OLMIS

by Charles Johnson
Published Sep-21-2009

Average Wages Below 2000 Levels Industry Trends Vary Conclusion

In the past decade, bubbles have grown and burst. Fancy financial acronyms like ARM and CDO have become household dinner table talk. Economics 101 has become one of the most requested courses in undergraduate institutions throughout the country. Now, one is left to ask - how has all of this economic turbulence affected real wages in Oregon?

One of the best sources of wage information within the state is the Quarterly Census of Employment and Wages (QCEW), a joint program between the Oregon Employment Department and the Bureau of Labor Statistics. Each quarter Oregon businesses with employees covered by the state's unemployment insurance program are required to provide information about the number of employees at the business and the total wages paid to all employees in that quarter. Using these two figures, an average quarterly wage can be calculated for all employees within each industry.

Interestingly, wages are very seasonal; year-end bonuses tend to boost average wage rates in the fourth quarter each year. Therefore, analysis of QCEW data must be done on an annual average basis, or within the same quarter for each year. Here we will use the most recent data (first quarter 2009) as a proxy for this year, and examine first-quarter wages over the past decade.

In this decade Oregonians received their highest average first-quarter wage in the year 2000 - $10,175 after adjustment for inflation (Table 1). Wages have slipped by 1.4 percent since then to $10,030 in the first quarter of 2009. But that isn't the whole story - in fact, the 2009 figure is up 2.2 percent from the decade's low point in 2005. While the 2001 recession "officially" began and ended in 2001, the economic impact reverberated in Oregon for four years. Wages bottomed out mid-decade, then jumped 3.5 percent between 2005 and 2006, only to begin a slow slide from that point due to the current recessionary cycle.

Government workers fared better than private-sector employees since 2000, enjoying a 2.2 percent increase in adjusted wages compared to the private sector's 2.2 percent decrease. Private employees experienced their lowest first-quarter average wage in 2003 compared to 2005 for public employees. However, government workers have enjoyed a 4.0 percent rebound in wages since their decade low compared to just 2.3 percent for private workers. In the first quarter of 2009 the average private and public employee were paid $9,921 and $10,536, respectively.

The bust-boom-bust cycle of the past 10 years has, inevitably, affected each of Oregon's industry sectors uniquely. The natural resources and mining sector has performed particularly poorly. Adjusted wages in the sector are down 6.5 percent from their peak in 2003, for a total decline of 5.9 percent since 2000 (Graph 1). In fact, natural resources and mining is the only sector with 2009 first-quarter wages at the lowest level of the decade.

Construction wages have also had a wild roller-coaster ride over the past 10 years. The average first-quarter wage in this sector topped out in 2001 at $11,871 (a 4.1% increase from 2000), plummeted 12.0 percent to 2005's low of $10,040, then rebounded 9.9 percent to end at $11,035 in 2009. Overall, the sector ended the decade with a first-quarter average wage 3.3 percent lower than in 2000.

The manufacturing and leisure and hospitality sectors also experienced significant adjusted wage reductions from 2000 to 2009 (5.1% and 6.1%, respectively). Both sectors experienced their greatest average first-quarter wage in 2000. However, manufacturing sector wages recovered handily from their lowest point in 2003, up 7.9 percent since that time. As of the first quarter of 2009, they were the second highest of any industry in the state. The leisure and hospitality sector, meanwhile, has experienced only a 0.8 percent increase since its bottom in 2005. The sector is also the state's lowest paying, with a 2009 first-quarter average wage of $3,955 - 39 percent of the average for all sectors.

The education and health services sector has done well with adjusted wage growth of 9.9 percent over the ten-year span - ending the period with higher wages in 2009 than any other year. The professional and business services sector was the only other sector to have an adjusted first-quarter average wage in 2009 greater than any other year in the decade.

Average first-quarter wages in the financial activities sector topped out in 2007, then dropped 8.5 percent to a 2009 level of $13,220. Even so, the sector ended the decade with a gain of 8.4 percent compared to the 2000 level. The information sector is the state's highest paying, with an average first-quarter wage in 2009 of $15,731. The sector experienced only a 2.6 percent increase in wages over the decade, but the 2009 level was a remarkable 13.8 percent higher than the sector's lowest wage year in 2002.

This century's infant years will no doubt be remembered for their economic turbulence. The effects of two recessions on wages in Oregon are undeniable - inflation adjusted wages for the average Oregonian have decreased over the decade. And because the ultimate depth and length of the current recession are still unknown, it is possible that wages will slip further still before rebounding from our current down cycle. One unknown is whether increases in other compensation to workers, such as health insurance and pension plans, have made up for the reduction in wages.

The bright spot in the cloud overhead is that adjusted wages will likely grow during the next 10 years, if for no other reason than that the new decade will begin with wages near the bottom of this economic cycle's trough. How long it will take for adjusted wages to return to their year 2000 highs remains to be seen.