HEART OF ALENE — Although it ranks among the lowest states in terms of labor productivity, Idaho has a substantial fiscal surplus.
Data from the US Bureau of Labor Statistics indicates that Idaho’s labor productivity has ranked in the bottom four states for the past decade and beyond. Most recently, the Gem State was in 48th place.
Labor productivity is an economic measure of how much money an area generates per hour worked.
In 2021, Idaho had a value-added gross domestic product of about $72.5 billion and a total time worked of 1.2 billion hours. Dividing one by the other leaves Idaho with labor productivity of nearly $60.
This means that in 2021, for every hour worked in Idaho, approximately $60 was added to the state’s output.
Idaho’s labor productivity is significantly lower than the national average of $82.89, but that doesn’t reflect the work ethic of Idahoans.
“Labour productivity can be a bit confusing at first glance, as it appears to be related to how hard or efficiently workers do their jobs, but it actually tries to capture the amount of GDP produced. by the worker,” said Sam. Wolkenhauer, Idaho Department of Labor regional economist for northern Idaho. “It naturally varies quite widely between different industries and sectors of the economy, so when labor productivity is compared between states, it’s not so much a statement about the labor force of the people in the state, but a statement on the types of industries are in the state. »
The majority of the disparity in Idaho’s labor productivity stems from how its industries contribute to the state’s GDP.
According to the Federal Bureau of Economic Analysis, Idaho’s top industries in 2020 were finance, 19%; government, 13%; manufacturing, 12%; professional services, 11%; and social services, 9%.
Idaho primarily participates in industries that see low contributions to GDP.
Average labor productivity in the United States is largely supported by a few industries. The technology industry in California and the financial industry in New York are the best-known examples of high-profit industries in the country.
“So when we see that Idaho has low labor productivity, that primarily reflects the mix of industries we have in Idaho and the makeup of our economy,” Wolkenhauer said. “It’s not about the quality of our citizens or how hard they work.”
Given that Idaho’s labor productivity lags due to a relatively low GDP among other states, why does Idaho have a higher surplus per taxpayer than many states whose GDP is higher ?
In fiscal year 2022, Idaho had a fiscal surplus of $1.4 billion.
Almost all of the tax revenue that Idaho collects comes from one of three places: income tax, sales tax, and corporation tax.
A tax surplus represents the difference between the amount of money actually collected during the year and the amount of money that was estimated to be collected.
The tax divisions that were well beyond their projections were income tax and corporation tax.
Corporate tax collections for 2022 were nearly 165% higher than projected values.
With the considerable increase in corporate tax, corporate income must have risen in turn.
Although data is not yet available for the current year, given the apparent growth in business and personal incomes, labor productivity could also be on the rise.