Connecticut’s slow income growth tied to population decline?

Connecticut gained 6,700 jobs during the month of May, according to the monthly job numbers released by the Department of Labor.

The positive gains came as welcome news for a state that is still trying to regain the jobs lost during the 2008 recession. Connecticut’s job growth has remained remarkably low despite major growth among its neighbors like Massachusetts.

But there has also been remarkably slow growth in personal income, according to a study conducted by Pew Charitable Trusts, and that slow growth may be tied to Connecticut’s declining population.

Two separate reports – one showing personal income growth across the states and the second showing which states gained and lost population – appear to have a lot in common.

The study by Pew Charitable Trusts showed personal income growth since 2007, with states like Colorado, Texas and Utah showing high rates of income growth. Those states also happen to be experiencing rapid population growth, according to figures released by the U.S. Census Bureau.

However, Connecticut’s annualized income growth was one of the lowest in the nation with a rate of .9 percent, the same rate as Mississippi. The national average was 1.7 percent.

The Pew report also showed personal income growth for 2016 alone, producing wildly mixed results for some states, like North Dakota. Unfortunately, Connecticut’s 2016 personal income growth numbers were similar to its annualized numbers – slow.

In 2016 the income growth rate for Connecticut residents bumped up to 1.2 percent, but continued to lag behind the nation as a whole which measured 2.1 percent and far behind its neighbors in the Northeast.

But Connecticut’s slow income growth may be tied to its declining population. Figures released by the U.S. Census Bureau in December of 2016 showed the states with the highest population growth also happen to be the states with the highest personal income growth.

It may be that the increase in state populations are fueling the rise in personal income rather than rising income levels drawing people to particular states. Either way Connecticut finds itself in the unenviable position of low personal income growth combined with population decline.

The states with the highest annualized income growth, according to Pew, were North Dakota, followed by Texas, Utah, Colorado and California.

According the Census Bureau, Utah, Texas and Colorado were each among the states with the highest population growth in terms of percentage of population. Texas, California and Colorado were the highest in terms of numeric population growth, or the raw number of people moving into the state.

North Dakota, which is heavily reliant on the oil industry, had the highest personal income growth since 2007. However, that changed in 2016, when residents of the state saw a precipitous drop in personal income of 1.5 percent.

This personal income decline coincided with a similar drop in its population growth during that same period.

“North Dakota, which had been the fastest-growing state for the previous four years, mostly from people moving into the state, fell out of the top ten in growth due to a net outflow of migrants to other parts of the country,” the Census Bureau wrote in its report.

Illinois, the only state ranked below Connecticut for both annualized and 2016 personal income growth, also had the highest outmigration rate in 2016, losing 37,508 people.

The 2016 McKinsey report commissioned by the Connecticut Commission on Economic Competitiveness showed those moving out of Connecticut have higher incomes than those moving into the state, which may contribute to the low rate of personal income growth and declining income tax revenue.

The decline in income tax revenue – largely from the state’s top 100 income earners – has contributed to a projected $5.1 billion budget deficit, which some lawmakers and union leaders want to solve by raising taxes.

Previous budget deficits in 2011 and 2015 were solved with two of the largest tax increases in state history. Those tax increases also coincided with the Connecticut’s population decline.

Correlation may not equal causation but the loss of population and tax revenue has spooked some lawmakers.

Gov. Dannel Malloy – who twice raised taxes in Connecticut – has thus far refused to consider any direct tax increases to solve the $5.1 billion budget deficit.

Connecticut residents already have one of the highest tax burdens in the nation and one of the highest costs of living in the country, which may drive out young people just starting their careers and seniors who live on a fixed income to low-cost states.

In May, the U.S. Census Bureau reported that 143 of Connecticut’s 169 towns and cities lost population between 2015 and 2016 and the state saw an overall decline of 8,300 people during that same time.

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