High County GDP No Guarantee of Growth

High worker productivity occurs across diverse counties and sectors but is not always connected with population growth and opportunity.

  • High economic output per worker is not limited to big cities or to a specific industry.
  • Economic productivity is not creating growth and opportunity in all places—more than one-third of counties with the highest GDP per worker in 2015 lost population in the decade prior.
  • To ensure long-term benefits from high productivity, good fiscal policies are essential to diversify industries and attract population.

The Bureau of Economic Analysis (BEA) recently released data on gross domestic product (GDP) by U.S. county. Looking at counties with high GDP per worker (defined as greater than $100,000 for the purposes of this analysis), we found several interesting patterns.

See definitions below and/or look up data for any county in the country.

Only Half of High-GDP Counties Are Metropolitan

We found high economic output per worker is not limited to big cities, and not limited to rural areas producing commodities (i.e., energy, metals, agricultural products). Of the 334 counties with GDP per worker exceeding $100,000, about half (52 percent) are metropolitan, 30 percent are rural, and the remainder (18 percent) are micropolitan.

Many Sectors Demonstrate High Productivity

Beyond the urban-to-rural diversity, we found that the industries responsible for high GDP varied widely. Since high GDP is not necessarily attributable to the largest employers, we called local chambers of commerce to learn more about which industries have created the most economic output.

We learned that in rural Sherman County, Oregon (population 1,758), high productivity per worker is driven largely by a combination of profitable wheat farming and wind energy production. In contrast, high GDP per worker in metro New York County, New York (population 8.6 million) is driven by output from professional, technical, and financial services. Somewhere in the middle we see Franklin County, Kentucky (population 50,485), where more than 75 percent of GDP is generated by workers in government and services including health care and administration.

High Productivity Does Not Always Create Economic Opportunity

Our most surprising finding was that more than one-third (35%) of counties with high GDP per worker are losing population. We found evidence that a smaller proportion of rural counties with high GDP per worker are losing population compared to their lower-GDP peers. Even so, population is declining in nearly half of rural counties with high GDP per worker.

That population loss is so prevalent among high-GDP counties is odd because GDP is such a common measure of economic performance. But, as is usually the case, a single indicator fails to tell the whole story. Pairing GDP with data on trends in population, employment, and earnings offers a more complete picture of economic health and opportunity.

You can download Excel and PDF reports showing many economic performance indicators for U.S. counties using our Economic Profile System.

Solution: Better Fiscal Policy Can Help Communities Benefit from High GDP

The fact that some high-productivity places are losing population raises the question of what happens to the wealth created in the county. Sometimes fiscal policies offer an explanation.

Commodities: In previous work we have shown that even with high economic output, communities can be faced with more challenges—including market volatility and community/environmental impacts—than benefits. These challenges are often an issue in commodity-driven economies. Oil and gas development may or may not benefit local communities, depending on state tax policy. The same is true with renewable energy, and timber production. Taxes collected in resource-wealthy counties are often insufficient to cover the required increase in infrastructure and services, or the taxes benefit the state overall and not the community. Or, as is often true, government officials use increased commodity-related taxes as a reason to drop other taxes, such as property taxes.

Services: Fiscal policies, which tend to focus on wage income, property, and sales of goods, are also failing to generate revenue from rapidly growing service sectors. High productivity in financial, professional, and technical services are often not taxed, or are taxed at lower rates, even though communities with fast-growing service sectors often struggle to manage growth, provide affordable housing, and keep pace with rising service and infrastructure demands.

Tax incentives and tax and fee structures that are not adjusted for inflation also can erode revenue relative to GDP.

BEA’s new data set shows us that high economic output per worker is found in many types of counties, from metro to rural, and is seen in a diverse set of industries, from mining to financial services. Interestingly, high GDP per worker is not always connected with local economic success. Improved fiscal practices related to how revenue is generated, set aside in permanent savings, or spent by state and local governments, may be necessary to ensure that communities benefit from local economic production.

Definitions:

    High gross domestic product (GDP) means more production of goods and services and is typically associated with greater economic opportunity such as higher rates of hiring, higher salaries, higher levels of investment, and better living standards. Economists often divide GDP by the number of workers to calculate “GDP per worker”, which is used to compare the standard of living between places. We defined high GDP per worker as being above $100,000 in 2015 (the latest year for which these data are available). The BEA’s web page for these data provides more detail.
    The Metropolitan, Micropolitan, and Rural county classification uses the Census’ definitions, where a metropolitan county has at least one urbanized area with 50,000 or more residents. A micropolitan county has at least one urban area with between 10,000 and 50,000 residents. The remaining counties are considered rural.