Arizonans continue to lose ground against the rest of the nation when it comes to income.
New figures Thursday from the U.S. Bureau of Economic Analysis show the state’s per capita personal income for 2015 at $39,156. That’s an increase of just slightly more than 3 percent from 2014.
By contrast, the same numbers for the country as a whole last year were $48,112, a boost of nearly 3.7 percent.
More to the point, it means that per capita income in Arizona is 81.4 percent of the national figure.
It’s true that per capita income in Arizona has always been below the national figure. But the BEA finds a steady decline since 2006 when the state hit 91 percent.
Arizona now ranks No. 42 nationwide. And the trendline is not good.
In 1995, Arizona was 35th in the nation. It slid to 37th by 2000 and 38th five years after that and hit No. 40 in 2007.
And economist George Hammond, director of economic business research at the Eller College of Management at the University of Arizona, figures Arizona’s ranking against the national figure is likely to drop even more.
The figure is a simple math equation: Divide the number of Arizonans into the total income and you come up with a per capita figure.
Economist Elliott Pollack said that can color the figures.
“Maybe there are more young people or maybe there are more older people who have simply dropped out of the labor force here than in other places,” he said. Pollack cited data showing the “labor participation rate” in Arizona at the beginning of the year at about 57 percent, versus 63 percent nationally.
Hammond, however, said that doesn’t explain everything. He teased out the earnings-per-worker figure for Arizona versus the rest of the country, a move designed to filter out those not in the workforce.
“What’s going on is that Arizona’s wages per worker have been gradually falling further and further behind the national average,” Hammond said.
And he said you can’t blame that on the fact that the state has a lot of service jobs and a decreasing number of manufacturing jobs.
“It’s not that we’re more concentrated in low-wage jobs than the national economy,” Hammond explained. “It’s that our wages are lower than the national economy.”
Pollack, however, said it’s not that simple.
Manufacturing jobs are disappearing in Arizona. The Office of Economic Opportunity reports there are currently about 158,000 people working in that sector; in 1998 there were more than 212,000.
That’s not unique to Arizona. But Pollack said it’s what’s replacing those jobs that makes a difference.
“What we have gotten is a lot of leisure and hospitality jobs, a lot of business and professional services, a lot of education and health services,” he said, jobs that pay less. “So it could be a (jobs) mix situation.”
Daniel Scarpinato, press aide to Gov. Doug Ducey, said his boss is aware the problem.
“He recognizes that we need to diversify our economy, that we need to focus on things like biotech and the sciences and technology and attracting companies from Silicon Valley,” Scarpinato said, the ones with the high-wage jobs.
Hammond said wages are tied to the state’s relatively low level of “educational attainment.”
He said back in the 1940s the average Arizonan had more education than the national average. By 1980 it had pretty much evened off.
And now Hammond said it’s “significantly below” the national figure. That, he said, makes Arizona less attractive as a place for firms that need skilled workers for high-paying jobs.
“It exactly is a chicken-and-the-egg problem,” he said.
“Firms are going to be reluctant to move to metro areas where they don’t think they have an available labor supply,” Hammond said. And he said while Arizona has historically been a magnet for people from other states “workers aren’t going to move to an area where they don’t think there are going to be jobs.”
Scarpinato said Ducey supports a public-private partnership to get 60 percent of Arizonans to have some degree or certificate beyond high school; the current figure is 42 percent.
And there may be something else. Put simply, while the summers can be blistering — literally — the weather is nicer here in the winter than lots of other places
“Climate matters,” Hammond said.
He said per capita personal income is a key measure of the standard of living.
“But it’s also important to keep in mind that it’s not everything,” he said, which is why some people don’t like using that metric to measure economic viability.
“They know that they feel happier here,” Hammond. “They don’t feel like they’re 42nd in the nation as part of their happiness.”
And that, in turn, figures into what Hammond calls the “elasticity of labor supply.”
“When wages start to rise in Arizona, people are so willing to move here that they’ll move in and push the wages down,” he said.
But don’t look to cost of living to explain the lower wages.
Certainly there are more expensive places. But the website Bestplaces.net finds that, on average, it costs about 3 percent more to live in Arizona than the national figure, with more expensive housing and groceries but cheaper utilities and miscellaneous services.
