Where private sector employers spend the least


My last post looked at the top 10 states for private sector employment earnings (both wages and employer paid benefits) per capita. The component of per capita income that everyone wants and should be the goal of state and local economic development policy. In this post we look at the bottom 10 states on the metric. Here are the bottom 10:

State

Private Sector Employment Earnings Per Capita

% with four-year degrees or more

% of per capita income from government revenue

Mississippi

$14,732

19.6%

42.9%

West Virginia

$16,222

17.3%

42.6%

New Mexico

$16,645

25.3%

41.2%

South Carolina

$16,757

24.3%

38.6%

Arkansas

$17,131

18.9%

37.6%

Idaho

$17,533

23.9%

32.3%

Alabama

$17,626

22.0%

38.1%

Montana

$17,702

27.3%

35.4%

Kentucky

$17,875

20.1%

39.9%

Arizona

$18,656

25.6%

33.0%

United States

$23,427

27.9%

31.2%

The reverse pattern holds true here from the top 10.  Unlike the top 10 states, the bottom 10 rather than having economies that are private sector driven each of these states have a higher proportion of their income coming from government revenue (both public sector employment earnings and government transfer payments) than the country as a whole. And, most significantly, each also is below the national average in the proportion of  adults with a four-year degree or more. (Six of ten are also in the bottom 10 in college attainment.)

So what can Michigan learn from the top and bottom 10 states in terms of growing per capita income (a top priority for both Governor Snyder and Business Leaders for Michigan)? First is that the key is growing private sector employment earnings per capita. Something Michigan has not done for two decades. That has to change. And to do that the data are clear we need both to get better educated (particularly the proportion of  adults with a four-year degree or more) and get more concentrated in the growing and high wage knowledge-based sector of the American economy. Those two characteristics, and not adherence to a low cost/small government/anti-union agenda, are the keys to growing per capita income.

Below is a comparison of the states with the highest and lowest private sector employment earnings per capita compared to Michigan and the United States. Clearly Michiganders want an economy more like Connecticut’s and less like Mississippi’s. Our problem is for two decades we have been moving rather rapidly towards Mississippi’s.

Connecticut is ranked 40th and Mississippi 17th in the Tax Foundation’s new State Business Climate Index. Mississippi is a right to work state, Connecticut is not. So the prevailing ideology would predict that private sector employment earnings per capita would be far higher in Mississippi than Connecticut. Wrong! In an increasingly knowledge-based economy private sector employers most highly value citizens of a state with high education attainment, not the lowest cost or the weakest unions states. The bottom line: you can’t get Connecticut’s economy by following Mississippi’s policies.

State

% with four-year degrees or more

% wages from knowledge-based industries

Private Sector Employment Earnings Per Capita

% of per capita income from government revenue

Connecticut

35.6%

65.0%

$33,201

24.9%

Mississippi

19.6%

49.9%

$14,732

42.9%

Michigan

24.6%

55.8%

$19,785

34.4%

United States

27.9%

60.3%

$23,427

31.2%

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Lou Glazer

About Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.