What’s Happening With Wages in Washington

Why most workers won’t be ready for the next (inevitable) recession

If the economy continues growing through mid-2019, the current expansion will become the longest in post-war history. It certainly looks rosy on the surface: since 2008, Washington has added more than 440,000 nonfarm jobs, and average hourly wages have climbed 19 percent after adjusting for inflation.[1]

But the reality is that while more people are bringing home paychecks compared to a decade ago, the bulk of wage gains have gone those at the top. Wage growth has been sluggish – at best – for everyone else, and that doesn’t bode well for the next economic downturn, whenever it comes.

Let’s put the current economic expansion into context. Despite the long boom, most workers still haven’t made serious economic gains for decades. Since 1979, hourly wages for the bottom 60 percent of workers have increased $1/hour or less (about 4 percent), despite the fact that overall economic productivity climbed 53 percent.[2] Nearly all of the economic gains of the past 40 years have gone to the top 30 percent of workers.

Tableau

In most of Washington’s biggest employment sectors, wage gains since the Great Recession have been meager at best.[3] In the state’s eight largest sectors – which comprise 73 percent of all nonfarm employment and have contributed nearly 8 in 10 new jobs since 2008 – average wages have increased just $850, or 1.7 percent, annually.

That actually overstates the gains made by most workers. Above-average wages in Nonstore retail (think Amazon) account for just 1.5 percent of the state’s total jobs in 2018, but nearly one-third of the overall wage increase. Excluding Nonstore retail, average wages have increased just $587 (1.1 percent) annually for nearly 7 in 10 Washington workers.

Moreover, while at first glance manufacturing seems to be holding on to relatively high-wage jobs, outside of aerospace (where wages are above average but employment growth is basically flat), wages are below average, and there are 7600 fewer jobs than at the start of the Great Recession.

Tableau

Job and Wage Growth: High Employment Sectors, Washington

Sector Total Jobs 2019 Q1 (% of total) New Jobs 2008 Q1-2019 Q1 (% of total) Avg. Wage 2018 Q2 (vs. WA avg.) Avg. Annual Wage Increase 2008 Q1-2018 Q2 (%)
Health Care and Social Assistance 431,933
(12.7%)
95,350
(23.1%)
$53,046
(-$27,658)
$390
(0.9%)
Retail Trade 387,167
(11.4%)
57,883
(14.0%)
$58,205
(-$22,409)
$2,263
(6.4%)
Retail Trade
(less Nonstore retailers)*
334,714
(9.8%)
16,672
(4.0%)
$37,432
(-$43,182)
$363
(1.1%)
Nonstore retailers* 52,453
(1.5%)
41,161
(9.7%)
$191,007
(+$110,393)
$10,557
(12.4%)
Local Government 357,558
(10.5%)
39,492
(9.6%)
$59,512
(-$21,102)
$625
(1.2%)
Accommodation and Food Services 291,308
(8.6%)
55,525
(13.5%)
$23,934
(-$56,680)
$429
(2.2%)
Manufacturing 290,783
(8.5%)
-4267
(-1.0%)
$80,864
(+$250)
$742
(1.0%)
Manufacturing
(less aerospace)
205,767
(6.1%)
-7,608
(-1.8%)
$63,691
(-$16,923)
$319
(0.5%)
Aerospace 85,017
(2.5%)
3342
(0.8%)
$123,180
(+$42,566)
$1,618
(1.5%)
Professional, Scientific, and Technical Services 208,358
(6.1%)
46,925
(11.4%)
$100,856
(+$20,242)
$1,505
(1.8%)
Construction 215,808
(6.3%)
6,808
(1.7%)
$64,299
(-$16,315)
$649
(1.1%)
Administrative and Support Services 157,775
(4.5%)
21,292
(5.2%)
$47,577
(-$33,037)
$627
(1.5%)
State Government 153,000
(4.5%)
3,100
(0.8%)
$65,850
(-$14,764)
$616
(1.0%)
Total/Average 2,493,691
(73%)
322,058
(78%)
$60,025
(-$20,589)
$850
(1.7%)

Sources: 1) Employment Estimates (WA-QB, not seasonally adjusted) through March 2019 (preliminary), and 2) Covered Employment (QCEW) through June 2018, shown as annualized four-quarter rolling averages, with wages expressed in 2019 dollars using CPI-U-RS (estimated). *2018 Retail Trade (less Nonstore retailers) and Nonstore retailers wage data is estimated based on overall sector trend through 2018 Q2.

