Will Mississippi pass Germany this year in GDP per capita (middle-class, 2014)

[brickpatio]

Usually around June of each year, the federal bureau of economic analysis publishes the GDP by state for the previous calendar year. And by taking into account population figures you can figure the GDP per capita for each state.

If you want to compare each state to another country, you can start by estimating the state's GDP per capita as a percentage of the overall average GDP per capita for the U.S. as a whole. Then you do the same for other countries (taking their gdp per capita as a percentage of the U.S.), and thus can compare U.S. states to other nations.

If you really want to be precise, you can adjust a state's GDP per capita for cost of living relative to the U.S. average, achieving so-called purchasing power parity within the U.S. itself.

Taking all these into consideration, I believe it's likely that Mississippi in 2014 will pass Germany in GDP per capita, and possibly Austria, Sweden, and the Netherlands, three of the top European nations, other than wealthy Switzerland and oil-based Norway.

Currently the U.S. GDP per capita is about $52k. Germany is about $39k. Mississippi's GDP per capita is about 67% of the U.S. average, which comes to about $35k. However, since Mississippi's cost of living is about 88% of the U.S. average, $1 in Mississippi purchases about $1.15 in goods in services due to Mississippi's lower overall prices. This means that to adjust for purchasing power parity, you can adjust Mississippi's GDP per capita from $35k to $40k. This compares to Germany's $39k and some $43k in Austria and the Netherlands.

Lastly, growth in the U.S. and in Mississippi for 2014 will exceed Europe by roughly 1.5%. And secondly, the value of the U.S. dollar apparently increased relative to the Euro by some 10% in 2014. ...I'm happy to stand corrected on any of these data points ...

Putting all this together, it would appear that Mississippi's GDP per capita - factoring in cost of living, the value of the dollar, and faster growth in the U.S. - should increase Mississippi's GDP per capita based on purchasing power parity to some 11 or 12% higher relative to Europe compared to last year. And this would mean Mississippi's $40k would increase, comparatively speaking, to roughly $44k, surpassing all of Europe except relatively tiny Norway and Switzerland.

I know it doesn't feel that way, because Europe is highly educated yet suffers from an extremely slow economy lacking in good jobs for even educated people... compared to America's stronger economy which offers well-paying jobs to moderately educated people and is stronger despite far greater educational diversity of populations within the U.S. I suppose this is why middle class people in Mississippi often live in spacious homes and eat out at restaurants and take plenty of long weekends and vacations etc, compared to Europeans where even the well educated often live in tiny apartments and struggle to find jobs worthy of their high educational levels.

In any event, I believe if my calculations are correct, the headline should be something akin to "Mississippi wealthier than Sweden, France, and Germany in 2014." How about them apples!

[Southern man]

This should really bring out the Mississippi haters.

[Listener2307]

That GDP per person figure is something I actually follow. It shows the productivity of the US to be consistently far greater than most detractors would like.

If you want to see something really revealing, figure the GDP per person for China.

Population 1.3B and GDP of around $10T. You can find arguments all over the place about the Chinese GDP, but I use $10T. US is about $16T; world is about $64T

$7,700. That compares to Mississippi $35,000.

Man. Those people are poor! China can showcase all their military, all their new roads, and all their cars, but the people are poor by all standards.

[Phil75230]

Per Capita GDP is not really the same as actual wages. Sure, the companies may be producing as much wealth per capita as Germany (or close to it), but the salaries paid out to employees still must be proportionate to the GDP for it to be reflective to a state's quality of life.

(This is NOT a Mississippi issue - this is a NATIONAL issue. So please, no accusations of Mississippi-hating toward me)

Anybody who wants to make this GDP comparison truly relevant vis-à-vis Germany had better start insisting that Mississippi wages be made comparable to German ones for the same occupation. Perhaps Mississippi should pass a minimum wage law of at least $12.50/hr, plus start a comprehensive infrastructure project with the aim of having decrepit bridges and sewer lines repaired (again, this is a NATIONAL trend, not exclusively Mississippi), and with Internet speeds comparable to Chattanooga, or at least the South Korean average (Ditto). Not to mention raise teachers salaries by at least one-third (again, ditto). Plus, up the taxes on salaries of over $200,000 per year, and add maybe a 5% tax on all businesses with a gross revenue of over $20 million dollars per year (yes, for the fourth time here, too).

