guest commentary by Greg Kaza, executive director of the Arkansas Policy Foundation, a Little Rock think tank founded in 1995
A long-standing economic goal of Arkansas officials is to achieve 100% income parity with the United States. The goal is ambitious – overly so in the short-term but possible long-term – as the following analysis suggests.
Arkansas' per capita personal income (PCPI) has improved from 78% to 81% since 2007. That small piece of good news is tempered by a sobering fact: it took 38 years for Arkansas' PCPI to improve from 71% to 80%. Arkansas crossed 70% for the first time in 1971 (71.15% of U.S.), and finally broke the 80% barrier in 2009 (80.36%).
Arkansas, at that rate, will not reach 90% until mid-century.
Yet 10 of Arkansas' 75 counties have achieved 90% at least once, U.S. Bureau of Economic Analysis data show. They are Arkansas, Benton, Cross, Lonoke, Prairie, Pulaski, Saline, Sebastian, Woodruff, and Union.
Arkansas officials have emphasized spending more on public education to the exclusion of other factors. So where is the 100% income parity with the U.S.? You'll have to ask those officials to explain this policy failure.
Only five counties achieved 100% income parity for at least a year. Pulaski (104.89%) and Union (106.26%) were the only counties to reach 100% in 2012, though Arkansas, Prairie and Woodruff counties did earlier.
The economic factors contributing to income growth are more varied than education spending to develop a skilled work force. A skilled work force is a factor but by no means the only one.
Foundations of America's free enterprise system such as the rule of law, freedom of contract, property rights, and a non-arbitrary regulatory climate are factors. Another is infrastructure, a category encompassing roads, airports, waterways, rail lines and the power grid. An entrepreneurial, risk-taking culture has created growth in several counties. Yet another factor are tax policies that give neighboring states an advantage in attracting capital.
Commodity booms are another factor. North Dakota, the center of a boom, is one example. North Dakota PCPI, second in the U.S. behind Connecticut (137%), has increased from 91% to 128% since 2007. Earlier examples include Alaska (129% to 179%, 1971-1976) and Wyoming (92% to 112%, 1998-2006). Both were above 100% in 2013.
Commodities have also played a role in some Arkansas counties' income growth. Five Arkansas counties, in the mid-1970s, achieved 90% simultaneously. But by the late 1970s only Pulaski County reached that goal.
More Arkansas counties must achieve 90% before the state has a chance to equal or surpass the U.S. average. The bad news is that most counties have PCPI less than the state (81%). The good news is that five counties have achieved 90% for four consecutive years, a historic first. They are Arkansas, Pulaski, Saline, Sebastian, and Union counties (2009-2012).
The best news? Income parameters, long-term, have narrowed between states. The 1929 PCPI range was 165-to-38%. By 2013 it was 137-to-77%. The U.S. macro-economy, not a state policy, may ultimately play the key role.