MAINE PERSONAL INCOME: AN ANALYSIS OF THE PRIVATE AND PUBLIC SECTOR COMPONENTS

January 3, 2007

Personal income is an important economic measure of a state's well-being because higher levels mean that a state's residents are able to buy more goods and services.  It is also a very useful way to gauge the ability of a state's residents to pay taxes, says J. Scott Moody of the Maine Heritage Policy Center.

Fundamentally, personal income comes from two sources: the private sector and the public sector.  The distinction between the two sectors is important because only the private sector creates new income.  The public sector simply redistributes existing income and/or wealth.

According to Moody:

  • In Maine, the share of personal income generated by the private sector in 2005, declined to an all-time low of 66.2 percent, from the peak of 92.4 percent in 1929, a 28.4 percent drop.
  • Maine now has one of the smallest (41st largest) private sector shares of personal income in the country; since 2000, over 100 percent of the growth in Maine's personal income came from the public sector as the private sector shrank over the period.

Also:

  • Maine personal income growth has been below the national average since 1929, with a trend-line showing a widening gap.
  • Average Maine personal income of $30,808 ranked only the 37th highest in the nation in 2005.
  • Maine personal income ranked the lowest out of all New England states in 2005.
  • Personal current transfer receipts in Maine (Medicare, Medicaid, and Social Security) grew to 20 percent in 2005, from a mere 2.9 percent of personal income in 1929, an increase of 590 percent and ranked 5th highest in the nation.
  • Total government compensation to employees in Maine (including federal, state, and local) grew to 13.7 percent of personal income in 2005, from 5.5 percent of personal income in 1929, an increase of 149 percent and ranked 23rd highest.

Source: J. Scott Moody, "Main Personal Income: An Analysis of the Private and Public Sector Components," Maine Heritage Policy Center, December 19, 2006.

 

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