Removing Barriers in Nebraska, Part One: Why Growing Nebraska Matters

The state certainly lived up to that reputation as the rest of the country struggled in the Great Recession. Unemployment in Nebraska stayed below 5 percent.[i] And if you talk to many Nebraskans, you’ll learn that doesn’t come as a surprise.

Even in the farm crisis of the 1980s, state unemployment never rose higher than 6.3 percent.[ii] Is there something unique about Nebraska that so many people seem to have jobs even in hard times?

Experience seems to suggest the state is stable, but does that mean it’s productive? Measures of economic growth can help us separate myths from facts. In this brief, we will look at four key measures:
 

• Gross Domestic Product Growth, which measures the dollar value of how much more goods and services a state produces;
• Per Capita Personal Income Growth, which measures how much more income residents of a state are earning on average;
• Employment Growth, which is the gross amount of new jobs created;
• and Population Growth, which measures how many more people take up residence in a state.
   

Each of these figures is an indicator of how much additional value workers in Nebraska can add to the economy over time. These measures tend to build upon one another:  more people can bring more money into the state and make investments that create new jobs, raising incomes.

But the less these measures grow, the less additional output and income growth Nebraskans will experience in the future. Sometimes these indicators can be reduced by public policies that impose barriers on activities that promote economic growth, which are factors we’ll discuss throughout this policy brief series.
 

Some government assistance programs, for example, may discourage recipients from earning more income that can help improve their long-term economic circumstances.[iii] Interestingly, many Nebraskans shun this approach to government dependency and contribute to one of the highest labor force participation rates in the nation.[iv] More Nebraskans also choose to work a second job or are self-employed compared to residents in most other states.[v][vi]

This hard work has paid off. Over the past decade, economic output and incomes in Nebraska grew substantially faster than nearly 90 percent of the country.[vii]

Figure 1

 

Figure 2

But employment alone is not enough to sustain strong economic growth. Nebraska needs continual investment and new economic activity that helps workers to become more productive.
 

Now that the recession is far enough behind us (though many are asking when the next recession might occur), a more competitive environment across all state economies is reemerging. Nebraska needs people to want to come to here to start new businesses, create new jobs, and retain or attract a skilled, productive workforce in the state.

Unfortunately, on these measures, Nebraska is far from the top of the list. From 2004-2014, Nebraska lagged behind the national average employment growth rate at 0.80 percent, while the fastest growing states surpassed one or even two percent annual growth. That may not sound like a big difference, but over time these gains multiply. Workers in states with higher, sustained rates of growth will enjoy higher incomes and be able to afford a better quality of life many years from today.
 

Figure 3

Fast-growing states like Texas, Florida, Colorado, and Arizona led the nation in employment growth, while Nebraska’s employment growth rate hardly budged before and after the recession.

More people also continue to relocate to these states, providing a solid case that the opportunities they provide are considered attractive to more people.
 
On a percentage basis, Texas’ population grew from 2004-2014 by more than twice the national average of 0.86 percent. Once again, these small numbers really add up, as Texas’ average annual population increase of 1.87 percent dramatically understates the scope of Texas’ growth. Putting it in perspective, U.S. Census data show the number of people who have moved to Texas since 2004 is more than twice the size of Nebraska’s total population.[viii]
 
Nebraska’s population growth, meanwhile, has been unremarkable. We rank below the national average at 27^th — or 0.73 percent average annual growth — over the same period.
 

Figure 4
 

Why don’t more people want to be part of the Good Life? Is growing Nebraska simply a matter of pride for our state, or are there economic consequences for Nebraskans?

It is true that many barriers to population growth are outside the control of government policy. The Nebraska Legislature can’t make the weather nicer by passing a law, and Nebraska won’t have oceanfront property or major mountain ranges any time soon.

Joseph Henchman, of the nationally-recognized Tax Foundation, once remarked to a committee of Nebraska state senators that while there are features they can’t change about their state, they do have the ability to provide policies that can help answer the question: “Why Nebraska?”[ix]
 
To find out how to answer this question, we will need to explore the states to which Nebraska is losing people, income, and opportunities to see what these states provide that Nebraska doesn’t.

We will investigate public policies these successful states have used to remove barriers to those opportunities, and attract more residents. We will also review the states from which Nebraska is currently attracting wealth. These would be states not to emulate.

These states can differ dramatically by the taxes they impose on their residents, how taxpayer money is spent, the education options made available to families, and the regulations placed on workers and entrepreneurs.

In the next five issues of this policy brief series, we will identify ways for Nebraska to remove its own barriers to growth in these areas. By fostering an environment that encourages the creation of new opportunities, we can retain and attract more residents to our state and put the Good Life within reach for more Nebraskans.  

Removing Barriers in Nebraska, Parts Two and Three will be released in July 2016. Click here to return to the series main menu.

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