Courtesy of DECON First
The Department of Commerce personal income data for all quarters of 2013 is now in for Delaware, and the results are discouraging.
Overall, from 2012 to 2013 Delaware personal income rose by 2.9%, well above inflation. However, a number of troubling long term trends continue.
First, the increase in earnings from jobs located in Delaware (3.4%) far outstripped the earnings of Delaware residents (2%). So the net out-migration of wages earned in Delaware continued at around $2.5 billion exiting from the state’s economy.
Delaware businesses are creating jobs once again, but the majority of those jobs are being filled by out-of-state residents…who spend most of their earnings in the communities where they live.
Second, Delaware personal income remains highly dependent upon transfer payments…Medicare, Medicaid, Social Security, unemployment insurance, and food stamps. Between 2012 and 2013 the transfer component
of Delaware’s personal income rose a whopping 4.9%. Third, and consequently, employee and self-employed contributions for government social insurance in Delaware soared 32%.
These contributions, which are subtracted in the calculation of personal income, consist of the contributions, or payments, by employees, by the self-employed, and by other individuals who participate in the following government programs: Old-age, survivors, and disability insurance (social security); hospital insurance; supplementary medical insurance; unemployment insurance; railroad retirement; veterans life insurance; and temporary disability insurance. Obviously, at some point the runaway spending of government on entitlements has to be repaid, and this will be a larger and larger drag on Delaware disposable personal income going forward.
Finally, the fourth quarter to fourth quarter performance of Delaware personal income was dismal. From 2012Q4 to 2013Q4 total Delaware personal income grew only 1.2%, with a growth rate of just 0.9% for nonfarm personal income. The growth rate in earnings by place of business fell to 1.4% and dividend income from stocks tailed off. Transfer payments, however, rose 4.3% and subsequently employee contributions for government social insurance was up 29%.
These trends in Delaware personal income do not bode well for businesses dependent up spending by Delaware residents. They reflect the growing two-tiered income distribution in Delaware and signal that the years of government accelerated spending are over.
DECON First uses economics to strengthen Delaware business. Direct questions to info@deconfirst.com
