UPDATED 2015 FIGURES: CA per capita GDP — adjusted for COL — is worse than all but 13 states

Richard Rider, Chairman, San Diego Tax FightersUndesignated 10 Comments

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It’s common for the remaining California boosters (almost ALL of whom are far to the left of center) to smugly assert that “If California were a country, it would have the world’s 6th largest economy.” Referencing this ranking, “Comedian” Bill Maher recently delivered this smug progressive punchline to Republicans — “Scoreboard, bitches!!”

To entertain his carefully screened liberal audiences, Maher relies on “talking points” rather than economic analysis. Indeed, how else could he be a progressive?  By not digging deeper into such matters, he periodically demonstrates his profound economic illiteracy. Certainly in this case!

Granted, using just GDP (Gross Domestic Product) as a benchmark, this GDP boast is technically a true assertion.  
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

It’s also an incomplete assertion. And definitely a misleading assertion when talking about comparing the prosperity of California with the other states. Indeed, the more detailed analysis below cuts the legs out from under the California booster bunch.

California’s four immediate national “competitors” are France, India, Italy and Brazil — all economic basket cases. This fact should alert one that using simple GDP as a measure of a country’s prosperity can be remarkably misleading. Indeed, under this gonzo standard, the people of China are more prosperous than the folks living in California.

Touting CA as the most prosperous state simply because of its high GDP ranking as a country (again, compared to the other states) is just plain silly. CA has over 39.3 million people, far larger than any other state. Second largest is Texas with over 27.6 million people, with the other 48 states tailing off quickly in population.

A much more legitimate comparison is the PER CAPITA GDP of the states. After all, THAT’s what people want to know about the prosperity of  a state or country — not the GROSS GDP figure without considering the size of the population.

Fortunately I found good sources for this information, and just got more recent figures.  All the data I’ll be citing from this point forward comes from the listed sources on my posted Excel spreadsheet, available on Google Drive for anyone to access.

https://docs.google.com/spreadsheets/d/1Fa8tNa48ct5vxz2UdgH-0TTlgms6mKdbO71QinDfQZo/edit#gid=155632612

I might add that this Excel spreadsheet online is worth visiting, as you can fool around with the rankings and the order of the states. You can play with it, but you can’t change it.  My son Steve is an Excel expert, and was the key to making this information both readable and accessible — yet protected.

First, let’s look at the 2015 PER CAPITA GDP rank of states. We don’t count “Columbia.” D.C. has by FAR the richest per capita GDP compared to any state — almost TRIPLE the best state.  But this rip in the space-time continuum doesn’t operate by the normal rules of wealth physics — if it WERE a state, we’d nickname it the “Looter State,” given its source of wealth (taxation). Hence we ignore D.C. in this ranking comparison (oh, we also ignore it because it’s NOT a state!). Here’s that ranking of these 50 states (plus the U.S. average):

State GDP

(Millions)

