Abstract
After 3 decades of gentle convergence, regional per capita incomes diverged sharply in the 1980s. In New England, per capita income rose from 4% above the national average in 1979 to 20% above in 1987. At the same time, per capita income in the West South Central states fell from 7% below the national average to 15% below. While changes in earnings were most significant, changes in employment ratios and in income derived from property were also factors. Sources of personal income are usually grouped into 3 categories: earnings; dividends, interest, and rent; and transfer payments. During the 1980s, earnings grew more slowly than property income or transfers. Changes in unemployment rates accounted for most of the shifts in the regional employment-to-population ratios. Changes in earnings per job were the single most important factor behind the changes in per capita income. The key to both the converging per capita incomes of the 1970s and the diverging incomes of the 1980s was changes in industry earnings, particularly earnings in more locally oriented industries.