Business / Economy

OPINION: The good news and bad news about the county’s per capita personal income

This economic indicator for San Benito County was high in the short run, but low in the long run where it really counts. Can we turn it around?

One of the key factors used by the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) to measure sectors of the economy is called Per Capita Personal Income (PCPI) and that is estimated to the county level based on data reported to the federal government.

The good news is that San Benito County’s 7.6 percent PCPI increase from 2014 to 2015 was larger than the national (3.5 percent), state (5.4 percent) or even regional levels, which ranged from Merced’s 4.7 percent to Monterey’s 7.3 percent.

The really bad news is that even with that very good number factored in, the county’s 10-year, 2005-2015, compound annual growth rate was only 2.5 percent. By comparison the 10-year U.S. annual compound growth rate was 3.0, California 3.1, Santa Clara County 4.6, Merced 3.7, and Monterey and Fresno counties 3.1 percent. Thus, San Benito County lost personal economic ground in relation to the nation, state and region during that decade.

Before you say, “My family is not making that much,” it’s important to note that although this measurement levels the playing field for population, it does not mean that the income is evenly distributed within the county – it is not. Some individuals and families have a lot more personal income than others, but the numbers are still valuable for comparison as a relative indicator.

What is Per Capita Personal Income (PCPI)? 

The components of Personal Income are net earnings by place of residence; dividends, interest, and rent; and personal current transfer receipts received by the residents. 

Net earnings by place of residence are earnings by place of work less contributions for government social insurance plus the adjustment for residence. In other words, if you live here but earn in another county or state, the net earnings are still credited to San Benito County.

Personal current transfer receipts are receipts from government and business for which no current services are performed. They include Social Security benefits, medical benefits, veterans' benefits, and unemployment insurance benefits. Current transfer receipts from business include liability payments for personal injury and corporate gifts to nonprofit institutions.

All of that is added together then divided by the population to obtain the PCPI.

Those percentage differences may not sound like much, but they have a tremendous impact over time. At an annual compound PCPI growth rate of 2.5 percent, $45,000 in 2005 would rise to $57,603 in 2015. If the compound annual growth rate were 3.7 percent your 2015 income would be $64,714 – an increase in $7,110 (corrected);.

Another problem exists when the annual compound personal income growth rate dips below the local inflation rate. I use the term local inflation rate because we all know that there can be a big difference between the national, state and local inflation rates. In the event the inflation rate exceeds your income growth rate you lose buying power and that can lower your standard of living.

The best examples are the Actual PCPI data 2005-2015 (see image attached to this story.)

The result of those 10 years was that the PCPI in Santa Clara County grew more than $30,000, more than $14,900 in Santa Cruz County, more than $13,100 in Monterey County, more than $10,900 in Merced County and more than $10,100 in Fresno County, but only $9,489 in San Benito County.

Obviously, the 2014-2015 one-year growth rate of 7.6 percent is encouraging, but that result is included in the 10-year figures above showing that it is the long-term growth rate that is crucial for increasing our local economic resources.  Can we turn it around?  We have to if we want to move forward economically.

(Data Source: U.S. Department of Commerce)

Marty Richman

Born and raised in Brooklyn, NY, Marty (Martin G.) spent his teen years in northern New Jersey. He served more than 22 years on active military duty, mostly in Europe, and is a retired U.S. Army Chief Warrant Officer 4, Nuclear Weapons Technical Officer. Marty then worked 25 years in various engineering and management positions in the electronics and energetic materials industries supporting the communications, computer, aerospace, defense and automotive sectors. He is a graduate, summa cum laude, from The College of Hard Knocks, among his numerous awards and accomplishments. He was a regular weekly Op/Ed columnist and feature writer for The Hollister Free Lance for seven years and a member of its editorial board for five years. Marty is a frequent commentator and contributor to BenitoLink on a wide variety of local, state, national and international subjects.   Marty was elected to represent the City of Hollister District 4 on the City Council in November, 2018. Marty and his wife, Joyce, have been residents of Hollister since 1996.