In a competitive labor market, wages are determined by the supply and demand of labor. Over time, a worker’s wages should increase as he or she gains proficiency in the job and obtains more valuable skill sets, or because of changes in the macro economy that influence the demand for those particular skill sets.
Although wages are only a portion of an individual’s income, they are a primary source of income for many Idahoans and an important indicator of their economic wellbeing. As an individual’s wages increase, so does his or her standard of living. This study will evaluate the wage growth of Idaho’s permanent workforce using data collected through Idaho’s unemployment insurance program from 2005 to 2014. Unless otherwise indicated, only those with reported earnings each year are included in the study.
Growth by Wage Group
For much of the past decade, the take home pay for Idaho wage earners has been on the rise. In 2005 the reported median annual wage for Idaho’s permanent workforce was $25,061. By 2014 the state’s median wage had increased to $35,146. The $10,000 increase marked 40 percent growth over the decade or 3.8 percent annually.
A deeper look into Idaho’s wage growth shows that the growth has taken place for all wage groups in the state. Since 2005 wages at the bottom 10 percent posted the highest percentage increase of 112 percent, growing nearly $5,000 by 2014, while wages at the 75th percentile posted the smallest percentage increase of 36 percent, but growing by nearly $14,000 over the decade.
Source: U.S. Bureau of Labor Statistics
Idaho’s wages have been on the rise, with much of the growth occurring during the years leading up to the recession. Since 2010, the growth in Idaho’s wages has slowed considerably. From 2005 to 2010, Idaho’s median wage increased by an annual average of 4.4 percent. From 2010 to 2014, however, the annual growth rate dropped to 3.1 percent, slowing by nearly one and a half percentage points a year.
While Idaho’s wage growth has slowed across the board, the rate of deceleration has not been equally distributed. Since 2010, the rate of deceleration has increased for every step taken down the wage scale. For example, annual wage growth at the 90th percentile fell from 3.8 percent a year between 2005 and 2010, to an annual average of 3.1 percent after 2010, slowing the annual growth rate by 0.7 percentage points for wage earners at the 90th percentile. In contrast, wages at the bottom 10th percentile fell from an average annual growth rate of 15.6 percent between 2005 and 2010, to an annual growth rate of 0.6 percent after 2010, marking a decrease of 15 percentage points in the average annual growth rate for wage earners in the bottom 10 percent.
Comparing the wage growth of the bottom 25th and top 25th percentiles of Idaho’s wage earners further highlights the disproportionate shift in Idaho’s wage growth. Between 2005 and 2010, the wage gap between Idaho’s bottom and top 25 percent of wage earners increased from just under $28,000 to just over $30,500, increasing by an average of 1.7 percent per year. After 2010, however, Idaho’s wage gap grew by an annual average 2.8 percent and increased to $34,200 by 2014
Source: U.S. Bureau of Labor Statistics
The disproportionate shift in Idaho’s wage growth since 2010 has stifled the economic impact from benefiting Idaho’s lowest wage earners and exacerbated the disparity between Idaho’s top and bottom wage earners.
As the state’s wage growth has slowed following the recession, mobility between wage groups has been difficult. Wage mobility refers to an individual’s ability to move from one wage group to another. Data collected through Idaho’s unemployment insurance program indicate that more than 60 percent of Idaho’s permanent workforce were reported in the same wage group in 2014 as they were in 2010. Of the remaining workforce, 21 percent were reported in a higher wage class, while 19 percent were reported to have moved to a lower wage class. The numbers represent only those individuals who have reported some sort of wage for at least one quarter every year since 2005 and therefore may not fully reflect the mobility of those who have left the workforce to further their education or training if they were not reported to have received wages in a given year.
Separate data reported by the U.S. Bureau of labor Statistics’ Occupation Employment Survey (OES) further indicates stagnation in Idaho’s wages. For much of the past decade Idaho’s overall growth has lagged behind national trends. In 2005 the BLS reported that Idaho’s median wage ranked 35th nationally. By 2014 Idaho’s median wage slipped to 43rd. Nationally, Idaho ranked 48th for overall growth placing the state slightly ahead of only Minnesota and Michigan.
As Idaho’s wage growth continues to stagnate the best way for an individual to improve his or her standard of living is to invest in one’s human capital. The more a person increases their skillsets the more valuable he or she becomes to potential employers. For those interested in exploring additional training opportunities, please visit the Idaho Department of Labor’s website.
Christopher.StJeor@labor.idaho.gov, regional economist
(208) 557-2500 ext. 3077