 GPD

Rank

 Population Per Capita

GDP

 GDP Per

Capita Rank
New York $1,455,568 3 19,994,125 $72,800 1
Connecticut $262,212 23 3,630,717 $72,220 2
North Dakota $53,686 46 743,437 $72,213 3
Alaska $54,256 45 768,335 $70,615 4
Massachusetts $478,941 12 6,817,391 $70,253 5
Delaware $66,150 41 950,149 $69,621 6
Wyoming $40,170 49 589,054 $68,194 7
New Jersey $579,379 8 9,003,477 $64,351 8
Washington $449,404 14 7,212,218 $62,311 9
California $2,448,467 1 39,340,198 $62,238 10
Minnesota $334,780 16 5,526,730 $60,575 11
Maryland $365,209 15 6,097,060 $59,899 12
Illinois $771,896 5 12,933,292 $59,683 13
Texas $1,639,375 2 27,643,720 $59,304 14
Nebraska $112,208 35 1,902,994 $58,964 15
Colorado $318,600 18 5,470,274 $58,242 16
Oregon $228,120 25 4,022,717 $56,708 17
Virginia $480,876 11 8,512,360 $56,492 18
Hawaii $79,595 38 1,442,754 $55,169 19
Iowa $171,532 30 3,130,191 $54,799 20
Rhode Island $56,323 43 1,041,028 $54,103 21
New Hampshire $71,632 39 1,327,461 $53,962 22
Louisiana $253,517 24 4,721,354 $53,696 23
Pennsylvania $684,313 6 12,887,827 $53,098 24
South Dakota $45,415 48 864,291 $52,546 25
Wisconsin $300,699 20 5,803,454 $51,814 26
Ohio $599,093 7 11,570,379 $51,778 27
Kansas $149,090 31 2,927,950 $50,920 28
North Carolina $509,718 9 10,115,740 $50,389 29
Nevada $141,204 33 2,813,238 $50,193 30
Indiana $331,126 17 6,643,266 $49,844 31
Utah $148,225 32 3,016,311 $49,141 32
Georgia $501,241 10 10,303,378 $48,648 33
Missouri $290,713 22 6,080,530 $47,810 34
Michigan $468,029 13 9,876,279 $47,389 35
Vermont $29,750 50 628,061 $47,368 36
Tennessee $310,276 19 6,621,626 $46,858 37
Oklahoma $179,835 29 3,920,864 $45,866 38
Montana $45,799 47 1,033,786 $44,302 39
Florida $893,189 4 20,270,461 $44,064 40
Arizona $298,204 21 6,791,173 $43,911 41
Kentucky $194,578 28 4,456,414 $43,662 42
Alabama $209,382 26 4,881,756 $42,891 43
New Mexico $90,810 37 2,135,288 $42,528 44
Maine $55,137 44 1,330,413 $41,444 45
Arkansas $123,424 34 3,014,732 $40,940 46
South Carolina $199,256 27 4,872,009 $40,898 47
Idaho $65,202 42 1,648,438 $39,554 48
West Virginia $71,123 40 1,860,832 $38,221 49
Mississippi $106,880 36 3,017,806 $35,416 50
National Figures $17,813,607 322,207,338 $55,286

As we can see from this chart, California is NOT the most prosperous state.  PER CAPITA, it’s the 10th most prosperous state — nothing to brag about, but pretty good.

Now let’s adjust the per capita state GDP for the cost of living (COL) in each state.  California’s COL is 36.2% higher than the national COL average. Only the isolated island state of Hawaii is worse.  Here’s the ranking of the states with this important modification (“Adjusted GDP Rank” — the right hand column):

State GDP

(Millions)

