Parts of the regional economy are increasingly dependent on government transfer programs, according to the latest report from the King Institute for Regional Economic Studies

BRISTOL, Tenn., Feb. 10, 2021 — Following a study that compiles decades of data on regional income levels, the King Institute for Regional Economic Studies (KIRES) is reporting a pronounced shift in the composition of personal income in the Northeast Tennessee/Southwest Virginia region over the past 15 years. 

The newest KIRES study reveals a marked decline in earned income from wages, and a corresponding rise of dependence on income from government sources such as Social Security, veterans’ benefits, Medicare/Medicaid payments, and unemployment insurance. 

Entitled “Government Transfer Payments Play Important Role in the Regional Economy,” the report was prepared by Sam Evans, Ph.D., director of KIRES and associate professor of economics for King University’s School of Business and Economics. King University students Douglas Alves, Suetonius Harris, Samuel Corredor Rincon, and Alex Marzullo Sadre also contributed.

“Transfer payments are positive in the light that they bring outside money into the regional economy, which impacts job creation and income growth,” Evans said. “These types of payments also have a stabilizing effect on the economy in times of recession because they are mostly impervious to the business cycle. When we see the region relying on this type of payment as a significant portion of individual income, however, it serves as a disturbing signal that indicates a lack of economic opportunity.”

Findings of the report include the following:

• Over the past five decades, earned income fell from as much as 80% of total personal income, both regionally and throughout the United States, to levels of 63% in the overall U.S., 57% in Northeast Tennessee, and 47% in Southwest Virginia. (The study measures these trends using data from 2019, the last year for which annual data is currently available.)
• During this same time period, the share of total personal income attributable to government transfer payments showed a steady increase. In 2019, transfer payments accounted for 28% and 34% of Northeast Tennessee and Southwest Virginia residents’ total personal income, respectively. In comparison, in 2019, the share of U.S. personal income attributable to transfer payments was 16%.

• Transfer payments increased from 37% in 2004 to 51% in 2019 for Northeast Tennessee, and 48% in 2004 to 73% in 2019 for Southwest Virginia. The 2019 percentages were equivalent to 51 cents in government transfer payments for every dollar of workplace earnings for Northeast Tennessee residents, and 73 cents for every dollar for Southwest Virginia residents, compared to 26 cents for every dollar for U.S. residents overall.

“Regional dependency on transfer payments as a percentage of earned income is well above the national average, and there is a decided and troublesome upward trend in this measure,” Evans said. “This trend is reflective of a growing divide in job and income growth between urban and small-town America, something that affects all aspects of American life.” 

Additionally, according to the report, over the past 15 years, personal income growth in Northeast Tennessee and Southwest Virginia has lagged behind that of the U.S. 

In 2019, the per capita personal income in Northeast Tennessee was $40,450, or 72% of the U.S. per capita income of $56,489, while income in Southwest Virginia was $37,039, or 66% of that of the U.S.

The KIRES Report No. 22, “Government Transfer Payments Play Important Role in the Regional Economy,” can be found here.