Maine’s Personal Income in 2006: Private Sector Continues to Shrink

Read the full report | Personal income is an important economic measure of a state’s well-being. Higher levels of personal income mean that a state’s residents are able to buy more goods and services such as homes, cars, education and health care. Fundamentally, personal income comes from two sources: the private sector and the public sector. The distinction between the two sectors is important because only the private sector creates new income. The public sector simply redistributes existing income because what it spends must first be taken from the private sector through taxation or borrowing.

Chart 1 shows a 77 year historical trend of the private sector share. The new 2006 data from the Bureau of Economic Analysis shows that Maine’s private sector continues to decline as a share of personal income.[1] In fact, Maine’s private sector share is at an all-time low of 66.1 percent, from the peak of 92.4 percent in 1929, a 28.5 percent drop. Since 2000, the decline in Maine’s private sector share has accelerated in spite of the slight increase at the national level.

Maine now has one of the smallest (42nd largest) private sector shares of personal income in the country. States with a smaller private sector share are: Louisiana (65.7 percent), Kentucky (65.5 percent), Arkansas (65.3 percent), Hawaii (62.4 percent), New Mexico (62.3 percent), Mississippi (60.5 percent), West Virginia (58.8 percent) and Alaska (57.9 percent). At the other end of the spectrum, the state with the largest private sector share is Maine’s neighboring state of New Hampshire at 79.1 percent.