Connecticut may enjoy the highest personal income in the nation, but its standing is eroding.
According to a report released on Tuesday by the federal Bureau of Economic Analysis, Connecticut had a per capita personal income of $70,121 in 2017, leading runner-up Massachusetts by almost $5,000. But growth last year was lackluster: The 1.5 percent uptick in personal income was less than half of the national average of 3.1 percent and the seventh lowest among the 50 states. No other state in the Northeast recorded a growth rate lower than 2.1 percent. According to Peter Gioia, vice president of the Connecticut Business and Industry Association, weak growth defined the state economy for several years.
“We have been struggling in recovery [from the Great Recession] compared to other states,” Gioia said. “And now our personal income looks more like states that are in or near recession, like North Dakota or New Mexico, rather than Florida or Massachusetts, even New York.”
Breakdowns across different industries show disparities in growth. Industries like manufacturing, utilities, education and entertainment have kept even with or even exceeded the national average, whereas finance and insurance, information, construction and real estate have slipped even further behind.
Gioia cited Connecticut’s onerous tax code as one major reason for the state’s weak income growth. Though many neighboring states like Massachusetts and New York are widely known for relatively high taxes, he said, Connecticut stands out, with its steep personal tax rates and paucity of exemptions for higher-income people. Unlike the national income tax, these people can easily move to states with lower taxes, dampening income statistics and depriving Connecticut of capital investment.
Gioia also noted that Connecticut’s aging population and declining immigration rate have also been drags on its economy. Although certain sectors have shown sizable growth, they tend to concentrate in lower-wage occupations, while core industries with high-paying jobs have mostly languished.
Suzanne Bates, policy director of the Yankee Institute, added that Connecticut has in recent years dealt with a spate of budget crises, which have caused unease in many business communities that taxes may trend still higher in the years to come.
“We have had a lot of instability in pension liabilities and debts,” Bates said. “That really makes people and businesses think twice about staying.”
The budget impasse last year left Connecticut without a budget for 123 days — the longest of any state in the country — and the state’s budget deficit is projected to reach more than $3 billion in 2022.
Donald Shubert, president of the Connecticut Construction Industries Association, told the News that the construction industry has been hit hard by the uncertainty surrounding the state budget. In a time of budget shortfalls, many municipalities are worried that the state may further reduce funding to local governments, forcing them to cut back on their construction contracts.
“We are not in a growth phase,” Shubert said. “We are in more of standby or hold phase.”
Personal income growth in the construction industry declined by 0.14 percent in Connecticut in 2017, compared to the national average of 5.21 percent.
Despite its high per capita income, Connecticut is not always the clear front-runner in other economic metrics, most notably median household income. The main reason, Bates noted, is that Connecticut has many people in the finance and insurance industries with extremely high incomes, which pushes up the per capita figure. The Census Bureau found last year that Connecticut has the third highest level of inequality in the nation.
Still, signs of accelerated growth have appeared in recent months. In the last quarter of 2017, Connecticut’s personal income growth rates kept even with the national average, at 1.1 percent, and Connecticut scored the eighth highest GDP growth in the third quarter. Concurring with the statistics, Gioia said that there has been a gradual turnaround in economic activity in the past months, with higher-paying industries catching up in their growth rates. He cautioned, however, that recovery usually takes at least several years to translate into real gains in personal income.
New Haven has seen more robust economic growth than the state as a whole. Though county data for 2017 have yet to be released, past numbers show that personal income in the New Haven County consistently outpaced the state average in the years leading up to 2016 and at times exceeded the nationwide growth.
Garrett Sheehan, president of the Greater New Haven Chamber of Commerce, attributed New Haven’s relative strength to its good location and high concentrations of higher education institutions — including Yale and health care and tech companies. These companies and institutions have been growing and attracting a highly educated workforce in recent years, contributing to strong income growth, he said.
Nationally, the Pacific West and the Southeast have registered the largest income gains in 2017, whereas the slowest growths were seen in the Midwest and the Rockies.
Malcolm Tang | jiawei.tang@yale.edu