Banking & Finance and Human Resources

Income growth is weak

Bureau of Economic Analysis data shows average personal gains of 2.2 percent for West Michigan in 2016.

November 24, 2017
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Figures released this month show per capita income in four West Michigan counties is barely keeping up with inflation.

The U.S. Bureau of Economic Analysis (BEA) on Nov. 16 released its local area personal income estimates for 2016, measuring per capita personal income by county, in dollars and by percent change from the preceding period.

Allegan, Kent, Muskegon and Ottawa counties show an average growth rate of 2.2 percent, which ties the annual U.S. rate of inflation for 2016.

The BEA report defines personal income as the income received by, or on behalf of, all persons from all sources — from participation as laborers in production, from owning a home or unincorporated business, from the ownership of financial assets, and from government and business in the form of transfer receipts.

It includes income from domestic and foreign sources.

Per capita personal income is calculated as the total personal income of the residents of a given area divided by the population of the area. In computing per capita personal income, BEA uses U.S. Census Bureau mid-year population estimates.

David Smith, president and CEO of Grand Rapids-based human resources solutions provider The Employers’ Association, said his organization estimated wages grew in the past year from 2.5 to 3.2 percent in West Michigan, albeit using different methodology.

“The 2.5 percent to 3.2 percent is what we’re seeing on changes in (HR) pay administration plans,” he said. “We also surveyed our membership in those same counties (Kent, Ottawa, Muskegon and Allegan) to see what they are projected to be for the coming year. The increases being projected for 2018 are 2.8 percent to 3.2 percent on average.”

BEA data for 2016 in the four counties the Business Journal covers presents a picture of where the region ranks compared to the rest of the state.

Allegan County saw a growth rate of 1.3 percent from 2015 to 2016, which translates to $40,389 per capita in 2016 over $39,855 in 2015. This ranks Allegan 23rd among the state’s 83 counties for per capita income dollar amount and 75th for income growth.

Kent County per capita personal income grew 1.8 percent from 2015 to 2016; per capita income was $49,599 in 2016 and $48,730 in 2015. Kent ranks sixth in the state for income dollar amount and 68th for income growth.

Muskegon County saw 3.1 percent personal income growth over 2015. Per capita income was $35,641 in 2016, up from $34,567 in 2015. The county ranks 50th for income dollar amount and 29th for income growth.

Ottawa County’s personal income grew 2.6 percent in 2016, or $44,035 per capita in 2016 compared to $42,931 in 2015. Ottawa ranks 10th for income dollar amount and 53rd for income growth.

For the sake of comparison, Jackson County was ranked No. 1 for income growth in the state, at 4.4 percent, with income rising from $36,714 in 2015 to $38,331 in 2016.

Oakland County had the highest per capita personal income in 2016, at $65,759, up from $64,106 in 2015, a percent change of 2.6 percent, the state’s 51st fastest rate of growth.

Nationwide, personal income growth in 2016 ranged from minus-40.8 percent in Kenedy County, Texas, to 27.1 percent in Tillman County, Oklahoma.

The overall U.S. rate of personal income growth was 1.6 percent, and per capita personal income was $49,246, up from $48,451 in 2015.

Smith said it’s important to remember averages can be misleading when it comes to wage data.

“A lot of the people entering our workforce are entering in entry-level jobs, so when you’re dealing with average changes in income and job type, it doesn’t tell the whole story,” he said. “There are comments people entering the market are not being paid competitively. We see entry-level wages go up some, but we see mid-level increase rates going slower.”

He said his association’s aim is to help companies benchmark their competitive edge in the marketplace, and setting wage increases has little to do with inflation.

“We look at trying to provide solutions to companies that will help them achieve operational excellence and stability,” he said. “Pay rates are driven more by organizational profitability, sustainability and the ability to compete in a global market (than by inflation).

“I’m sure most companies would like to pay employees twice what they do, but they couldn’t stay in business if they did.”

Still, Smith said he believes West Michigan companies offer “pretty benevolent” wage rates to their employees.

“A lot of the support groups’ (wages) are closer to average than what even the management team gets,” he said.

Per capita personal income by county, 2014-2016

Per capita personal income (1)

Percent change from preceding period
                            Dollars Rank in state Percent change Rank in state
  2014 2015 2016 2016 2015 2016 2016
United States 46,494 48,451 49,246 -- 4.2 1.6 --
Michigan 40,830 43,074 44,253 -- 5.5 2.7 --
Allegan 37,841 39,855 40,389 23 5.3 1.3 75
Kent 46,349 48,730 49,599 6 5.1 1.8 68
Muskegon 32,936 34,567 35,641 50 5.0 3.1 29
Ottawa 40,743 42,931 44,035 10 5.4 2.6 53

1. Per capita personal income was computed using Census Bureau mid-year population estimates.
Estimates reflect county population estimates available as of March 2017
Source: U.S. Bureau of Economic Analysis

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