Declining Delaware Per Capita

Per capita (per person) personal income is one important measure of the economic well being of a society. In 2002 Delaware per capita income was 18% above the nation (see chart below).

It has been downhill since then with 2019 seeing Delaware per capita income registering 4% below the nation. What has happened?

Delaware Per Capita Income as a Percent of the U.S.

(GRAPH SOURCE: U.S. Bureau of Economics Analysis)

Economists track personal income as three major components: earnings (wages and proprietor’s income), investments (dividends, interest, rent) and transfer payments (Social Security, Medicare, Medicaid, TANF-Temporary Assistance for Needy Families).

Earnings are the largest component of personal income, accounting for 60%. From 2002-2019 total earnings in the U.S. increased 86%, but rose only 47% in Delaware. The closing of the DuPont company resulted in a substantial loss of high wage jobs in Delaware. The average wage in the state has gone from above to below the nation.

The loss of high wage earners in Delaware was accompanied by a slow down in income from investments. From 2002-19 income from investments rose 133% across the nation but only 94% in Delaware.

As shown in the chart below, the growth in the third component of personal income – transfer payments – in Delaware outpaced the nation. Total transfer payments increased 147% in the U.S. from 2002-2019 while rising 208% in Delaware.

The state rose faster than the nation in all categories of transfer payments, most notably in Social Security and Medicare (beach retirees) and Medicaid (liberal eligibility requirements). Medicaid is now the single largest line item in the state government’s budget.

Change in Total Transfer Payments, 2002-19 in Delaware and the U.S.

(Graph Source: U.S. Bureau of Economics Analysis)

The current condition of Delaware per capita income registering lower than the nation’s per capita income is unlikely to change in the near future as the majority of jobs being added in Delaware are lower paying and most transfer payments by formula increase no faster than inflation.