 GPD

Rank

 Population Per Capita

GDP

 GDP Per

Capita Rank

 COL

Index

 GDP Per Capita

Adjusted

for COL

 Adjusted

GDP Rank
North Dakota $53,686 46 743,437 $72,213 3 0.974 $74,141 1
Wyoming $40,170 49 589,054 $68,194 7 0.920 $74,124 2
Delaware $66,150 41 950,149 $69,621 6 1.024 $67,989 3
Texas $1,639,375 2 27,643,720 $59,304 14 0.910 $65,169 4
Nebraska $112,208 35 1,902,994 $58,964 15 0.908 $64,938 5
Illinois $771,896 5 12,933,292 $59,683 13 0.962 $62,040 6
Minnesota $334,780 16 5,526,730 $60,575 11 0.993 $61,002 7
Iowa $171,532 30 3,130,191 $54,799 20 0.916 $59,824 8
Washington $449,404 14 7,212,218 $62,311 9 1.086 $57,377 9
Louisiana $253,517 24 4,721,354 $53,696 23 0.940 $57,123 10
Indiana $331,126 17 6,643,266 $49,844 31 0.874 $57,030 11
Virginia $480,876 11 8,512,360 $56,492 18 0.999 $56,548 12
Kansas $149,090 31 2,927,950 $50,920 28 0.902 $56,452 13
Ohio $599,093 7 11,570,379 $51,778 27 0.928 $55,795 14
Colorado $318,600 18 5,470,274 $58,242 16 1.045 $55,734 15
Connecticut $262,212 23 3,630,717 $72,220 2 1.318 $54,795 16
New York $1,455,568 3 19,994,125 $72,800 1 1.354 $53,766 17
North Carolina $509,718 9 10,115,740 $50,389 29 0.938 $53,719 18
New Jersey $579,379 8 9,003,477 $64,351 8 1.203 $53,492 19
Georgia $501,241 10 10,303,378 $48,648 33 0.910 $53,460 20
Alaska $54,256 45 768,335 $70,615 4 1.328 $53,174 21
Utah $148,225 32 3,016,311 $49,141 32 0.931 $52,783 22
Wisconsin $300,699 20 5,803,454 $51,814 26 0.985 $52,603 23
Missouri $290,713 22 6,080,530 $47,810 34 0.910 $52,539 24
Tennessee $310,276 19 6,621,626 $46,858 37 0.895 $52,355 25
Oklahoma $179,835 29 3,920,864 $45,866 38 0.879 $52,180 26
South Dakota $45,415 48 864,291 $52,546 25 1.013 $51,872 27
Michigan $468,029 13 9,876,279 $47,389 35 0.914 $51,848 28
Pennsylvania $684,313 6 12,887,827 $53,098 24 1.032 $51,451 29
Kentucky $194,578 28 4,456,414 $43,662 42 0.903 $48,353 30
Maryland $365,209 15 6,097,060 $59,899 12 1.243 $48,189 31
Alabama $209,382 26 4,881,756 $42,891 43 0.894 $47,976 32
Massachusetts $478,941 12 6,817,391 $70,253 5 1.467 $47,889 33
Nevada $141,204 33 2,813,238 $50,193 30 1.058 $47,441 34
Arkansas $123,424 34 3,014,732 $40,940 46 0.890 $46,000 35
New Hampshire $71,632 39 1,327,461 $53,962 22 1.174 $45,964 36
California $2,448,467 1 39,340,198 $62,238 10 1.362 $45,696 37
New Mexico $90,810 37 2,135,288 $42,528 44 0.945 $45,003 38
Arizona $298,204 21 6,791,173 $43,911 41 0.978 $44,898 39
Rhode Island $56,323 43 1,041,028 $54,103 21 1.212 $44,640 40
Florida $893,189 4 20,270,461 $44,064 40 0.991 $44,464 41
Montana $45,799 47 1,033,786 $44,302 39 1.016 $43,605 42
Oregon $228,120 25 4,022,717 $56,708 17 1.306 $43,421 43
Idaho $65,202 42 1,648,438 $39,554 48 0.925 $42,761 44
Mississippi $106,880 36 3,017,806 $35,416 50 0.853 $41,520 45
South Carolina $199,256 27 4,872,009 $40,898 47 1.006 $40,654 46
West Virginia $71,123 40 1,860,832 $38,221 49 0.978 $39,081 47
Vermont $29,750 50 628,061 $47,368 36 1.241 $38,169 48
Maine $55,137 44 1,330,413 $41,444 45 1.113 $37,236 49
Hawaii $79,595 38 1,442,754 $55,169 19 1.928 $28,615 50
National Figures $17,813,607 322,207,338 $55,286 1.000 $55,286

So, after making the proper adjustments, we find that high-cost California has a lower per person GDP than all but 13 states.  It turns out that our Golden State is not so golden after all.

Our dismal “37th” ranking has not changed in three years. Currently the per capita U.S. GDP national average is 20.7% higher than California. Here’s an additional thought: If California is such a prosperous state, how come we have the highest poverty rate in the NATION?? FACT: California’s real poverty rate (the new Census Bureau standard adjusted for COL) is easily the worst in the nation at 23.4%. We are 57.3% higher than the average for the other 49 states (up from 48.8% higher last year). Indeed, the CA poverty rate is 17.0% higher than 2nd place Nevada.

http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-251.pdf page 9

BTW, it’s interesting to look at the California per capita GDP (GDP adjusted for population, but unadjusted for COL) compared to the other COUNTRIES.  While we are 6th in the world in aggregate GDP, we rank about 19th when one factors in the population to get the per capita figure.  To adjust these figures further for the COL differences is beyond the scope of this article, but such an analysis would move CA much further down the “country” ranking.  And indeed, if we included these two adjustments (population and cost of living), 36 of our states would have a higher adjusted GDP “country” rating than California!

If you want to take the countries’ COL into consideration and do the math, here’s the link comparing national COL figures (it’s rather complicated):

http://www.numbeo.com/cost-of-living/rankings_by_country.jsp

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Comments 10

  1. Per capita GDP ADJUSTED FOR COST OF LIVING is probably higher in Bangladesh than it is in California or in Texas. I am still not moving to Bangladesh. I think you need to find a more relevant metric.

  2. Richard, Why don’t you do something positive for a change? Point to a place in the world that you would provide as a glowing example of your vision . If it’s an ecological hellhole or a 1900’s style serfdom please try again.

  3. Post
    Author

    HQ, you CONTINUE to present solid reasons why you should stick to using a pseudonym when you post. You wrote:

    “Per capita GDP ADJUSTED FOR COST OF LIVING is probably higher in Bangladesh than it is in California or in Texas.”

