Midwest and Mountain West Saw Biggest Income Gains Over Last 4 Years

By Tim Henderson, Stateline.org (via TNS).

Residents of some Midwestern and Mountain states gained the most income per capita during the past four years, a Stateline analysis shows, as competition for workers drove up wages in relatively affordable places to live.

With the COVID-19 pandemic now in the nation’s rearview mirror, Stateline’s analysis offers a more complete understanding of how some states’ residents benefited economically — and others didn’t — as policy decisions and Americans’ choices shuffled state-by-state outcomes.

The oil and gas industry boosted the per capita incomes for residents of North and South Dakota. Mountain states such as Utah saw high earners moving in from California, Oregon and Texas.

States where inflation-adjusted income declined included Alaska, where oil drilling has been in long-term decline, as well as Georgia and Maryland.

Inflation took the biggest bite out of paychecks in the West and South, with consumer prices rising about 20% in those regions between mid-2019 and mid-2023, according to U.S. Bureau of Economic Analysis figures compiled for Stateline by the Urban-Brookings Tax Policy Center in Washington, D.C. Inflation was a little lower in the Midwest, about 19%, and about 16% in the Northeast.

Stateline’s analysis calculated gains in per capita personal incomes after regional inflation between the second quarter of 2019, before the pandemic, and the second quarter of 2023, the latest available from the Bureau of Economic Analysis. Per capita personal income, which includes all kinds of income from wages to business income and pandemic support payments, often is used as a barometer of economic health for states.

Many of the states in the Mountain West, Midwest and New England that experienced large income increases have scenic or affordable areas that have attracted remote workers looking for a lower cost of living and proximity to recreation.

“Things changed fast. Now there’s competition for workers and upward pressure on wages, and people from Oregon and California are saying ’Hey I could live next to five national parks. This is an incredible place,’” said Shawn Teigen, president of the Utah Foundation, a nonprofit that monitors Mountain State trends.

Newcomers to Utah, for example, brought both more income and oftentimes smaller families than the longtime Mormon population, boosting per capita incomes, he noted. And competition for scarce service and manufacturing workers has forced employers to pay more.

“This used to be a place where we could bring businesses in and say, ‘You can pay minimum wage and people will take the jobs because it’s not expensive to live here,’” he said.

Inflation-adjusted per capita incomes in Utah have grown by about 8% since 2019. Incomes in Colorado, Maine, Montana and Nebraska also grew by roughly that much. Incomes in Arizona, Idaho and Missouri increased by about 7%.

But the greatest gains were in North Dakota and South Dakota, where inflation-adjusted incomes increased by 11% and 9%, respectively.

North Dakota’s per capita personal income rose to $73,414, giving it the 12th highest income in the country, up from 16th in 2019. The gains allowed it to leapfrog states including Illinois, Minnesota and Virginia.

Growth in North Dakota’s energy industry continues to roar ahead, with taxable sales and purchases by the industry up more than 50% in recent quarters compared with the previous year, according to state estimates through mid-2023.

Unemployment has remained below 3% — and in recent years it has stayed low even in winter months, when outdoor work used to stop in brutally cold weather, said Kevin Iverson, a demographer at the North Dakota State Data Center.

The major impediment now is finding more workers to hire, Iverson said.

“It is no longer surprising to see businesses spend their advertising dollars on recruiting workers instead of customers,” Iverson said. The state recently created an Office of Legal Immigration to help recruit workers from abroad and among work-authorized immigrants already in the United States.

Incomes didn’t grow as much in most of the Northeast, partly because low-wage service workers have fared better than the high earners who predominate in the region, said Lucy Dadayan, principal research associate at the Urban-Brookings Tax Policy Center. Some of the highest-income areas in the country, including Connecticut and the District of Columbia, were in the bottom 10 for income growth. New Jersey and New York weren’t far ahead.

Those states still have among the highest incomes, though. Connecticut fell to No. 3 for personal income per capita overall at $86,674, from No. 2 in 2019, behind Massachusetts at $88,197 and the District of Columbia at $100,971.

“Connecticut, New York and New Jersey have a higher share of high-income taxpayers, and the salaries of low-income workers increased far more in the pandemic,” Dadayan wrote in an email. “Moreover, some of the income for high-income workers is often dependent on the stock market performance, which declined in 2022.”

The knocks to personal incomes affected state revenues. In Connecticut, personal income tax revenue took a $1.3 billion hit in fiscal 2023, down nearly a third in one year and erasing gains since fiscal 2019, according to state comptroller records. Comptroller Sean Scanlon blamed the drop on 2022 stock market losses in his annual report to the governor.

However, Connecticut’s general fund revenues showed a surplus overall in fiscal 2023 because of strong gains in use and sales taxes as hospitality and tourism industries recovered. Democratic Gov. Ned Lamont signed a tax cut bill in June.

Both Alaska and North Dakota have economies driven by oil, but North Dakota’s shale boom is still on an upswing while Alaska’s production has been in decline since the 1980s, helping North Dakota rise to the top of income growth statistics while Alaska sunk to the bottom. Alaska’s per capita income dropped 2.4% after inflation over the past four years.

North Dakota landowners are seeing continued profits from oil leases on private land. Alaska’s oil, however, is largely on public land that has seen more cutbacks in drilling rights, said John Connaughton, professor of financial economics at the Belk College of Business at the University of North Carolina at Charlotte.

State-by-state income rises across the Midwest were “all over the map,” from North Dakota’s double-digit percentage increase to just 2% for Wisconsin and 3% for Kansas and Michigan, said Nina Mast, who studied the region’s wage trends in the pandemic in an October study for the Economic Policy Institute, a nonpartisan think tank in Washington, D.C.

The region as a whole suffered lower wage growth compared with other regions in the pandemic through 2022, threatening to increase inequality and hurt middle-class workers, who increasingly lack union representation, Mast said.

Michigan became the first state to repeal an anti-union “right to work” law in March, a step that could help empower workers there, Mast said. “It was a really historic step that could really have important effects for workers in the Midwest.”

Stateline is part of States Newsroom, a national nonprofit news organization focused on state policy.

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