Delaware's Personal Income Problem

The Federal Bureau of Economic Analysis has released the first quarter 2015 personal income data for Delaware and the changes since 2005 are striking.   Total personal income for Delawareans rose 39% over the latest 10 years. Adjusted for inflation, real personal income has averaged growth of 1.8% per year. Personal income grew 8.4% during the first year of the decade and 3.7% during the last year.  

Of the components of Delaware personal income, transfer payments clearly led the way with a whopping increase of 96%. The fastest growing component of Delaware transfer payments has been Medicaid, rising 118% and today comprising 21% of all transfer payments. Next in line are Medicare benefits with an increase of 95% and a 23% of total transfer payments.

Obviously the $5 billion that government provides is a key driver to Delaware's health care industry.   Because Social Security payments are tied to inflation, they have risen just 79% over the 10 years. This is substantially faster than total personal income due to the continued in-migration of retired households into southern Delaware.

Finally, after peaking at $355 million in early 2010, unemployment compensation payments have dropped as the Delaware economy has recovered and presently stand at merely $85 million.  

Most disturbing is that net earnings (wages and proprietors income) by place of residence is growing slower than total personal income, 28% vs. 39%. This is a reflection of a shift of jobs in Delaware to lower paying industries such as leisure and hospitality, retail, and temporary help. The booming stock market has caused a 37% increase in dividend and interest income among the state's households.   

Compared to the nation, over the decade Delaware personal income has grown more slowly (39% vs. 46%). Reflecting the lower per capita income in Delaware, the state's transfer payments grew more rapidly than the nation (96% vs. 76%), earnings by place of resident grew more slowly (28% vs. 37%) as did dividends and interest (37% in Delaware vs. 54% across the U.S.).  

When it comes to personal income, Delaware's economy is performing below average.    

Dr. John E. Stapleford President Caesar Rodney Institute