For years, I have been a demographic scold. Maine needs more people. Growth is necessary for economic prosperity. But why?
“Can’t we just continue to live life the way it should be here and let the craziness of growth and change go on as it will in the rest of the world?” countless readers have appealed to me over the years. “We have a good thing going here. Let’s stay out of the rat race.”
The last five years of recovery from the Great Recession present an interesting time to explore these ideas. Between 2010 and 2015, Maine’s population was basically stable. Census estimates indicated an increase over the period of 0.3 percent, just over 2,000 people. This compares to national growth of 3.9 percent, or just over 12 million people.
Yet when we look at total personal income, Maine’s grew nearly 14 percent. That’s nearly $6.7 billion. As a result, our per-person income increased 13.4 percent, rising from $37,000 in 2010 to $42,000 in 2015.
True, this doesn’t match the 23 percent total income growth for the U.S. as a whole, or the nation’s per capita income increase of 18 percent. True, this still leaves us at only 88 percent of the national per capita level – $42,100 versus $47,700 – but who cares? Isn’t $5,600 per person a small price to pay for living “the way life should be”?
Perhaps. But these gross averages leave three major questions unanswered:
• First, where does our income come from?
• Second, are these sources sustainable into the future?
• Third, how is this income divvied up among the 1,329,492 of us who live here, according to Census Bureau estimates?
Regarding sources of income, there are several important differences between Maine and the United States as a whole.
First, Maine derives a far-greater share of its net earnings from employers not based in Maine than is true for the nation – 2.6 percent, compared to 0.04 percent for the U.S. as a whole. In short, Maine gets more of its income from workers commuting to work outside Maine than the national average.
To the extent that this reflects actual driving to work, too bad for those workers. To the extent that this reflects virtual workers living in Maine while telecommuting for paychecks sent by businesses located outside of Maine, hooray for the internet and “the way life should be” attracting knowledge workers.
Maine also derives a higher share of its income from “unearned” sources (i.e., not from payment from an employer) than the national average (40 percent versus 36 percent).
Transfer payments – mostly Social Security, Medicare and Medicaid – amounted to 23 percent of total personal income in Maine in 2015. For the nation as a whole, they amounted to 17 percent. For property income (dividends, interest and rent payments), Maine is just slightly below the national average (17 percent of total income versus 18 percent).
These facts shed a great deal of light on the future sustainability of our income sources. Maine gets an above-average share of its income from sources outside Maine – employers based outside the state; transfer payments that come largely from the federal government, and dividend and interest payments that are almost certainly earned on a globally diversified series of companies, rather than strictly Maine-based sources.
In a word, our future income security is more heavily dependent on out-of-state sources than the national average. Thus, “the way life should be” in Maine is in fact far more dependent on the rest of the world’s being “what we need it to be” than on our own virtuous qualities.
As regards the final question posed above – how we divvy up our income, regardless how much it is or where it comes from – there is some reason for distinction. According to a recently published Economic Policy Institute study, Maine ranks 46th among the 50 states in income inequality. Or, to give the results a more positive spin, Maine is the fifth most equitable state in terms of income distribution.
As its measure of inequality, the study, using 2013 data, takes the average income of the top 1 percent of families as a ratio of the average income of the bottom 99 percent of families.
For example, New York state has the highest level of income inequality: The income of the average top 1 percent of families (just over $2 million) is 45.4 times the income of the average bottom 99 percent of families (just over $44,000). In Maine, by contrast, the average income of the top 1 percent of families (just over $600,000) is 14.9 times the average income of the bottom 99 percent of families (just over $41,000).
Is this sustainable? Does it reflect some good in the Maine character? Is it a model for “the way life should be”? Or is it simply a reflection of the possibility that very, very rich families simply don’t report their incomes in Maine?
All questions for further investigation.
Charles Lawton is chief economist for Planning Decisions, Inc. He can be contacted at:
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