MARCUS: 90 counties show income improvement

May 1, 2010

The U.S. Bureau of Economic Analysis has released personal-income data for each county in the nation. The Indianapolis area did not fare well.

These data include earned income, interest, dividends, rent and transfers (Social Security and unemployment compensation). When divided by population, we get per-capita personal income. In recent years, local and state politicians have latched onto PCPI as a yardstick of economic performance and well-being.

Thus it was an outraged Alexander Hamilton (not the fellow on the $20 bill) who rang my doorbell. “My county is not first? How could that be? We are the elite of the state. We have wider streets so that more drivers can be first at traffic lights. We have the most growth, which shows how popular and virtuous we are.”

“Alex,” I said calmly. “It happens. PCPI in Boone County surpassed Hamilton County several years ago. You just weren’t watching.”

“But why? Why is Dan Boone’s county on top and not mine anymore?” he asked.

“Suburban pioneers,” I replied. “Wealthy people, often when their children have moved on, leave the urban core seeking space, fresh air, exclusivity and distance from newcomers, while maintaining close contact with the core.

“As Hamilton County grew, adding stores, jobs and traffic, people responded and your county began to lose some of its desirability. Then a few pioneers migrated west within the county. Later, pioneers were entering Boone County for the same reasons that gave rise to Hamilton’s growth in the past.

“Now who is moving into Hamilton County? People with children. Children don’t earn money. They wear and eat money. Even if newcomers earn as much as the settled population, those children will cause PCPI to grow slowly or even fall.”

“But now we’re second in the state,” Alex moaned. “We look better in gold than silver. And look at who’s just below us: Porter, Hancock, Dubois, Floyd and Warrick. Where are these places? For whom were they named? What do people do there?”

“I think,” I said, “the more interesting aspect of those PCPI figures is that the spread between the wealthiest and the poorest counties in the state has hardly changed in 20 years. Back in 1998, when Hamilton was No. 1, its PCPI was 2.35 times higher than bottom-dwelling Starke County. In 2008, No. 1 Boone was 2.26 times higher than last-place LaGrange County.”

“So what!” Alex said. “The rich stay rich and the poor stay poor. Tell me something I don’t know.”

“OK,” I said. “Only two Indiana counties had declines in PCPI between 2006 and 2008: LaGrange and Elkhart. The other 90 counties advanced (without allowing for inflation, which hardly mattered in this period). While PCPI for the nation increased 6.5 percent, Indiana’s rose only 5.2 percent (41st among the 50 states).

“Every county (except Shelby) in the Indianapolis metro area lagged the state in PCPI growth. So, too, did five other counties. But all is not as it may seem. Take your county, Hamilton … .”

“Yes? Something good?” he asked eagerly.

“Hamilton,” I fed him slowly, “led the state in population growth from 2006 to 2008 with a 7.3-percent increase. That depressed its growth in PCPI, despite seeing a 10.5-percent advance in personal income. Similar results can be found in all five of the state’s fastest-growing counties in population, all of which were in the Indianapolis area.”

“So who had strong growth in both income and population?” Alex asked.

“I thought you’d never ask,” I replied. “Jasper, Hamilton and Porter counties were the top three. But, as I said earlier, Hamilton’s population growth (first in the state) was so strong that it offset much of the gains in income (17th), leaving the county ranked 85th of 92 in PCPI growth.”

“Then,” Alex said, “if growth of PCPI is the target, the best thing is to raise income and decrease population.”

“Exactly,” I said. “Try suggesting that in public.”•


Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.


Recent Articles by Morton Marcus

Comments powered by Disqus