If it feels like you’re no further ahead than you were a decade ago, your instincts are absolutely right.
Our incomes have pretty much stagnated since the beginning of 2001. Just about any increases we’ve had have been eaten up by rising prices.
Even though our incomes have been growing a bit faster since the depths of the recession in 2009, that has barely been enough to overcome the ravages of inflation and subpar income growth during the first half of the last decade, according to new federal data.
The results are important because they provide a revealing look at the spending power of consumers in the Buffalo Niagara region – a vital part of the local economy since that spending makes up about 70 percent of all economic activity. The more consumers have to spend, the more robust the economy will be. And how much they have to spend depends on how fast their incomes are growing.
What the data shows, however, is a regional economy that is basically treading water. From 2001 through 2011, the total personal income in the Buffalo Niagara region grew at an annual rate of 1 percent a year, after adjusting for inflation, according to new data from the federal Bureau of Economic Analysis.
The income growth is a little bit better – although not by much – if you factor the region’s declining population into the equation. Our per capita personal income grew by an average of almost 1.3 percent a year, after inflation, from 2001 to 2011, the government said.
In other words, a big piece of the region’s economic pie has essentially stuck in the mud for the past decade. That’s a trend that has important implications for local policy makers. especially government officials struggling to balance budgets and hold the line on taxes.
It also shows that the consumer sector is barely growing locally, which only underscores how silly – and harmful – it is for local industrial development agencies to grant tax breaks for car dealers, dollar stores, doughnut shops and wine stores.
All of these businesses are just competing for a piece of the fairly stagnant pot of money that local consumers have to spend. Subsidizing one retailer at the expense of dozens of others only serves to divide up the pie in a different way, without doing anything to make the pool of consumer money any bigger.
Why are local consumers feeling the pinch? A big part of it is that our wages and salaries have barely budged since 2001. Any pay raises that we’ve been lucky enough to receive have been eaten up by the rising cost of living, even though the recent increases in the inflation rate have been fairly modest.
With interest rates at historic lows, we’re also not making much on income-yielding investments. In fact, after taking inflation into account, the amount of income we get from dividends, interest and rent actually went down a smidgen from 2001 to 2011.
In fact, the only piece of the personal income pie that’s growing is the slice that comes from government transfer payments for programs like Social Security, along with social assistance programs like welfare payments and food stamps. Those payments, even after inflation, have been growing at an average annual rate of about 2.7 percent a year over the past decade – a reflection of the region’s aging population and its economic struggles.
That’s not what businesses – especially those that depend on consumer spending – look for in new markets. Those businesses, from stores to just about any business that sells its products to consumers, look for markets where wages and salaries are growing. And they have plenty of better choices than the Buffalo Niagara market.
Over the past decade, our personal income growth rate has been about 40 percent slower than the annual increases nationally, and most of the difference comes from our subpar growth in both earnings and dividends, interest and rent. While income from those two components has been essentially flat in the Buffalo Niagara region over the past decade, total personal income, excluding transfer payments, has grown by 11 percent nationally.
As a result, the Buffalo Niagara is slowly sliding in the nation’s economic ranks. The region was the 47th biggest consumer market, based on total personal income, in 2001. Today, it’s No. 50.
That leads to an interesting divergence between the local trends in income growth and what’s happening nationally.
Across the country, the overall pool of income has been growing faster than it is here, expanding at an average rate of nearly 1.4 percent a year, compared with the 1 percent increase in the Buffalo Niagara region, after inflation. What that means over the course of a decade is that the nationwide income pool has tacked on an additional 7 percentage points of growth.
But because people have been moving out of the Buffalo Niagara region, while the country as a whole has been gaining population, our per capita income growth over the past decade actually has been better than the national average because it’s spread over fewer people. Our per capita income growth rate of almost 1.3 percent a year, after inflation, is more than three times better than the nationwide growth rate of nearly 0.4 percent.
So those of us who have stuck it out in the Buffalo Niagara region over the past decade actually have fared a little better, individually at least, in our overall income growth.
In other words, each of us, on average, has become a bigger fish in an evaporating pond.