WASHINGTON – Maryland’s per capita personal income grew 4.8 percent to $39,247 in 2004, the fourth-highest level in the nation, according to new figures from the Commerce Department.
The report Monday by the Bureau of Economic Analysis said Maryland’s per capita income was well above the national average of $32,937, and the growth rate from 2003 was slightly above the national 4.7 percent rate.
While the relatively high income can make Maryland an expensive place to do business — the state also had the fourth-highest income level in 2003 — most business officials welcomed the news Tuesday.
“It’s a positive effect on the overall business climate,” said Richard Parsons, president of the Montgomery County Chamber of Commerce. “The retail sector, in particular the auto industry, tends to do well when personal income is increasing. It’s also good for home builders.”
The Maryland Retailers Association said that higher income levels translated into good retail sales in 2004.
“That’s good for Maryland retailers, especially because the trend has been for 15 months (that) the strongest sales have been chalked up by the stores that sell high-end merchandise,” said Tom Saquella, president of the retailers association.
Higher personal income may also boost some lower-end businesses and mid-level department stores, Saquella said.
Another official said there is no question that Maryland’s high disposable incomes are attracting higher-quality retail establishments, such as Nordstrom.
Greater spending power has encouraged the “proliferation of fine restaurants” and high-end recreational activities, said Richard Story, chief executive officer of the Howard County Economic Development Authority.
Story said high personal incomes may be a “mixed blessing” for some businesses. Higher labor costs make doing business in the state more expensive, he said. But many employers, such as those in homeland security and defense, need highly trained, specialized workforces that usually earn more than $100,000 annually, he said.
A state government official said that Maryland may be seen as a more expensive state to do business, but that’s OK — it is also seen as a state with a better-quality workforce.
“We don’t sell Maryland as low-value labor costs,” said Chris Foster, deputy secretary of the state Department of Business and Economic Development. “We prefer to compete in the high-end workforce that is highly educated.”
Higher labor costs are tied to the overall cost of living, but Foster said the average increases in income outstripped increases in the state’s cost of living last year. That was supported by Towson University economist John Hopkins, who said the consumer price index rose 2.8 percent in the Baltimore-Washington region last year.
Foster said every high-paying job creates a multiplier effect on the economy, trickling down from the top earners to lower income levels.
But Tom Hucker, executive director of Progressive Maryland, challenged the benefits of trickle-down economics. High-wage earners may shop at a local mall, but some invest their money in the stock market or buy real estate in other states, Hucker said.
“That doesn’t help Maryland’s economy at all,” he said.
Hucker suggested giving money directly to low-income workers by raising the minimum wage.
“For low-wage workers, there’s no question that they’ll spend it right away in the local economy,” which is important for the store owner who immediately receives that dollar, he said.
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