Idaho ranks 48th in the nation for labor productivity

COEUR d'ALENE — Despite ranking among the lowest states in terms of labor productivity, Idaho has a substantial tax surplus.

Data from the U.S. Bureau of Labor Statistics indicates that Idaho’s labor productivity has ranked among the bottom four states for the past decade and beyond. Most recently, the Gem State was in 48th place.

Labor productivity is an economic measure of how much money an area generates per hour worked.

In 2021, Idaho had a value-added gross domestic product of roughly $72.5 billion and total time worked of 1.2 billion hours. Dividing one by the other leaves Idaho with a labor productivity of nearly $60.

This means that in 2021, for every hour someone worked in Idaho, about $60 was added to the state’s output.

Idaho’s labor productivity is substantially below the national average of $82.89, but that’s not a reflection of the work ethic of Idahoans.

“Labor productivity can be a bit confusing at first glance, because it seems as if it’s related to how hard or effectively workers are doing their jobs, but it actually is trying to capture how much GDP is being produced by the worker,” said Sam Wolkenhauer, the Idaho Department of Labor’s regional economist for North Idaho. “This naturally varies quite drastically between the various industries and sectors of the economy, so when labor productivity is compared between the states, that is not so much a statement about how hard the state’s people are working, but a statement about what sorts of industries are in the state.”

The majority of the disparity in Idaho’s labor productivity comes from how its industries are contributing to the state’s GDP.

According to the federal Bureau of Economic Analysis, Idaho’s main industries in 2020 were finance, 19%; government, 13%; manufacturing, 12%; professional services, 11%; and social services, 9%.

Idaho mostly participates in industries that see low contributions to GDP.

The average labor productivity of the U.S. is largely propped up by a few industries. The tech industry in California and the finance industry in New York are the most well known examples of high-grossing industries in the nation.

“So when we see that Idaho has a low labor productivity, this is mostly a reflection of the mixture of industries that we have in Idaho and the composition of our economy,” Wolkenhauer said. “It’s not about the quality of our citizens or how hard they are working.”

Given that Idaho’s labor productivity is lagging behind due to a comparatively low GDP among other states, why is it that Idaho has a surplus per taxpayer greater than many states with higher GDPs?

In fiscal year 2022, Idaho had a $1.4 billion tax surplus.

Nearly all the tax revenue that Idaho collects comes from one of three places: income tax, sales tax and corporate tax.

A tax surplus represents the difference between the amount of money actually collected during the year and the amount of money that was estimated to be collected.

The divisions of tax that were well beyond their projections were income tax and corporate tax.

Corporate tax collections for 2022 were nearly 165% above projected values.

With corporate tax climbing by a considerable margin, corporate revenue must have climbed in turn.

While data is not yet available for the current year, given the apparent growth of corporate revenue and personal income, labor productivity may also be on the rise.