How we can be individually rich and communally poor

On May 18, 2007, a front page article in the Ames Tribune indicated that since 2000, Ames per capita income was growing faster than most places in the state. This was presented as indicating that the employment picture in Ames was rosy, but that is not the case.

Since 2000, employment in Ames has grown more slowly than the state average. Between January 2000 and January 2007, Ames employment has grown 1.5% compared to 2.7% for the state as a whole. What little employment growth we have had is due entirely to private sector expansion, as government employment has fallen by 4.5%. Ames has relied atypically on government sector jobs historically, and so weakness in that sector is a threat. In fact, if not for the expansion of manufacturing in Ames, we would have had a reduction in employment over the past 7 years.

Earnings per job in Story County has also grown more slowly than in Boone, Dallas, Madison, Polk and Warren counties, surpassing only Jasper and Marion counties in the Des Moines metro area. How can Ames per capita income rise relative to other places if we are growing more slowly?

Part of the answer is that the employment and earnings information is based on place of work while the per capita income data is based on residence. We can live in Ames and work someplace else. In the 2000 Census, 10% of the Story County working population had jobs in Polk County.

We can also increase per capita income with atypically slow wage and job growth by

1) Increasingly obtaining income from nonemployment sources such as pensions, dividends, and retirement income. This would be true if Ames is getting older. The run up in the stock market will atypically raise per capita incomes in older communities.

2) Shrinking the share of new hires and youth in the population so that the fraction of workers is being weighted more heavily toward older, more experienced workers. This would happen if we were generating few new hires employing few young people. A sign that might be happening is a reduction in the number of children in the community.

3) Increasingly relying on commuting to other, higher paying and faster growing markets for our household income. The fraction of the Ames population commuting to faster growing labor markets to our South is almost certainly growing, but we will wait until the 2010 Census to see if I am correct on that speculation.

4) Decreasing the fraction of the population with children. Per capita income is measured as . Children don’t earn much and so they don’t add much to the numerator but they are in the denominator. Having limited work and housing opportunities for young families will tend to raise per capita incomes by lowering the number of children in the population. We lower the denominator relative to the numerator, and we look richer.

Employment growth, January 2000-January 2007, Ames and Iowa

	Ames growth 2000-2007	Iowa growth 2000-2007
Total Nonfarm	1.5%	2.7%
Total Private	6.1%	2.8%
Goods Producing	18.5%	-2.1%
Service-Providing	-0.7%	4.0%
Private Srvc Providing	2.9%	4.5%
Government	-4.5%	2.2%
Federal Government	20.0%	-12.7%
State Government	-7.7%	-0.2%
Local Government	0.0%	5.0%

Source: http://www.iowaworkforce.org/trends/emphistory.html