Lockdown states rebound more slowly
California Comes in Last in Personal Income Growth
Net earnings in 2022 grew most in Idaho, Texas, Nevada, Florida and Arkansas, but the Golden State ranked 50th.
By The Editorial Board, WSJ
April 6, 2023 6:47 pm ET
The Bureau of Economic Analysis (BEA) late last week published its 2022 report on state personal income growth, and it deserves more media attention than it’s been getting, which is none.
These columns have documented the economic disparities between states such as New York and California that imposed severe lockdowns for longer and those that reopened sooner such as Florida and Texas. But lockdown states would have been expected to record a stronger rebound last year compared to 2021 when many of their restrictions were still in effect. That’s not what happened.
Net earnings last year grew most in Idaho (12.5%), Texas (11.5%), Nevada (10.8%), Florida (10.7%), Arkansas (10.7%), North Carolina (10.4%) and Tennessee (10.2%). The BEA defines net earnings as wages, wage supplements and proprietors’ income minus government social insurance deductions. It notably excludes transfer receipts like food stamps and Medicaid.
By contrast, earnings growth in nearly all lockdown states fell below the national average (8%). California ranked last (5%) while Maryland (5.5%), Massachusetts (6.2%), Hawaii (6.2%) and New York (6.7%) also significantly trailed the national average. One reason is population migration during the pandemic: Fewer workers equals lower earnings.
States with the greatest earnings growth in 2022 also had large population inflows from high-tax states. Mining and oil and gas extraction not surprisingly contributed sizably to earnings growth in North Dakota, Wyoming and West Virginia, yet accounted for only about 10% of Texas’s growth. Even subtracting oil and gas, Texas’s earnings grew at twice the rate of California’s.
California Gov. Gavin Newsom can’t blame layoffs in the tech industry. Earnings in information fell by 3.5% in California last year but climbed 6.2% nationwide and surged by double digits in many states, including Florida (18.5%), Texas (19.2%) and Idaho (26%). California and Maryland were the only two states in which information earnings declined.
Notably, the Golden State posted slow earnings growth across many industries. Its food and accommodation growth (7.1%) was the second lowest in the country and less than half of the national average (15.5%). Could one culprit be the law that Democrats passed last year creating a state council to dictate wages and work conditions at fast-food franchises? California employers may be struggling to find workers because so many have moved to lower-cost and tax states. Many small business owners have left as well.
We recognize this reality check about relative state prosperity isn’t as entertaining as Donald Trump’s indictment. But it does help Americans understand which state governing model does better for more people.