Wage Inequality in Oregon: The Widening Gap

Wage Inequality in Oregon: The Widening Gap

by Barbara Peniston

October 24, 2016

Over the past two decades, the distribution of wage income in Oregon has continued to become more unequal. In 2015, employees who worked all four quarters of the year earned a total of more than $76.7 billion in covered wages, an (inflation-adjusted) increase of nearly $35 billion since 1990. The number of workers rose by 52 percent during that time period, with the average four-quarter wage rising from $44,000 to $52,000. 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 2015, the bottom 20 percent of year-round Oregon wage earners made $19,214 or less and the bottom half of wage earners made $37,400 or less. The top 10 percent of year-round workers in the state made more than $96,785 and the highest earning 1 percent of workers made more than $264,097. Between 1990 and 2015, the real (inflation-adjusted) wages of the lowest-paid of the top 10 percent rose 24.1 percent, while the maximum wage of the lowest 20 percent increased by only 9.3 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 2015. Over the same period, the gap between the wage of the bottom 20th percentile and the 50th percentile changed little, remaining at 2-to-1.

Middle-Wage Workers Get Left Behind

Between 1990 and 2015, the median inflation-adjusted wage of all four-quarter Oregon workers was essentially stagnant, rising by only 4.6 percent. During that period of time, the lowest median ($35,323) occurred in 1994. The highest ($37,772) was seen in 2004, prior to the Great Recession, which began in 2007 and continued, officially, until mid-2009. That high was reached again in 2015, after many years of recovery.

The median wage of the top 1 percent of all four-quarter workers rose 43.6 percent over the past two and a half decades, from $252,968 to $363,316, after adjusting for inflation. 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 slowdown. Their median wages successfully rebounded afterwards, however, to the high reached in 2015.

Between 1990 and 2015, the median wages of the top 0.1 percent of Oregon's year-round wage earners experienced a growth rate of 103.7 percent, nearly two and one half times that of the rest of the top 1 percent. Members of this group earned a minimum of $750,545 in covered wages in 2015. Their median wage that year was $1,054,000, almost matching the pre-recessionary high ($1,076,287) that was achieved in 2000.

What a Difference a Decade Can Make

Between 1990 and 2000, all percentile wage values increased by more than the rate of inflation, meaning that nearly all groups saw real growth in wages. The percentage increases were greatest at the high and low ends of the earnings spectrum over that time period. For most of the percentiles below the 26th   and all of those above the 82nd, real wage values grew by at least 5 percent. For the 92nd percentile and above, they grew by at least 10 percent, with more than 15 percent growth for the 96th and 98th percentiles. Workers in the 2nd (the lowest) and middle-wage percentiles (34th to 72nd) experienced the least amount of growth in real wage values – less than 3 percent.

Between 2000 and 2013, the wages of most low- and median-wage workers (below the 58th percentile) did not keep up with inflation and showed a negative change. During that same time period, the growth rates of the 92nd through 98th percentiles were less than those seen between 1990 and 2000 and none exceeded 11 percent growth. The story changed in the most recent two years. All percentiles experienced wage growth between 2000 and 2015, ranging from 1.5 percent for the 40th to 16.8 percent for the 98th, or highest percentile. Low-wage workers (in the 12th and lower percentiles) saw their real wages increase by at least 5 percent. Workers in the 16th through 62nd percentiles did not fare as well; none saw increases above 4 percent. All percentiles above the 80th saw wage gains of at least 10 percent. However, the growth for the two highest (96th and 98th) percentiles remained lower than it was during the 1990 to 2000 period.

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, nearly doubling 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 12.9 percent – more than any other group. The next, or second lowest quintile experienced a percentage loss nearly as large, at 11.6 percent. The lowest quintile's slice of the wages pie decreased by 5.9 percent between 1990 and 2015. But for Oregon's increases in the minimum wage, which rose in several steps from $4.75 per hour to $9.25 per hour
between 1997 and 2015, 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.

A Fat Gini Grants No Wish for Wage Equality

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 has risen to reach its highest point in the 26-year period in 2015.

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 2015, the average wage for full-time year-round workers was $70,729, compared with just over $39,005 for all workers. Roughly two-thirds of Oregon workers are employed year-round; of these, slightly less than one-third work full-time.