This article originally appeared in the News Journal and at delawareonline.com.
The total inflation adjusted output of goods and services in Delaware rose a mere 0.6% over the past 10 years. This contrasts to 8.2% in Pennsylvania, 16.6% in New York, 34.3% in Texas, and 12.1% across the nation.
What accounts for Delaware's poor performance?
The simple answer appears to be the industry mix in Delaware compared to these other states.
With one exception, the output in all the Delaware industries with above average productivity is either in decline or flat. High Delaware productivity industries in decline over the past decade include manufacturing, especially nondurable manufacturing, and information services. High productivity industries where output is flat include agriculture and wholesale trade.
The highest productivity Delaware industry, financial services, is growing but most of the output gained leaks immediately out of the state. During the most recent year only 25% of the output in financial services went into labor income while 73% flowed out as corporate profits and capital allowances (on average 46% of all Delaware output goes to labor). Without the activity from the credit card banks, Delaware's total output would have fallen over the past ten years. Unfortunately the multiplier effect from this industry inside Delaware is limited.
Meanwhile growth in total Delaware output is concentrated in such lower productivity industries as health care, food services, leisure, temporary services and government.
A key industry appears to be manufacturing. Over the ten years manufacturing's share of total Delaware output dropped from 9.9% to 6.6%. While manufacturing's share of output has been fading in most states, as of the latest year manufacturing still accounts for 12.2% of the output in the U.S., including 12.1% in Pennsylvania and 14.9% in Texas.
During the past 30 years state tax revenue in Delaware has held steady at 5.5% of the state's total output. Obviously, the state government's current fiscal crunch will not be relieved without renewed growth in Delaware's output.
The key is revival of Delaware manufacturing. But without a Delaware right-to-work law and with among the highest industrial electric rates in the nation due to the half a billion dollar Bloom subsidy and participation in a regional cap and trade system, the outlook for Delaware manufacturing is modest at best.
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