OK, that was getting off topic, but my essential point is clear: It's as much what a political unit does with the wealth it generates as much as the amount of wealth generated itself.

[psulions2007]

Yes a bunch of financiers making money from money in NYC, or in the case of Mississippi...a bunch of casino hogs... really shows how the US is so much more productive.

(Hint: It's actually a giant paper tiger)

[atler8]

brick
Have you traveled abroad to Europe to have a basic reality-based, hands-on view of what life is like for the average European?
Japan has been in a relative economic malaise since their hyper costly economy hit a brick wall over 20 years ago. Would you also thus claim that the average middle class Japanese family struggles too?

[Listener2307]

Originally Posted by Phil75230

Per Capita GDP is not really the same as actual wages. Sure, the companies may be producing as much wealth per capita as Germany (or close to it), but the salaries paid out to employees still must be proportionate to the GDP for it to be reflective to a state's quality of life.

(This is NOT a Mississippi issue - this is a NATIONAL issue. So please, no accusations of Mississippi-hating toward me)

Anybody who wants to make this GDP comparison truly relevant vis-à-vis Germany had better start insisting that Mississippi wages be made comparable to German ones for the same occupation. Perhaps Mississippi should pass a minimum wage law of at least $12.50/hr, plus start a comprehensive infrastructure project with the aim of having decrepit bridges and sewer lines repaired (again, this is a NATIONAL trend, not exclusively Mississippi), and with Internet speeds comparable to Chattanooga, or at least the South Korean average (Ditto). Not to mention raise teachers salaries by at least one-third (again, ditto). Plus, up the taxes on salaries of over $200,000 per year, and add maybe a 5% tax on all businesses with a gross revenue of over $20 million dollars per year (yes, for the fourth time here, too).

OK, that was getting off topic, but my essential point is clear: It's as much what a political unit does with the wealth it generates as much as the amount of wealth generated itself.

Not really off topic, I don't think.

The GDP per capita is part of the macro-economic view that I use for investing. Sometimes I find that backing away to get a good look gives me a better view. Sometimes.

But comparing Mississippi to any country is not really fair. Mississippi has the benefit of being part of The United States. Germany is part of the EU, but it is hardly the same thing.

Mississippi is a poor state by American standards. Wages are low, unemployment fairly high, education results poor. But it's all relative.

My own view is that raising Mississippi minimum wage to $12.50 will result in nothing but more unemployment. FWIW, I think the Feds should stay out of the minimum wage debate. The problems in our state are different from the problems in Some Other Place, so the same rule should not apply.

Taxing businesses on gross revenue is about as counter productive as any move I could think of. How do you think Mississippi got Nissan and Toyota in the first place?

[brickpatio]

I just want to thank everyone who responded so far. An actual, real-live, intelligent discussion taking all sides of an issue. A beautiful thing!!!

I'll put some thoughts and send feedback on the responses but I wanted to get that out of my system. Thank you!

[brickpatio]

For starters, I think the question about how Europeans and Japanese live is a good one.

I've been to Europe a few times over the years and yes, especially in the areas I went everything was pristine. I didn't see any areas that felt scary or looked unkempt or run down. There were lots of fancy stores and yes, it felt very nice, I have to say.

That said, I've noticed something interesting of late, on google maps. (I love to get on google maps and go exploring in other parts of the world. You can get that street view and it's just like you are walking around a city, virtually anywhere in the world except for some of the extremely poor places where google maps hasn't taken all the pictures yet.)

One thing I noticed about Europe is that once you get out of the historic areas with all the gorgeous architecture, and you get into the so-called suburbs, those areas have a different feel. Their suburbs are more like our downtown areas, particularly American downtowns where most of the buildings have been torn down and replaced with modernist buildings from the 60s and 70s, i.e. kind of bland in appearance but definitely not dead or anything like that. Plenty of people, plenty of stores etc. But the stores are mainly McDonalds, KFC, convenience stores etc.

