Department of Economics Michigan State University The Economy of the Big Ten States: Past, Present, and Future Presented to: Big Ten & University Credit Union Conference May 14, 2015 Charles L. Ballard Department of Economics Michigan State University East Lansing, MI ballard@msu.edu

BY FAR the worst since the Great Depression. The recession of 2007-09 is BY FAR the worst since the Great Depression. The scars will remain visible for a long time.

Despite the recession, the United States economy is MUCH bigger than it was a few decades ago.

Per-Capita Income in 2013, Selected States 1. Connecticut $60,658 26. Wisconsin $43,244 3. New Jersey $54,462 28. Florida $41,497 4. Maryland $53,826 30. Ohio $41,049 13. Minnesota $47,500 37. Michigan $39,055 14. Nebraska $47,157 38. No. Carolina $38,683 16. Illinois $46,980 39. Indiana $38,622 18. Pennsylvania $46,202 40. Georgia $37,845 23. Iowa $44,763 50. Mississippi $33,913

High-Income States Tend to Have a Higher Cost of Living High-Income States Tend to Have a Higher Cost of Living. But if We Adjust for Price Differences, the Rankings Don’t Change Much.

Rankings Among the 50 States, 2012 Nominal Real Nominal Real Income Income Income Income State Ranking Ranking State Ranking Ranking Connecticut 1 2 Wisconsin 26 19 New Jersey 4 9 Florida 28 31 Maryland 6 8 Ohio 30 22 Minnesota 12 10 Michigan 37 38 Illinois 16 18 No. Carolina 38 32 Nebraska 17 6 Indiana 39 30 Pennsylvania 19 17 Georgia 40 37 Iowa 23 7 Mississippi 50 43

Manufacturing’s share of the economy has shrunk dramatically.

Some Midwestern states have recently adopted Right-to-Work laws Some Midwestern states have recently adopted Right-to-Work laws. These are unlikely to do much. For better or worse, unions had already lost a great deal of strength long before these laws were considered.

Many of the states with the highest incomes have high levels of educational attainment.

This slide is brought to you by the letter “M”: College- Attainment Income State Rank 2009-13 Rank 2013 Massachusetts 1 2 Maryland 3 5 Minnesota 10 13 Michigan 34 37 Mississippi 49 50

The earnings gaps between people with different levels of educational attainment are very large.

Average Earnings in 2012, for Those Aged 45-54 Who Worked Full-Time Year-Round (For the Entire U.S.) Men Women Professional Degree $179,967 $119,231 Master’s Degree $115,702 $ 81,156 Bachelor’s Degree $ 96,591 $ 62,222 Associate’s Degree $ 64,159 $ 44,899 Some College (No Degree) $ 64,964 $ 42,952 High-School Graduate $ 50,178 $ 35,926 Some H.S. (No Diploma) $ 37,547 $ 23,648 Less Than 9th Grade $ 29,367 $ 21,532 Source: U.S. Census

In the first half of the 20th century, the distribution of income in the United States became dramatically more equal.

This did not happen by accident: 1. Huge increases in educational opportunity. 2. Tighter regulation of financial services. 3. Stronger labor unions. 4. More progressive taxation.

The trend toward a more equal distribution of income reversed in the late 1970s.

This did not happen by accident: 1. The supply of highly skilled workers increased less than the demand. 2. Deregulation of financial services. 3. Weaker labor unions. 4. Less progressive taxation.

State and Local Tax Effort Has Reduced Substantially 29

In most parts of the country, the increase in income inequality was NOT spread evenly through the income distribution: The top pulled away from the middle, but the middle did not pull away from the bottom.

The disequalization was most pronounced in the Northeast.

The bottom half of the income distribution did manage to do pretty well in some regions.

For the U.S. as a whole, the income gap between black and white households has decreased slightly in the last 35 years.

The black-white income gaps, like everything else, show a lot of regional variation.

1. Kentucky 0.91% / yr. 11. Maryland 0.52% / yr. Estimated Annual Percentage Rate of Growth of the Ratio of Median Income for Black Households to Median Income of White Households, 1976-2013, for Selected States 1. Kentucky 0.91% / yr. 11. Maryland 0.52% / yr. 2. Alabama 0.89 14. Illinois 0.39 3. Tennessee 0.87 15. Florida 0.39 4. Arkansas 0.81 US Average 0.35 5. Mississippi 0.70 18. Pennsylvania 0.23 6. Texas 0.68 20. Michigan 0.10 7. Louisiana 0.67 23. New Jersey -0.06 8. Georgia 0.61 25. Ohio -0.37 9. So. Carolina 0.57 26. Wisconsin -0.40 10. No. Carolina 0.54 29. Indiana -0.58

THANK YOU!