Nutgraph # Is Wyoming's per capita personal income all that it seems to be?
TOM MAST Star-Tribune staff writer | Posted: Sunday, July 30, 2006 12:00 am
The picture painted by Wyoming's per capita personal income numbers is probably too rosy, a state labor force expert says.
The federal Bureau of Economic Analysis, which is part of the U.S. Department of Commerce, recently reported that the state's per capita personal income in 2005 grew by 7.3 percent when compared to 2004.
The Federal Deposit Insurance Corporation says when the first quarter of 2006 is compared to the same quarter in 2005, per capita income increased by 6.9 percent.
Wyoming also registered the highest annual per capita income in the 13-state West region at $38,159, while ranking 10th nationally.
If you didn't get a 7 percent raise, you might be tempted to think your boss is a tightwad.
Or if corporate headquarters is breathing down your neck because growth in sales was only 3 percent despite all that money apparently sloshing around, perhaps you have considered falling on your sword. Figuratively, of course.
But there may be a reasonable explanation for the gap between expectations and performance.
Tom Gallagher, manager of the Research and Planning Section, Wyoming Department of Employment, thinks per capita income as an economic barometer should be taken with a dose of caution.
"If you take per capita income as an expression of our economic well-being, it can be misleading," he says.
First, consider how per capita personal income is calculated. The Bureau of Economic Analysis adds together all income from all sources, including such things as wages, rents, transfer payments, royalties and interest.
To find per capita income, total income then is divided by the state's population.
But Gallagher says when people move, there is a lag as the records upon which population estimates are based go from one federal agency to another. Typically, it takes the Internal Revenue Service 12 to 16 months to process and move the pertinent records to the Census Bureau.
If population is growing rapidly due to in-migration - as one might expect during an energy boom - the result of the delay will be an undercount. And the smaller the population is thought to be, the larger the per capita income.
Another problem arises because workers whose wages are reported as Wyoming income - that is, reported by place of work - may not actually be residents of the state.
Residency is determined by using unemployment claims, driver's licenses, enrollment in a state community college and Social Security number states of origin.
Assume a carpenter works in Casper for six months, then returns to Colorado, which he considers his home. His Casper earnings are counted as Wyoming income, even though most of the economic benefits of his earnings accrue to Colorado.
Counting such nonresident income over-represents state per capita personal income, Gallagher says.
Nonresident workers play a significant role in Wyoming's economy. In 2005, almost one dollar in 10 paid out in wages went to nonresident workers.
"In the construction industry, it happens over and over and over," Gallagher said. "It's part of an institutional pattern. People are living in another state and commute here to work."
It also happens in high-paying energy industries, in which people with specialized skills work in Wyoming for a limited time.
"People come in for a specific period and earn a lot of money, then they ship them to Saudi Arabia," Gallagher says, but wages earned in Wyoming count in the state per capita personal income calculation.
Moreover, the wages of nonresident workers grew more rapidly between 2000 and 2005 than wages paid to resident workers.
The U.S. Census does make adjustments for workers commuting, but that only happens every 10 years. In Wyoming, much has changed since the 2000 census. The energy boom didn't really hit its stride until 2003.
Per capita income also says nothing about distribution of income.
Many people have done well in the current economic environment. Natrona County school teachers, for example, were granted hikes in pay and benefits packages that average 19 percent. This came on top of compensation that rose 14 percent last year.
The increases were part of a restructuring that saw base pay for a first-year teacher with a bachelor's degree rise from $28,114 to $40,808.
Similar, and sometimes larger, increases were seen for teachers elsewhere in the state.
But are such economic benefits as widespread as the high per capita personal income figures seem to suggest?
Recall that per capita income is calculated by dividing all income by total population.
So if total personal income for three people is $120,000, per capita income for each would be $40,000. However, the three people could actually have incomes of $100,000, $10,000 and $10,000, respectively.
State data also indicate increases in average weekly wages that exceeded 7 percent in many sectors. But there is no way to know how much of those increases can be attributed to raises and how much to people working more hours, although Gallagher suspects the latter is frequently the case.
Gallagher says understanding the dynamics of income matters because of the policy responses, or lack thereof, to the statistics.
"The averages, the per capita, don't tell you how people's incomes are affected and how it's playing out in their daily lives," he says.
Business Editor Tom Mast can be reached at tom.mast@casperstartribune.net, or call 307-266-0574.