OPINION: Be careful what you wish for

          Is 2016 the problem? I don’t see anyone with more recent data than that provided by the U.S. Bureau of Economic Analysis.

          Do the words real, per capita, and personal income, when put together scare readers, listeners, and viewers? Or are the journalists themselves put off by what they don’t understand?

           Perhaps this happy Indiana news was suppressed by Hoosier humility. We don’t want to embarrass other states. Our growth rate for 2016 in real per capita personal income (there are those words again) was 2.2 percent compared with an anemic 0.4 percent for the nation. Thus we are up with Maryland and Hawaii, a full point ahead of California (1.2 percent), beating out all our neighboring states, and leaving 11 declining states in the dust behind us.    

          Now let’s think about that adjustment for inflation. This takes into account what is happening to prices on both the national and state level. We start with good old personal income which grew nationally by 2.3 percent while Indiana advanced by 3.3 percent. During 2016 national inflation grew by 1.2 percent and 0.8 percent in Indiana. That’s good for us. The national personal income growth has to be brought down by more than Indiana’s because the nation had higher inflation than Indiana. Thus, when income growth is adjusted for inflation (becomes real) the U.S. growth rate falls from 2.3 to 1.1 percent and Indiana declines from 3.3 to 2.5 percent.

          But we are after real personal income per person, which means adjusting for population growth. Here the nation advanced by 0.74 percent between 2015 and 2016, or twice as fast as Indiana which had only a 0.35 percent increase.   

          Slow population growth keeps the per capita figure higher than it would be with faster population growth. If our population had grown at the same rate as the nation, we would have had 25,500 more Hoosiers. Then our real per capita personal income growth rate would have been 1.8 instead of 2.2 percent.

          Our politicians talk about both faster population growth and faster personal income growth. But income growth depends on what kind of people are added to our population. Persons under age 18 don’t generate much income. An addicted population also does little for income growth. Only a portion of the aged and the disabled are income producers.

          Growth in the number of income producers along with higher incomes puts added demand on housing. Indiana in 2016 had rents approximately 26 percent lower than the national average. Higher rental values raise property taxes without necessarily increasing the actual quantity or quality of housing.