Wichita per capita income not moving in a good direction

Despite its problematic nature, per capita income in Wichita is used as a benchmark for the economy. It’s not moving in the right direction. As Wichita plans its future, leaders need to recognize and understand its recent history.

One of the benchmarks used by Visioneering Wichita to measure the growth of the Wichita-area economy may not be the best statistic, and its interpretation requires caution.

The measure is per-capita personal income. Specifically, the benchmark goal of Visioneering is “Stop the 21-year decline of Wichita per capita income as a percentage of U.S. per capita income before 2011. By 2024 exceed the annual average of Omaha, Tulsa, Kansas City and Oklahoma City.” (Note that per capita measurements are problematic. See the section at the end of this article.)

How has the Wichita metropolitan area performed on this benchmark? What are the trends? I’ve plotted per capita income for the United States and the Wichita MSA, along with the ratio of Wichita to the nation. The leaders of Visioneering are right to be concerned about the direction of the Wichita economy relative to the country. Since about 1980, the trend of Wichita as compared to the country is that Wichita is not keeping up, and is falling behind. During the decade of the 1980s, per capita income in Wichita fell below that of the nation. Wichita per capita income had been higher, but since then has mostly been falling farther behind.

Visioneering peers

One of the Visioneering concepts is the idea of peers. The cities Visioneering Wichita selected as Wichita peers are Omaha, Tulsa, Kansas City, and Oklahoma City. It’s useful to compare Wichita with these cities, and also with a few others that are comparable to Wichita and interesting for other reasons.

Nearby are two snapshots from an interactive visualization of per capita income growth. Wichita is the dark line in each of these charts. As you can see, by the last year of available data (2012), Wichita is near the bottom in performance. It wasn’t always that way. In early years, Wichita did well.

The interactive visualization holds data from the U.S. Bureau of Economic Analysis and was created using Tableau Public. Click here to open it in a new window so that you may form your own conclusions.

We’ve had a plan

The current stance of Wichita civic leaders is that we need a plan to create jobs. But we’ve had plans, with Visioneering being just one.

These leaders also tell us that Wichita can’t compete with other cities in economic development because Wichita’s budget is too small. But as I show here, when Wichita leaders complain about a small budget for incentives, these officials don’t include all incentives that are available and regularly used. Not nearly all.

Per capita measurements

Per capita measures are problematic. They are not meaningless, but interpretation requires caution. Some of the issues with per capita measures are explained by Dave Trabert of Kansas Policy Institute:

Per-capita income is a bad measurement because it rewards cities that are losing people due to domestic migration and punishes those who are gaining.

Even without the per-capita issue, personal income is not a clean measure. Personal income can increase because federal transfer payments grew, employers had to spend more to provide health care benefits, and other items that have nothing to do with measuring relative economic growth.

Better measurements would be private sector jobs, private sector GDP and private sector wage and salary disbursements. Unless the point of Visioneering is to grow government, the measurements should only be of private sector elements.

KPI has explained how the mathematics of per-capita measures can produce results that seem paradoxical. A recent edition of Rich States, Poor States has a section devoted to these problems. Here’s an explanation of a scenario that requires caution to interpret:

Further, the residents of a state can be better off even if that state’s per-capita or median income decreases. If, for example, 50,000 low income agriculture workers move into Texas, those workers’ incomes almost surely rise (or else they would not have moved there). The residents and business owners in Texas who benefit from their labor services are better off, and the final result is that no one is worse off. But the per-capita income in Texas may actually go down if the low income agricultural workers earn less than the state’s average wage.