New Hampshire’s Private Sector in 2010

Last week the U.S. Department of Commerce’s Bureau of Economic Analysis released their preliminary 2010 personal income data (pdf) (which includes revisions to previous years).

The chart below shows the private sector share of personal income since 1929 (the first year of available data) to 2010 (the last year of available data).  The opposite of the private sector is the public sector which is defined as all government compensation paid to employees (military and civilian) plus all personal current transfer receipts (Social Security, Medicare, Medicaid, Welfare, etc.).

As the chart clearly shows, the private sector has been steadily crowded-out by the public sector.  Nationally, the private sector has plummeted 24 percent to 68.7 percent of personal income in 2010 from 92.7 percent in 1929.  More troubling, 2010 is the lowest private sector share in history after dropping another 0.6 percentage points from 2009.  How low will it go?

However, contrary to the national average, New Hampshire’s private sector is faring fairly well . . . at least given the circumstances.  In 2010, New Hampshire has the largest private sector in the country (having surpassed Connecticut back in 2008).  Additionally, the decline in New Hampshire’s private sector leveled off in 2010 while it continued to fall nationally.  Now if New Hampshire can only get right-to-work enacted, then maybe we can get the private sector up back to over 80 percent 🙂

New Hampshire Needs Right-to-Work

Today the Union Leader ran a story on the hearings for House Bill 474 which would make New Hampshire a right-to-work state.  Right-to-work simply says that an employee does not have to be a dues-paying member of a union in as a condition of employment.

This is an important debate since no New England state is a right-to-work state.  In fact, the closest state is Virginia.  This puts New Hampshire, and all of New England, at a distinct competitive disadvantage.  Richard Vedder, the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University, has an excellent article in the CATO Journal which describes the national movement of people and economic growth toward Right-to-work states (pdf).  He concludes:

“The proportion of Americans living in right-to-work states has risen noticeably over the years, and only a small part of that is driven by new states adopting such laws.  People move in extraordinary numbers to right-to-work states from states where union pressure has prevented the adoption of such laws.  Moreover, the greater flexibility for workers and employers offered where right-to-work exists has contributed to higher rates of economic growth rates in the right-to-work environment.  Although the United States seems to have been in roughly a stable political equilibrium regarding these laws in recent decades, if the past trends toward the right-to-work population growing in a relative sense persists while union membership continues to fall as a proportion of the labor force, a threshold point should be passed where the political equilibrium should tip toward making right-to-work laws universal for the entire American population.”

Additionally, my own research on migration patterns in other states has shown this very pattern of people moving from non-right-to-work states to right-to-work states.  I have done studies in four states that all have very high union membership rates (averaged between 1995 and 2007):  Illinois (7th), Minnesota (8th), Rhode Island (9th) and Connecticut (13th).

  1. In the Illinois migration study (pdf), folks moved to where union membership averaged 42.74 percent lower than in Illinois–to 10.3 percent of the labor force from 18 percent.
  2. In the Minnesota migration study (pdf), folks moved to where union membership averaged 49.99 percent lower than in Minnesota–to 9 percent of the labor force from 18 percent.
  3. In the Rhode Island migration study (pdf), folks moved to where union membership averaged 56.73 percent lower than in Rhode Island–to 7.5 percent of the labor force from 17.3 percent.
  4. In the Connecticut migration study, folks moved to where union membership averaged 50.63 percent lower than in Connecticut–to 8.2 percent of the labor force from 16.6 percent.

I’ve also done one study on the reverse in Oklahoma which recently became a right-to-work state in 2001.  In the Oklahoma migration study, folks moved from states to Oklahoma where union membership was 83.9 percent higher than in Oklahoma–to 7.8 percent from 14.3 percent.

While New Hampshire has been a net in-migrate state for many years, the evidence is clear that New Hampshire would be an even greater destination state if it were a right-to-work state.

Update: The Union Leader reports that House Bill 474 has passed 221-131.

New Hampshire’s Private Sector . . . 3rd Quarter, 2010

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released new personal income data for the third quarter of 2010.  As shown in Chart 1, New Hampshire’s private sector share of personal income for the third quarter of 2010 tied the all-time low at 75.3 percent–the low was first set in the first quarter of 2010.

Chart 2 shows the major culprit behind this crowding-out of the private sector–the Orwellian American Recovery and Reinvestment Act.  In the third quarter of 2010, the ARRA pumped $140 million into New Hampshire’s economy via personal current transfer receipts.  This is down from the peak spending ($345 3illion) under ARRA in the second quarter of 2009.  As ARRA spending continues to wind-down, New Hampshire’s private sector should rebound from its all-time lows.

However, it remains an open question as to how much of the private sector will be permanently lost.  As I blogged recently elsewhere, it is very likely that the private sector will continue to shrink.