Data Sense: Personal income growing from government sources
October 7, 2013
The United States federal government shut down Oct. 1 because the House and the Senate were unable to agree on a continuing resolution to keep the government funded. The government shutdown is having some local impact here in the Yampa Valley. For example, the Bureau of Land Management and Dinosaur National Monument essentially have closed down. In addition, the U.S. Forest Service is closed including the Hahn's Peak Bears Ears Ranger District Office in Steamboat Springs and the Yampa Ranger District in Yampa.
Although this is not an everyday occurrence, it is not without precedent. From 1976 to present there have been 17 shutdowns like this one. The average length of past government shutdowns is 6.4 days. The most recent shutdown in 1995 through 1996 was the longest. It lasted 21 days. So if history is any guide, the shutdown is likely to be resolved rather quickly. Nonetheless, the situation does bring to mind questions about the role of government here in the Yampa Valley. How much money actually flows from government coffers into the pockets of Yampa Valley residents? And how important are these funds to local income levels? Federal government statistics from the Bureau of Economic Analysis — data that was fortunately obtained before the shutdown disabled the BEA website — provides some answers.
Although it doesn't provide a complete picture of the role of federal dollars in the Yampa Valley, BEA Form CA04 provides insight on the share of personal income that is derived from what is known as "government transfers." They are called "transfers" because they represent a transfer of money from one group (taxpayers in this case) to another group (specific individuals who receive government benefits in this case). Note that government transfers are revenue neutral and simply represent a shifting of funds from one group to another.
BEA CA04 statistics at the county level are available through 2011. According to the BEA CA04 data, total personal income in 2011 was $550.7 million. If we divide total personal income by the 2011 population estimate, we find that per capita personal income in 2011 was $40,945. Per capita income actually rose by 10.3 percent in 2011 relative to 2010. So, as of 2011, the residents of Moffat County were getting wealthier once again after experiencing reductions in personal income in 2009 and 2010 as a result of the Great Recession.
Things get interesting when we examine the components of personal income. According to the BEA data, 57 percent of personal income in 2011 came from wages and salaries, 13 percent came from dividends, interest and rent, 15 percent came from small business profit (called "Proprietors' Income" by the BEA) and 15 percent came from government transfers. This includes all income from federal and state governments including, but not limited to, welfare, Social Security and health care.
An examination of the historical trend reveals that the share of personal income from wages and salaries is falling and the share of income from government transfers is rising. In 2000, wages and salaries accounted for 61 percent of personal income and government transfers accounted for 12 percent. Back in 1980, wages and salaries accounted for a full 73 percent of personal income and government transfers accounted for 6 percent. What will these shares look like in the future? Well, government transfers generally are higher for older individuals than for working age adults. Given the fact that the fastest growing population segment in the Yampa Valley is adults 50 years and older, it is likely that government transfers will account for an increasing share of personal income over time.
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Of course, the BEA numbers do not tell us whether it is sustainable to have government support programs account for increasing share of personal income over time, and these numbers certainly do not provide any clues on how to resolve the nation's budgetary challenges. However, they do provide some context for the role of government here in the Yampa Valley. Indeed, the statistics tell us that an increasing amount of local personal income comes directly from government sources.