A couple of weeks ago, I noted that, as Figure 1 shows:
…as recently as 2014, [Gross Domestic Product] GDP per capita in Minnesota was $4,658 above that of the United States generally, or $18,632 for a family of four. In every year but one since 2014, that premium has fallen until, in 2023, it vanished completely and Minnesota became, for the first time on record, a state with below average per capita GDP. In 2025, Minnesota’s per capita GDP was $2,767 below that of the United States generally, or $11,068 for a family of four.
Figure 1: GDP per capita in Minnesota minus GDP per capita for the United States, 2017$
This has happened because Minnesota’s rate of real, per capita GDP growth has lagged that of the United States generally in ten of the last eleven years, as Figure 2 shows: Only Pennsylvania and Wyoming match that dismal record.
Figure 2: Growth of real per capita GDP in Minnesota minus growth of real per capita GDP for the United States, percentage points
Does this matter? Isn’t per capita GDP a rather esoteric measure of wellbeing, distant from people’s “lived experience” of the economy?
No. To see why, let us look at how per capita GDP growth is related to the growth of a less esoteric measure of economic wellbeing, Median Household Income.
Figure 3 shows the relationship between real per capita GDP growth (taken from the Bureau of Economic Analysis) and real median household income growth (taken from the Census Bureau) across the 50 states between 1997 and 2025. We see that states which had faster rates of real per capita GDP Growth also had, on average, higher rates of real median household income growth. This relationship is statistically significant, with a p-value of 0.00, which means that it is unlikely to be random and the correlation coefficient of 55.7% is fairly strong and meaningful for the social sciences. The R Square value of 0.3101 indicates that 31.0% of the variation in real median household income growth between 1997 and 2025 can be explained by variations in real per capita GDP growth.
Figure 3: Real per capita GDP Growth and real median household income growth, 1997 to 2025
This suggests that one way to boost real median household income growth is to boost real per capita GDP growth. How do we do that? Watch this space…