Back to Goal 13From Measures and Milestones 2002
p. 44-45, published 2002
One legacy of poverty and undereducation for our state is an economy that has too often been built around our weaknesses, rather than our considerable strengths and our extraordinary potential. In order to become competitive in today’s information-based economy, we must develop the human as well as the physical infrastructure and the quality of life that will attract and hold desirable industries. Clearly, diversification or movement away from heavy reliance on an economic base that will not see us into the 21st century is key. Kentuckians rank this critical economic goal 8th in overall importance, but only 19th on the progress scale.
Table 1: Where Citizens Think We Stand
As a measure of economic prosperity, the gross state product (GSP) measures the market value of goods and services created within the state. Increases in GSP indicate higher levels of business activity within our state. Kentucky has experienced considerable growth in GSP throughout the latter part of the past century. These gains can be attributed mostly to the economic expansion that has occurred nationally over the past decade or so. While we have been able to maintain our relative status, however, we have been unable to improve upon it, as seen in the relatively stagnant trend of Kentucky’s GSP as a percent of the U.S. average.
Figure 1: Per Capita Gross State Product, Kentucky
The well-being of Kentuckians depends upon a rising standard of living. An often-cited indicator of the standard of living is per capita income (PCI). Dramatic efforts on behalf of state policymakers have helped contribute to the rising per capita income we have seen in Kentucky since the mid-1980s. However, a discrepancy remains between the state PCI and the national average. Vigilance in our efforts to improve the educational status of Kentuckians, particularly to make gains in our college-educated population, is vital to helping Kentuckians achieve a higher standard of living, one that is comparable to that enjoyed by much of the rest of the nation.
Figure 2: Kentucky Per Capita Income, 1980-2000
Shifting trends in the labor market and a growing emphasis on welfare-to-work programs have elicited recent concerns about the wages of many working families. Overall, wages have risen in Kentucky. However, Kentuckians do not fare well compared to the national average wage. Kentucky’s annual pay per job as a percent of the U.S. average has been declining fairly steadily over the past 20 years.
Figure 3: Annual Pay per Job, Kentucky
The diversification of a state’s economy, like that of a healthy stock portfolio, helps safeguard it from devastating consequences in times of economic downturns. A high ranking among the states in the area of sectoral diversity indicates that traded-sector activity is spread among several different industries rather than concentrated in one or two. High levels of dynamic diversity refer to the ability of a state’s industries to grow or remain stable while another industry is declining in size. This lessens the blow to the entire economy should one of the industries in a state suffer from recessionary pressure. Kentucky has maintained a relatively high ranking in sectoral diversity, although it has lost its top-10 status in recent years.
Table 2: Kentucky’s National Ranking for Sectoral and Dynamic Economic Diversity
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