It stands to reason that the state with the largest share of minimum-wage earners would lag the nation in personal income growth.
It’s disappointing that, despite record-low unemployment, that state is Kentucky.
Nationally minimum-wage earners make up 2.3 percent of hourly workers but in Kentucky’s it’s double that — an average 4.6 percent or more than 50,000 Kentuckians in 2016-2017, according to an analysis by Governing magazine.
Our high percentage of minimum-wage earners helps explain findings released last month by the U.S. Bureau of Economic Analysis that identified Kentucky as having one of the lowest rates of personal-income growth from 2016 to 2017.
Just five states had lower increases in personal-income than Kentucky’s 1.6 percent. Nationally, personal income on average increased 3.1 percent.
Congress has not raised the federal minimum wage of $7.25 an hour since 2009, despite 16 percent inflation since then that’s weakened the buying power of minimum-wage earners.
Twenty-nine states set their minimum wages above the federal level — but not Kentucky.
Lexington and Louisville enacted higher minimum wages, only to have them rejected by the state Supreme Court, which ruled in 2016 that Kentucky cities lack that authority.
As a result, any hope for an improved minimum wage rests with the legislature. But since Republicans took over the House in 2016, the legislature has shown more of an inclination to hold down wages, through anti-union laws, than to raise them. The prevalence of minimum-wage earners should, however, worry a legislature that’s banking on increases in consumption taxes to make good on obligations to education and public pensions.
State revenue sources will shift from income to sales taxes under a tax code revamp recently enacted. Some services including auto repairs, will be taxed for the first time. Income tax rates were lowered for most Kentuckians, a change that showers the greatest benefits on the highest earners. With an annual income of $15,089, minimum-wage earners spend every penny on necessities. Their levels of consumption can’t possibly fuel enough growth in state revenue to even keep pace with inflation, while income tax cuts for upper earners will rob Kentucky’s of its fastest growing revenue source.
Kentucky’s 4 percent unemployment rate, the lowest in more than 40 years, should be driving up wages. But beneath that positive number lurks some troubling currents, as the slow pace of income growth confirms.
The Bureau of Economic Analysis reports that growth in three industries — health care and social assistance; professional, scientific and technical services; and construction — were the leading contributors to overall growth in personal income last year. Although health-care employment typically grows, it declined in nine of the last 12 months in Kentucky.
Long-term, education is the way Kentuckians can claw their way out of the economic cellar. But Kentucky is again cutting state support for higher education, which constricts and steepens that path to prosperity.