Transfer Income – Northwest Oregon’s Hidden Treasure

March 18, 2020

The biggest “industry” in Northwest Oregon doesn’t employ anyone directly but generates more than twice the income of the region’s entire health care industry. Of course it’s not really an industry, it’s the semi-hidden transfer income that Northwest Oregon residents receive from various government programs such as Social Security and Medicare. Residents of Northwest Oregon (Benton, Clatsop, Columbia, Lincoln, and Tillamook counties) received nearly $2.6 billion in transfer income in 2018 according to the Bureau of Economic Analysis (BEA). The income is also known as transfer receipts by the BEA since it is money that people receive. This works out to an average of nearly $10,000 for each of the roughly 260,000 people in the five counties. This income is less obvious than regular industry wages, because it is usually distributed either directly to individuals or paid on their behalf without any visible employment, sales, or other economic activity associated with it.

Government programs for transfer payment are sometimes described by three main categories: social insurance programs (such as Social Security and unemployment benefits) where payment might depend on past work; public assistance programs (such as Supplemental Security Income (SSI) and Temporary Assistance for Needy Families(TANF)) that are targeted at low income people; and in-kind programs (such as Medicare, Supplemental Nutritional Assistance, and public housing benefits) that provide a specific good or service. Transfer income enters the economy when people spend it as part of their personal consumption expenditures. Transfer income can be paid either directly to a person or to an organization, such as a hospital.
The table above presents the largest 10 categories of transfer income. More than 63 million people receive Social Security benefits in the United States, and it is the single largest category of transfer receipts in Northwest Oregon. Medicare is the second largest category of transfer receipts. Although education and training assistance is in only the number six position, it is very important in Benton County – home to Oregon State University. It consists mainly of National Science Foundation (NSF) payments that support university research, and the amount has nearly doubled in the last 10 years. Two other rapidly growing categories are public assistance medical benefits, the principal one being Medicaid, and veteran’s benefits. Both of these categories are influenced by Northwest Oregon’s aging population because veteran’s benefits include pension, life insurance, and disability payments.

Transfer payments are not just bigger than any major industry in Northwest Oregon, they are much bigger. Health care and social assistance is the largest industry by payroll in the region. It paid about $720 million in wages in 2018, only a little over one-fourth the amount that transfer payments brought to the region. Accommodation and food services is the largest industry by employment, with nearly 16,000 employees, but transfer payments provided more than seven times as much money as that industry’s payroll. In fact, transfer payments in 2018 in Northwest Oregon were more than half as large as the $4.6 billion in wages and salaries paid by all industries combined.

Transfer payments are a good reminder that there are many ways of looking at the economy in Northwest Oregon. Although payroll employment is a fairly easy, common, and important way to examine the economy, other measures, such as income, sales, and number of businesses are also useful. Transfer income is very important to people in Northwest Oregon even though it provides no direct employment.