Vermont's personal income above U.S. average

The U.S. Bureau of Economic Analysis released some very good news about the Vermont economy last week. Vermont's personal income per capita (PCPI) increased faster than the U.S. average in 2014 and is just above than the national average.

That marks the sixth year in a row that Vermont's personal income per capita was at or above the national average — and before 2008 Vermont had never been above the national average. That's pretty impressive given that the federal government has been calculating per capita income since 1929.

Although it's common to hear people claim that Vermont is a poor state, but that's simply not true. Our personal income per capita is above the national average. We rank 18th in the nation, well in the top half of the states. And our median household income is also just above the U.S. average. Vermont was a low income state in the past, but that characterization is no longer true.

As the blue line in the graph shows, Vermont's per capita income has been closing in on the U.S. average ever since the late 1970s. And bear in mind that the graph shows Vermont's relative performance. When the line goes up, Vermont grows faster than the nation. When it declines, Vermont's personal income per capita grows more slowly than the national average.

In the late 1970s, Vermont's personal income per capita was 15 percent below the national average, and the state has slowly decreased the gap between Vermont and the nation's per capita income. The catch up hasn't been smooth — we lost ground in the bruising New England recession of 1989 to 1991, and also in the early 2000s. But those were two brief interludes in Vermont's relative rise. It is interesting that Vermont kept catching up during and after the Great Recession. That means that despite the intensity of that downturn, Vermont's economy fared better than the nation as a whole.

Going back farther in time, the graph shows that Vermont's personal income per capita grew more slowly than the nation from the late 1920s until the early 1950s. That means that throughout the Great Depression of the 1930s and continuing into the Second World War and for several years after the war's end, Vermont's economy was doing poorly — again compared to the nation. By 1953 Vermont's personal income per capita was nearly 25 percent below the national average — about where Alabama is today. Vermont was a poor state.

But during the 1950s and 1960s and continuing into the early 1970s Vermont began to catch up to the national average, which means our economy was growing faster than the nation's. Then came the big oil price increases of the mid- and late-1970s and Vermont's oil-dependent economy suffered. But Vermont's businesses and individuals were resilient. They adapted to the new reality of higher energy price hikes and our economic growth continued.

The story is different when we compare Vermont to our New England neighbors. Vermont (and Maine) are the poor cousins in New England. In fact, most of the New England states (and neighboring New York) are among the richest in the country. Connecticut has the nation's highest personal income per capita, 35 percent above the U.S. average. Massachusetts ranks second and New Hampshire ranks eighth. Maine is the region's poor cousin, with a personal income per capita 9 percent below the national average.

And as the red line in the graph shows, Vermont's personal income per capita has been relatively stagnant when we compare it to the New England average. In the late 1970s, Vermont's personal income per capita was 17 percent below the New England average, and we grew more slowly than the region for the next 20 years. By the late 1990s we were 22 percent below the regional average. We've climbed a bit since then but we're only now back to our relative position of 35 years ago.

Like many pieces of economic data, there is both good and bad news here. Vermont's per capita income is a little bit above the U.S. average, but compared to most of our neighboring states we still have a ways to go to catch up, and there's not much indication that we are heading that way.

Art Woolf is Associate Professor of Economics at the University of Vermont.