Wage Inequality in Oregon: The Widening Gap

by Barbara Peniston

July 24, 2018

Over the past two and a half decades, the distribution of wage income in Oregon has continued to become more unequal. In 2017, employees who worked all four quarters of the year earned a total of more than $83.4 billion in covered wages, an (inflation-adjusted) increase of nearly $43 billion over 1990. The number of four-quarter workers rose by 60 percent during that time period, with the average four-quarter inflation-adjusted wage rising from $42,000 to $54,000. The gains in wage income, however, have not been evenly shared by all workers. High-wage workers' slice of the wage pie has increased in size, while that of low- and middle-wage workers has shrunk.

Top Earners Pull Away From the Pack

One way to track the degree of wage inequality is to compare wages by earnings percentile. To derive the value of a given earnings percentile, the wages of each worker are computed and then all workers’ wages are sorted from lowest to highest. The wage associated with a given percentile is the highest wage earned by that percentage of the workforce.

In 2017, the bottom 20 percent of year-round Oregon wage earners made $20,554 or less and the bottom half of wage earners made $39,448 or less. The top 10 percent of year-round workers in the state made more than $101,013 and the highest earning 1 percent of workers made more than $271,164. Between 1990 and 2017, the real (inflation-adjusted) wages of the lowest-paid of the top 10 percent rose 32.4 percent. The maximum wage of the lowest 20 percent increased by 19.5 percent, undoubtedly boosted significantly by recent increases in Oregon’s minimum wage. In 2015, the increase over 1990 for the maximum wage of the lowest earning percentile had been only 8.3 percent.
The gap between the 50th percentile wage value and higher percentile wage values has widened over time. The ratio of the 99th percentile to the 50th percentile wage was 5-to-1 in 1990, but has since steadily widened to nearly 7-to-1 in 2017. Over the same period, the gap between the wage of the bottom 20th percentile and the 50th percentile changed little, with the 20th percentile consistently earning about half of the 50th percentile wage.

Middle-Wage Workers Get Left Behind

Between 1990 and 2017, the median inflation-adjusted wage of all four-quarter Oregon workers rose by only 11.6 percent. During that period of time, the lowest median ($35,317) occurred in 1991. The highest ($39,448) was seen in 2017, again, very likely the result of recent increases in the minimum wage.
The median wage of the top 1 percent of all four-quarter workers rose by 50 percent over the past two and a half decades, from an inflation-adjusted $247,500 to $369,931. The upward trend was disrupted during the 2001 and 2008 recessions, and again in 2012, when the wages of the top earners dropped for two straight years. It is likely that annual bonuses for this group of workers were considerably lower during these periods of economic slowdown. Their median wages successfully rebounded afterwards, however, to the high of $375,704 reached in 2015. Since then, the median wages of the top 1 percent have decreased slightly, by about 1.5 percent.

Between 1990 and 2017, the median wages of the top 0.1 percent of Oregon's year-round wage earners doubled, growing by 101.8 percent. That was twice the growth of the rest of the top 1 percent. Members of this group earned a minimum of $739,056 in covered wages in 2017. Their median wage that year was $1,021,366, nearly achieving the pre-recessionary high ($1,116,376) that was achieved in 2000.
The Pie Grows, but Slices for Lower-Wage Earners Shrink

The top 1 percent of Oregon's wage-earners saw their percentage take – their slice – of total wages increase significantly, by 40 percent, over the past two decades. This group of workers, and the remainder of the top 20 percent, were the only groups whose slice of the wages pie increased. Workers in the middle quintile (the middle 20% percent of four-quarter workers) saw their share of total wages decrease by 12.1 percent – more than any other group. The next, or second-lowest quintile experienced a percentage loss nearly as large, at 9.9 percent. The lowest quintile's slice of the wages pie decreased by 5.1 percent between 1990 and 2017. But for Oregon's increases in the minimum wage, which rose in several steps from $4.75 per hour to $10.25 per hour between 1997 and 2017, these lower-wage workers might have seen their share shrink by a much larger percentage. Unemployment Insurance (UI) wage file data also suggest
that there is a positive relationship between the average number of hours worked by this group and their percentile wage value.
Bumps on the Road, but the Gini Coefficient Continues to Increase

Beyond the comparisons of percentile groups, there are other indicators that help to measure wage inequality. One of those commonly used by economists is the Gini coefficient, based on the Lorenz curve that graphically displays the degree of income or wage inequality among workers. The larger the Gini coefficient, the greater the degree of wage inequality. A score of zero indicates perfect wage equality, where all workers earned the same wage. A score of one would indicate that only one worker earned all the wages. It is helpful to use annual Gini coefficients to see the pattern of changes in wage inequality over time.

The degree of wage inequality in Oregon has generally increased since 1990, though not steadily. The state’s Gini coefficient for all year-round workers rose from 1991 through the mid-1990s, and then was largely flat before rising to a peak in 2000. Since 2000, the coefficient fell slightly in 2001 and 2002, during the first economic slowdown of the decade. Afterwards, it began a steady rise to a second peak in 2007, as the state’s economy recovered from the recession earlier in the decade. The coefficient decreased a little again in 2008 and 2009 and subsequently rose to reach its highest point in 2015. It dropped slightly in 2016 and remained essentially unchanged in 2017.
Some Workers Are Not Included in This Study

This study analyzes wage records submitted quarterly by all employers for workers subject to unemployment insurance (UI) taxes in Oregon. That includes workers at most private employers as well as state and local government workers. Federal government workers covered by a separate UI system are not included. Roughly 90 to 95 percent of all private employees are covered by UI, with notable exceptions including the self-employed, workers paid solely by commission, and employees of small agricultural employers. Although workers not covered by UI affect wage distribution and inequality in Oregon, we were not able to include them because of the lack of data.

Wage distributions will vary depending on whether all workers or only full-time year-round workers are included. For many individuals, annual earnings are influenced by the number of hours or quarters worked during the year. Many workers have part-time or seasonal jobs. Others may take a new job in Oregon at some point during the year or leave the state for a job. Still others will drop from the wage files for various reasons, including death, disability, or retirement. Because such factors tend to reduce annual wages, the wage distribution will likely be wider for all workers than for those who are working full-time year-round. In 2017, the average wage for full-time year-round workers was $68,380, compared with just over $41,178 for all workers. Roughly two-thirds of Oregon workers are employed year-round; about 40 percent work full-time year-round.

 


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