Analysis: Personal income climbed during second year of pandemic

[May 31, 2022] By Kevin Bessler | The Center Square

(The Center Square) – Personal income climbed in Illinois and the rest of the country during the second year of the COVID-19 pandemic, just as inflation hit 40-year highs.

State personal income is important to state governments not only because it helps assess the economic well-being of its residents but also because it is a good barometer of tax revenues and whether they are going to rise or fall.

A Pew Charitable Trusts analysis shows personal income in Illinois rose 3% in 2021 after adjusting for inflation. That is in line with the national average. Inflationary costs, however, are at 40-year highs of about 8%, meaning higher costs eat up much or all of the wage increases.

Mike Maciag, an officer of state fiscal health for Pew, said worker’s take-home checks grew substantially last year.

“Much of the growth was driven by wages and other work-related earnings which climbed sharply last year,” Maciag said. “After a relatively weak 2020, nationally, total earnings actually rose 4.6%, the strongest growth in more than two decades.”
 

The report notes that state personal income has fluctuated greatly over the course of the pandemic, reflecting the timing of multiple rounds of federal aid. In the fourth quarter of 2021, total government assistance changed little from the same quarter of 2020.

Maciag said Illinois’ personal income landscape changed last year.

“The growth primarily was driven by wages and other earnings from work, which marks a change from 2020 when pandemic-related aid and unemployment insurance and other forms of government assistance were the main drivers,” Maciag said.
 

Government assistance from all sources, which includes Social Security, unemployment and other safety-net programs, increased in 2021 in all but six states from already elevated 2020 levels.

The states with the highest increase in personal income were Idaho at 5.3%, South Dakota at 5.1%, and Florida at 5%. Indiana had the highest increase in the Midwest last year at 4.6%.

Wyoming (-0.7%) and Alaska (0%) recorded the weakest performances, due in part to income losses in their respective energy sectors.

Kevin Bessler reports on statewide issues in Illinois for the Center Square. He has over 30 years of experience in radio news reporting throughout the Midwest.