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Total income growth is higher in all states than before the pandemic, thanks to elevated levels of government assistance and growth in wages, according to a report.
Personal income fell virtually everywhere in the U.S. in the second quarter of 2021 compared with historically high levels when residents received their first pandemic relief federal payments, according to a report by The Pew Charitable Trusts. Despite this dip, though, personal income was higher in all states as compared with before the pandemic, thanks to elevated levels of government assistance and growth in wages.
South Dakota was the leading state with an annualized rate of 6.1% in the second quarter, according to the report. States following South Dakota with the fastest annualized rate of income growth were:
- North Dakota—5.2%
Six of the 10 states with the fastest income growth rates are in the West. They experienced large long-term population gains, a trait typically associated with a strong labor force and economic expansion, according to another report by The Pew Charitable Trusts.
However, personal income in 18 states remained below pre-pandemic totals when government assistance is excluded.
Impact of Government Assistance
Personal income is important to state governments because it helps assess the economic well-being of its residents, and changes in residents’ income can signal that tax revenue and spending demands are likely to rise or fall, with repercussions for state budgets, according to the report.
The rise in personal incomes nationwide is the biggest in 20 years. States with the highest personal income gains since the pandemic began in March 2020 benefited from government assistance payments—including the extra relief payments, Social Security, Medicare and Medicaid, safety-net programs and state unemployment insurance—and also earnings growth, according to the report.
The extra money residents had available to spend helped support state economies disrupted by the pandemic while also generating state tax revenue—either through sales taxes or income taxes in states that tax unemployment checks, the report notes.
For more information from The Pew Charitable Trusts report click here.
Andre Claudio is the assistant editor for Route Fifty.