    “PROBABLY higher”??? We talking about your gut feeling here (as opposed to facts)?????

    It took me 60 seconds to look up these figures. Since clearly you can type, you should have the same skill set for such research. But then, facts are such troubling things.

    Bangladesh Per Capita GDP (projected 2016):
    $1,382 (nominal)
    $3,840 PPP (a.k.a. adjusted for COL)
    https://en.wikipedia.org/wiki/Economy_of_Bangladesh

    NOTE: Both Texas and California are a tad higher than your Bangladesh example.

    But you are right about one thing when you say you aren’t tempted to move to Bangladesh. Such a move would be sheer idiocy.

    I think my metric works just fine. It just doesn’t give the answers you’d like. YOUR assertion, however, can best be politely described as fiction.

  4. Post
    Author

    Paul Therrio — I don’t have a perfect example of my ideal society, but then Utopia is not an option. I’m interested only in how various economic systems compare with each other — especially states. Some do better than others. Too often YOUR ideal doesn’t fare well.

    I’m sorry that upsets you so much.

    NAAHHHHHHH. Just kidding!

  5. Post
    Author

    Is my metric not valid? Only if one doesn’t like the results.

    I’ve since come across a more respected study by the Tax Foundation using similar but different criteria. They compare the median per person PERSONAL INCOME (rather than GDP), adjusted for cost of living — using different data sets than I used.

    While that changes the rankings of the states somewhat, in the Tax Foundation study California still ranks 37th — the exact same ranking I found. Only 13 states were worse.
    http://www.aei.org/publication/adjusting-state-incomes-for-taxes-and-price-levels-may-change-our-perceptions-of-which-us-states-are-poor-or-rich/

  6. Richard,

    What I found interesting is the strong positive correlation between productivity (per capita GDP) and cost of living. Of the top 10 most productive state economies, 80% have a COL index above 1.0. The only two that don’t have outsized exposure to oil and gas production (Texas and North Dakota). Given the volatility of oil markets, the 2016 numbers might show a big drop in GDP per capita for these two states. In fact, North Dakota might drop out of the top 10.

    Likewise, in the bottom 10 of per capita GDP, 80% have a COL index BELOW 1.0.

    It would seem that generally, more productive economies are associated with conditions related to higher COL. These aren’t independent variables, as you suggest in your analysis, they are tightly coupled.

    It’s also true that states with the most productive economies bear a greater share of the federal tax burden as a natural consequence of progressivity in the tax code. California (and all of the most productive states) send more tax revenues to Washington than we get back in federal spending. This tax burden contributes to the higher COL.

    We could fix it by requiring the federal budget to spend in states proportional to their tax contribution. Let’s move military bases and Medicare funds from Alabama, Kentucky, and Georgia to California. Then let’s see how those deep red states feel about the current progressivity that funnels money from our wallets to theirs.

  7. Post
    Author

    Encinitas Dad, the low cost of living states are not less productive. They can DO IT for less.

    People in those states can live better while making less income. That’s not a bad thing — that’s a GOOD thing!

    You are confusing GDP with prosperity — a common mistake. They are not the same. PROSPERITY measures the economic well-being of the citizens. That’s what the COL adjustment does.

  9. I agree that GDP is a measure of output. I wasn’t talking about GDP. I was talking about GDP/capita, which is a measure of economic efficiency and productivity. Just like “miles” and “MPG” measure two very different things.

    Per Investopedia

    What is ‘Per Capita GDP ‘

    Per capita GDP is a measure of the total output of a country that takes gross domestic product (GDP) and divides it by the number of people in the country. The per capita GDP is especially useful when comparing one country to another, because it shows the relative performance of the countries. A rise in per capita GDP signals growth in the economy and tends to reflect an increase in productivity.

    [emphasis mine]

    Per capita GDP is a measure of economic efficiency, and is strongly connected to productivity.

    My point was, states with more economic output per person have a strong positive correlation with higher cost of living. The obvious reason is that the best workers compete to live in the most desirable places (like California).

    Richard suggests that the ratio between GDP/capita and COL is a suitable metric for prosperity and economic well being, and I remain skeptical. Modesto might have a better COL adjusted GDP/capita relative to Malibu, because the COL is way way lower. That doesn’t mean that the best and brightest will naturally migrate to Modesto, or that the quality of life, or economic conditions in Modesto are superior.

    Replace Malibu with California, and swap Texas for Modesto, and the point becomes clear.

  10. Post
    Author

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