The apartment buildings are all 10 stories roughly and kind of gray and bland. You never get to area area with regular subdivisions with the big houses and big yards like we have. Everything (almost) is urban and tall or mid-rise buildings, until you get the edge of town where it becomes rural quickly. I realized that the average Europeans live in apartments in these tall, bland buildings from the 60s and 70s, and likely the actual apartments are tiny by American home standards and probably not particularly updated on the inside.

In other words, their middle classes live in cramped, outdated, gray apartment buildings built in the 60s and 70s, and American middle classes live in 1,500 to 3,000 square foot single family homes on wooded, 1/4 to 1/2 to 1 acre lots. They walk outside their apartment buildings to a dense and somewhat ugly city environment and we live amid trees and yards (even moreso in Mississippi), 5 or 10 minutes from a fresh new Lowe's, Kroger, etc. For that matter in Mississippi, many, many people live on big acreage, i.e. 5, 10, or 20 plus acres. I really think Mississippi's middle classes are much more blessed than Europe's, in terms of economic opportunity.

And I have the impression that Europe is full of highly educated people such as engineers, for example, who end up driving a taxi or some other job outside their educational levels due to a total lack of jobs. And young people under 30 or 35 in many European countries must live with their parents unemployed due to lack of jobs. In America that's pretty unusual for middle class people, except perhaps in the last 5 years of rising taxes and regulations by the national government in the U.S.

Obviously America has dangerous neighborhoods that are much more of a rarity in Europe. I've read that certain "suburbs" outside places like Paris and London are now so-called "no-go zones" where even police don't go in Europe. Supposedly these areas are full of immigrants who sadly have come to Europe for a better life and instead been faced with the horrible jobs situation caused by the corrupt European governments, thus causing too many people to end up on welfare and then getting into crime etc (apparently, just from the little that I have read, etc...). Those same people in most cases probably would have come to America and thrived, because usually our economy is booming.

Nevertheless, our cities have a much larger so-called "underclass" of people who cannot or will not participate in society by remaining employed and paying taxes and following the laws etc like everyone else. But thank God America is still full of ambition and my impression is that most people of all races and ethnicities in America will happily dive into a booming economy and booming jobs market, once those return hopefully in a couple of years, and will gladly work their way up the economic ladder.

In America it seems that if you enter the work force at age 15 and stay in the work force of the next 50 years, after a decade or two most hard-working people can get their wages up to a decent level. And my impression is that a middle-class American lifestyle in "normal" cost of living states (i.e. normal prices on housing and electricity such as Mississippi and many others) can be achieved with at least $40,000 to 50,000 in household income.

So if both people have gotten up to say $12/hour wages and each work 60 hours a week, their household income is say $36,000 each - or a combined $72,000 per year. So even if they worked just 40 hours a week they could live a reasonable middle class lifestyle with family income over $50,000 in normal cost states.

That tells me that our so-called underclass that will not work and pay taxes like everyone else, is going to keep shrinking as long as the economy is "going to town", i.e. booming. Even uneducated people in a booming economy will find that they get various job offers from competing companies that need their particular skill set, and they move up the ladder that way, while also taking some night classes to keep improving their skill set over their 5 decades in the work force.

So overall, I would say yes for average middle class people, it appears to me that Americans have far more opportunity. And even though we have a larger group of uneducated people, with more dangerous areas etc, I think our economy, once it's allowed by the federal government to start booming again, has a better chance of pulling uneducated people well upwards over their 5 decades in the work force, something that Europe doesn't seem to offer and is thus going to become more and more dangerous as they import uneducated people who get stuck on welfare because of Europe's horrible economies, whereas those same people in America's booming economy would move up over a generation or two.

So anyway, those are just a few starting thoughts. Would love to hear more feedback!!

[Listener2307]

One thing that needs to be pointed out is that the 15 and 30 year mortgages that are common in America are exclusive (as far as I know) to America. They don't exist anywhere else in the world. The rest of the world has to save up money - a really LOT of money - and pay for a house. Or most of the price, anyway. They can borrow a little.

In fact, Germans don't usually own their homes. They rent them.
Most Germans don’t buy their homes, they rent. Here’s why – Quartz

The active housing industry in America makes a direct comparison very difficult. My sister lived in Basel, Switzerland and the home she rented came without anything in the kitchen. Renters are expected to provide everything - even the kitchen cabinets.