Thursday, May 27, 2021

How Income Growth in Tennessee Compares to Other States

by Samuel Stebbins, 24/7 Wall St. via The Center Square - The consumer price index jumped by 0.8% in April -- a far larger increase than many had anticipated. The recent spike in the cost of goods and services has led to widespread concerns over inflation. If the cost of living continues to climb at such a rapid pace, it could outpace wage growth, weakening the buying power of the American consumer. Such an outcome would be a reversal of a long-term trend in much of the United States.

Over the last 10 years, real personal income per capita, a measure of annual earnings that is adjusted for inflation, climbed in the United States from $42,287 in 2010 to $53,071 in 2020. There are many potential factors that drove up real personal income, not the least of which is wage growth outpacing inflation. 

While every state reported an increase in real personal income per capita, incomes in some states climbed far faster than others. In Tennessee, personal income per capita climbed from $40,827 in 2010 to $49,539 in 2020. The 21.3% 10-year growth rate is lower than the 25.5% national growth rate over the same time. Of all states, Tennessee had the 22nd lowest real income per capita growth. In addition to wage growth outpacing inflation, another factor that can affect change in real personal income include changes in the length of the average work week-- which can impact the income of workers. As of 2020, workers in Tennessee put in an average of 35.1 hours per week, down from 35.3 hours in 2010. Nationwide, the length of the average work week increased from 34.1 hours to 34.5 hours over the same period. 

Yet another factor that can affect wage growth is the workforce participation rate. The share of a state's population that are employed and earning incomes can have a considerable impact on per capita income. The share of the Tennessee population in the workforce climbed by 2.3 percentage points between 2010 and 2020. Meanwhile, workforce participation nationwide climbed by 0.9 percentage points over the same period. Percent growth in real personal income per capita from 2010 to 2020 was calculated using data from the Bureau of Economic Analysis. Personal income figures were adjusted from current dollars to constant 2012 dollars using the U.S. personal consumption expenditure price index and were also adjusted for regional price differences using regional price parity in accordance with the methodology provided by the Bureau of Economic Analysis. 

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