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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

March 25, 2011 at 10:00 AM

Census pops the delusion that population growth alone is enough

The big news out of the Census this week was the 25-percent drop in Detroit’s population, stunning by even Motown standards. But the more important lesson from the decade ought to be puncturing the conceit that population growth in itself equals economic power.

Consider the fastest-growing states of the ’00s: Nevada (35 percent) and Arizona 24.6 percent. Both are depression zones, and not only from the collapse of the housing bubble. Nevada ranks 31st in per-capita personal income and Arizona ranks 40th, both below the national average. Neither have many corporate headquarters or major research facilities. The gambling industry makes for economic diversity in Nevada, which has the highest rate of unemployment in the nation. Arizona has a smattering of call centers and a few technology operations, but nowhere near what one would expect in a state with a city the size of Phoenix. The distribution center jobs in Phoenix are considered high-end pay.

Washington, by comparison, is 10th in the nation in per-capita personal income, with a diverse economy, major trade engine and the talent-and-capital magnet of the Puget Sound region. State population growth was 14.2 percent from 2000 to 2010, strong to be sure. King County grew by 11.2 percent in the decade, Bellevue by 11.7 percent and Seattle by 8 percent. But population growth wasn’t the goal of economic development, but the result of it.

Slower-growing states managed to hold on to substantial economic assets and maintain some good outcomes (e.g., Minnesota grew 7.8 percent but ranks 13th in PCPI; Illinois 3.3 percent ranks 11th; Massachusetts grew 3.1 percent and ranks second in income).

Lest you think I am setting up a strawman, Arizona and Nevada ranked tops in job creation for most of the decade, before the Great Recession. Arizona businesses had their plans crafted around adding 100,000 new residents a year. All this was celebrated as huge success. In reality, population increases also add costs, in infrastructure, education, etc. So there’s no connection between population growth and economic power. And a huge number of the jobs created in those states were tied to continuing, unsustainable housing construction.

A couple of more points: The type of population growth matters, e.g. educated talent. And second, high growth in low-skilled workers adds to the pressures to create “port of entry” jobs that lead to higher skills, a very hard move. Bottom line: There’s a big difference between quality and quantity.

Today’s Econ Haiku:

The reactor mess

Truth is released much slower

Than radiation

Comments | More in Demographics, Housing, Income/living standards


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