Income gap in Alabama closing

By Dana Beyerle,
Montgomery Bureau

Published: Sunday, August 17, 2008 at 3:30 a.m.
Last Modified: Saturday, August 16, 2008 at 11:50 p.m.

MONTGOMERY - Living in Alabama often means making less money than residents of other states, but that historical income gap is narrowing thanks to economic development gains during the past 15 years.

Alabama's personal per capita income traditionally has been around 79 percent of the national average. That gap began closing during the late 1990s and continues to narrow.

In 2001, the state's per capita income was $24,740, or 81 percent of the national average. In 2006, per capita income was $30,894, or 84 percent of the nation's average, according to the U.S. Bureau of Economic Analysis.

The average American worker made $36,714 in 2006, based on bureau data.

Personal income in northwest Alabama increased in absolute dollars from 2001 to 2006, but the growth did not keep pace with national income growth.

Per capita income in Franklin County, for example, grew from $21,354 in 2001 to $24,448 in 2006, but it fell from 70 to 67 percent of the national average.

Colbert County improved 1 percent to 71 percent during those six years, while Lauderdale County fell from 76 percent of the national average income in 2001 to 75 percent in 2006.

Income in the South typically is less than other regions of the country, particularly those in the Northeast and West.

Alabama's urban counties do the best economically.

In 2006, 59 of 67 Alabama counties had income percentages less than the state average of 84 percent. Jefferson and Shelby were the only two Alabama counties with income averages higher than the national average, according to the Bureau of Economic Analysis.

The implication for policymakers in a state with significant rural areas is that there is a need for job growth, personal and corporate income tax policies and support for education.

Sam Addy, director of the Center for Business and Economic Research at the University of Alabama, said income of 84 percent of the national average is nearly the highest in state history. In 1929, right before the Great Depression, Alabama's per capita income was 46 percent of the national average, he said.

Income estimates for Alabama's metropolitan areas for 2007 showed slight increases over Bureau of Economic Analysis numbers for 2006.

Addy has an opinion about the shrinking income gap.

"It's mainly the economic development we've had in this decade," he said. "Our economy has outperformed the national economy, and it is reflected in income growth."

Addy said the state can continue income gains through economic development, but he added the Legislature should consider fundamental tax changes to support more workplace education, adult education, job placement and retraining, as well as transportation and public safety.

"All that is supported by tax revenues so, in essence, if we don't address tax policy in the state, I don't think we'll be able to sustain the kind of economic growth we want," he said.

Annette Watters, director of the Alabama State Data Center, said poorer counties share traits including:

they're likely to be rural and in the traditional Black Belt across southcentral Alabama.

they're home to much older residents than the average.

they're home to people with less education.

"A huge percentage of them did not finish high school," she said. "Forty percent of the adults in Wilcox County do not have a high school education. Another thing in common is dependency ratios with a lot of people at each end of the age spectrum."

Wilcox County had the lowest income in 2006, with 51 percent of the national average.

Greene County, another of the poorest Alabama counties, had the highest income growth as a percentage of national income - 60 to 71 percent - from 2001 to 2006, probably because of the addition of bingo at Greenetrack Entertainment Complex, according to experts.

Former state Sen. Gerald Dial, of rural Lineville, is executive director of the Alabama Rural Action Committee that is charged with bringing jobs to rural Alabama.

Dial said employers such as the Hyundai plant in Montgomery, the new Thyssen Krupp steel plant in southern Washington County, Honda and Mercedes-Benz, and a federal prison in Pickens County - all on the edge of rural Alabama - are a base for support industries in the rural areas.

"We're beginning to see help, but it's going to be slow," Dial said.

He said the process will be slow for several reasons.

Many people prefer to live in rural areas, Dial said. Only in this generation has Alabama's population shifted from rural to slightly urban as cities attract younger, more educated men and women looking for work and entertainment. Also factored in is the possibility of those younger people leaving the state for employment

opportunities.

Rural Alabama expert Conner Bailey, a professor at Auburn University, said education is the key to increasing wealth in rural Alabama as well as urban centers. And there needs to be a mindset change, too, he said.

"Policymakers set up facilities but I think what we need to recognize is what we might call human capital - the educated work force - is underdeveloped in many rural counties," Bailey said. "When young people complete their high school education, many leave because there are no jobs and that might be due to isolation from markets and transportation issues."

He said, based on his 20 years of working and studying rural Alabama issues, there's a "mindset" by "local economic elite" to resist changing the status quo of low wages and low cost of living, which means low taxes.

"We need to look at the local political and economic elite and understand if they are, in fact, interested in economic growth," Bailey said. "If you are the beneficiary of (the status quo) and your standard of living is quite high, and then when you add the racial dynamics in there, you have another dimension that is impossible to quantify but cannot be ignored."

Dana Beyerle can be reached at (334) 264-6605.