as the “peak earning years.” People aged 65 and over are for the most part not in the labor market, but do take in significant amounts of income collectively through government transfers and investments.
Because children (17 and under) are the only group that typically have no income at all, changes in the juvenile share of a state’s population have a big impact on its per capita income growth. Nationwide, the share of all Americans who are children has been declining for decades, but the rate of decline is far from uniform from state to state. Some states are “graying” far more rapidly than others.
Other things being equal, a state with a juvenile population share that is falling more precipitously than the national average will enjoy per capita income growth faster than the national average. In other words, earnings per employee/business owner/investor within a particular state may be going up no more quickly than in the nation as a whole, or even at a below-average pace, but the state’s per capita income growth could still be greater than the national average if its juvenile population share decline is especially rapid.
That is exactly what has been going on since 1980 in several New England states. Their personal income growth has actually been slower than the national average, but their per capita income growth has been far above average, because their juvenile populations have plummeted.
Take Vermont. From 1980 to 2012, its total population grew by 22.5%, but its population aged 17 and under fell by 14.5%. In 1980, there were 1.63 Vermonters in their peak earning years (aged 25-64) for every child. By 2012, there were 2.72 Vermonters in their peak earning years for every child.
Nationwide, this trend was far less pronounced. In 1980, there were 1.68 Americans in their peak earning years forevery child. By 2012, the ratio was 2.25 to one. And Right to Work Texas has “grayed” far more slowly than the national average. In the Lone Star State, there were 1.52 residents in their peak earning years for every child in 1980. By 2012, the ratio had expanded only to 1.94 to one.
Outpaced “graying” alone is more than sufficient to explain the fact that per capita income in Vermont grew more rapidly than it did nationwide or in Texas from 1980 to 2012. If given that information, few if any readers of the Washington Monthly or any other such publication would reach the conclusion that Vermont’s superior per capita income growth is anything that the Green Mountain State’s policymakers should be proud about or policymakers elsewhere should aspire to.
And of all people, Washington Monthly senior editor Phil Longman would be perhaps the last person you’d expect to exhort Texas to be more like Vermont with regard to its birthrate. A decade ago, Longman wrote a well-regarded book, entitled The Empty Cradle, about how, as the paperback’s cover put it, “falling birthrates threaten . . . prosperity and what to do about it.”
However, as a Big Government cheerleader, the Phil Longman of 2014 is apparently willing to use any stick he can find to bash Right to Work Texas, whose longstanding record of superior economic growth (a record that predates by many years the run-up in energy prices of 2007-2008 and the natural gas boom that began a few years later) is a perpetual source of consternation for union bosses and their ideological allies.
In a new Washington Monthly cover story purportedly “debunking” Texas’s economic track record (see the link below), Longman actually includes a chart showing more rapid per capita personal income growth in Vermont than in Texas since 1980 as “evidence” that Vermont’s economic policies are superior. Yet all that the chart actually proves, as we have just seen, is that the juvenile population share in Vermont has fallen more rapidly than in virtually any other state, whereas Texas has remained relatively young and vibrant.
There are many other problems with Longman’s article that we won’t address here. (Former California legislator Chuck DeVore, now a Texas resident, touches on several of them in the comments section of the web version of the article.) But the fact that the author of a book bemoaning the “birth dearth” now besetting most of the developed world is now touting “empty cradle” Vermont as an economic model is, all by itself, an excellent illustration of how desperate proponents of Big Government and its engine, compulsory unionism, are becoming.