Are you better off? Look at your personal income.

• Author: Barkey, Patrick M.
• Position: INDIANA INDICATORS

IT WAS 1980 WHEN then-candidate Ronald Reagan asked audiences whether or not they were better off than four years earlier. It was smart politics--1980 was a recession year--but, politics aside, it's always a relevant question. For if the economy is not growing the pie that we all share, then those who manage it, not to mention those in political leadership roles, have cause for concern.

But how do we answer such a question? One way immediately comes to mind--are you or your household making more money? When you add up what every one of us makes--not just in wages, but from all sources--you get something called personal income, which is closely tracked by our friends at the U.S. Bureau of Economic Analysis for states and major cities.

And even though it gets a lot less ink in the business media than the employment reports, personal income is the single most comprehensive measure of our economic performance at the state and regional level. It goes up when more of us are working, of course, but it also tells us something about the quality and the intensity of those jobs. And it also reflects the fact that about 34 cents of every dollar of income American households receive comes from something other than wages and salaries.

There is mixed news on income growth in Indiana. Perhaps the most important thing to note is that if we use income to keep score on things, the state economy accelerated in 2006, registering an average 5.1 percent growth over the last calendar year. That compares well with the 4.2 percent growth registered in 2005.

Wage and salary income growth was also better in 2006, picking up to an average of 4.5 percent after managing just 2.9 percent growth in the previous year. Much of that increase was due to increased earnings in durable good manufacturing industries in the first half of the year. But 2006 was also a good year for so-called unearned income, with dividends, interest and rent growing at a healthy 7.7 percent for the year.

That's the good news. Taking the glow off of these upbeat findings are two sobering pieces of information.

The first is the fact that the rest of the country, by and large, fared considerably better than we did, especially outside the Midwest. The fact that U.S. personal income growth, which averaged 6.3 percent in 2006, was more than a percentage point higher than Indiana says that the state is not fully participating in the current national economic expansion.

No surprise there, some would say...