Alabama’s Income: Past and Present

Per Capita Income Loses Ground

Per capita personal income (PCPI) reached $23,471 in Alabama for 2000, 79.1 percent of the U.S. average of $29,676. The Bureau of Economic Analysis (BEA) calculates this widely used measure of economic well-being as earnings; dividends, interest, and rent; and transfer payments per resident. During the 1990s, Alabama per capita income rose 48.2 percent, while U.S. per capita income increased 51.5 percent. Below average gains dropped Alabama’s per capita income ranking from 42nd in 1990 to 44th in 2000. Yet Alabama has come a long way in the 50 years since 1950 when per capita income of $909 was 60.2 percent of the U.S. average and ranked 48th. Still there is cause for concern that after steadily closing the gap in the decades of the 1950s through the 1980s, Alabama has fallen behind in the 1990s.

Wide Disparities Remain Among Counties

In 1999, the latest year for which county per capita income is available, Alabama’s estimated per capita income of $22,972 amounted to 80.5 percent of the U.S. average. Per capita income in Alabama’s 67 counties varied widely, however, as seen in Figure 1. Residents of only two counties, Jefferson and Shelby, had incomes exceeding the U.S. average of $28,546. Another seven counties—Baldwin, Coffee, Houston, Madison, Montgomery, Morgan, and Tuscaloosa—fell below the national but above the state average. In 41 counties, per capita income was below the state but above 65 percent of the U.S. average. Income in Alabama’s 17 poorest counties fell below 65 percent of U.S. per capita income in 1999.

There is a wide disparity among Alabama’s richest and poorest counties. Per capita income averaged $15,420 in Alabama’s six poorest counties in 1999, just 57.1 percent of the $27,002 average for the six wealthiest. The gap between the bottom six and the top six narrowed considerably in the ten years from 1969 to 1979, with the ratio rising from 46.3 percent to 60.1 percent. However, a sizeable difference between rich and poor remains and has widened since 1979, with the 1999 ratio at 57.1 percent.

Over the last 31 years, Alabama’s poor counties have generally stayed poor and the rich have stayed rich. Only 11 of the state’s 67 counties have cracked the top six in per capita income during this time, as shown in Table 1. Four counties—Jefferson, Madison, Montgomery, and Morgan—have been there every year; Shelby joined in 1971. Baldwin, which was in the group for a few years in the late 1970s, displaced Houston in the top six in 1996. Many of Alabama’s poorest counties have also been in the cellar for most of the last 31 years. Greene and Perry have always been there; Lowndes, Sumter, and Wilcox have been there well over 20 years, including 1999; and Hale, which spent 27 years in the bottom six, now ranks seventh from the bottom. Macon, also in the bottom six in 1999, has been in the group for about half of the last 31 years, as has Bullock, which was just above, at 60th, in 1999.

Long-term Income Growth Varies

Some Alabama counties have been much more successful than others in fostering and attracting well-paying jobs that can improve the economic status of their residents. Most Alabama counties saw their per capita income rankings change between 1969 and 1999, with about half going up and half down (see Table 2). Several counties, including Calhoun and Dale, saw income rankings decline as a result of outside factors—in these cases, a reduced military presence. Others lacked the resources to compete as economies evolved in the wake of burgeoning technology.

In general, counties in metropolitan areas fared better than their nonmetro counterparts. Alabama’s 22 MSA counties averaged per capita incomes of $24,482 in 1999, or 106.6 percent of the Alabama average of $22,972. Residents of the state’s 45 nonmetro counties had, on average, just 79.3 percent of the income of metro area residents. This gap has narrowed slightly since 1969 when nonmetro income was 74.0 percent of the metro average.

Income Inequality Increasing

Income inequality among Alabama’s families grew over the last two decades. Using data from the Census Bureau’s March Current Population Surveys, the Public Policy Institute studied income changes for population quintiles in each state during the late 1970s, 1980s, and 1990s. In 46 states, including Alabama, the income gap between the richest and poorest 20 percent of families widened. From the late 1970s to the late 1990s, Alabama’s wealthiest families saw the largest increases in real income (38 percent, or $33,000), while Alabama’s poorest families experienced the smallest gains (17 percent, or $1,610). (See Figure 2.) In contrast, however, the poorest fifth of families in 18 states faced real income declines. The income gap between Alabama’s richest and poorest ranked 11th worst among the 50 states, while the discrepancy between the richest and middle fifths ranked 24th. In the late 1990s, Alabama’s poorest families held 5 percent of the state’s income (Figure 3), while the wealthiest families held 45 percent.

Economic Prosperity Not Equally Shared

Across Alabama, economic prosperity has not been shared equally between Alabama counties and among residents of each county. Interrelated factors, including long-standing poverty, low education levels, and lack of economic opportunity, are depressing income growth in Alabama. Wage inequality among the highest paid and middle- to low-wage workers has increased. Globalization, declining manufacturing jobs, expanding low-wage service and trade jobs, and weakening of labor market institutions have contributed to the erosion of wages for workers without technical or college training.

Only by helping her poorest citizens become educated, productive participants in the state’s economy, by developing tax policies that help mitigate the effects of increased income inequality, and by attracting and nurturing higher wage jobs can Alabama pull itself out of the income cellar.