Meanwhile, a handful of high-wage job categories have been reaping most of the gains of a growing economy.[4] Four sectors (Professional, Scientific, and Technical Services; Information; Finance and Insurance; and Management of Companies and Enterprises), which together comprise just 14 percent of nonfarm employment, have seen wage increases averaging $3,000 (3.1 percent) per year since 2008. Much of that increase is in Software Publishing, which accounts for just under half of all Information sector jobs, and where wage increases are particularly outsized: averaging $7,452 (4.4 percent) per year.

Tableau

Job and Wage Growth 2008-18: High-wage Sectors, Washington

Sector Total Jobs 2019 Q1
(% of total)
New Jobs 2008 Q1-2019 Q1 (% of total) Avg. Wage 2018 Q2 (vs. WA avg.) Avg. Annual Wage Increase 2008 Q1-2018 Q2 (%)
Professional, Scientific, and Technical Services 208,358
(6.1%)
46,925
(11.4%)
$100,856
(+$20,242)
$1,505
(1.8%)
Information 135,767
(4.0%)
32,558
(7.9%)
$188,401
(+$107,787)
$6,809
(5.7%)
Information
(less Software publishers)
69,350
(2.0%)
14,258
(3.5
%)
$135,990
(+$55,376)
$5,813
(7.5%)
Software publishers 66,417
(1.9%)
18,300
(4.4%)
$243,008
(+$162,394)
$7,542
(4.4%)
Finance and Insurance 99,742
(2.9%)
-2825
(-0.7%)
$95,756
(+$15,142)
$1,021
(1.2%)
Management of Companies & Enterprises 44,733
(1.3%)
9,875
(2.4%)
$117,477
(+$36,863)
$1,343
(1.3%)
Total/Average 488,600
(14%)
86,533
(21%)
$125,662
(+$45,048)
$2,948
(3.1%)

Sources: 1) Employment Estimates (WA-QB, not seasonally adjusted) through March 2019 (preliminary), and 2) Covered Employment (QCEW) through June 2018, shown as annualized four-quarter rolling averages, with wages expressed in 2019 dollars using CPI-U-RS (estimated).

Sluggish wage growth and massive economic inequality aren’t the only economic headwinds facing Washington’s working families. Even after adjusting for inflation, costs are going up for critical needs like rent (or home ownership), health care, child care, and higher education. And to top it off, Washington’s low- and middle-income households pay a far higher share of their income in taxes than do those with higher incomes.

These trends aren’t just making everyday life a struggle for people – they’re making it impossible for many Washington households to build even a modest measure of economic security.

It doesn’t have to be this way. With the 2019 legislative session now adjourned, state and local leaders should take the summer to plan reforms for 2020 that will a) make Washington’s tax system more equitable, and b) promote increased investment in public policies that build and protect economic security for our families and communities. That includes: ramping up construction of affordable housing, tamping down out-of-pocket costs for health care, lowering the cost of child care by increasing subsidies for providers, teachers and families, and reducing tuition for public higher education, to name just a few!

Otherwise, when the next recession comes — as it inevitably will — it’s going to hit harder and hurt more than it needs to.

[1] Based on EOI analysis of Washington State Employment Security Department data: 1) Employment Estimates (WA-QB, not seasonally adjusted) through March 2019 (preliminary), and 2) Covered Employment (QCEW) through June 2018, shown as annualized four-quarter rolling averages, with wages expressed in 2019 dollars using CPI-U-RS (estimated).

[2] “Wages” include only hourly or salaried remuneration to employees.

[3] Wage and job figures for high-employment sectors based on EOI analysis of Washington State Employment Security Department data: 1) Employment Estimates (WA-QB, not seasonally adjusted) through March 2019 (preliminary), and 2) Covered Employment (QCEW) through June 2018, shown as annualized four-quarter rolling averages, with wages expressed in 2019 dollars using CPI-U-RS (estimated). 2018 Retail Trade (less Nonstore retailers) and Nonstore retailers wage data is estimated based on overall sector trend through 2018 Q2.

[4] Wage and job figures for high-wage sectors based on EOI analysis of Washington State Employment Security Department data: 1) Employment Estimates (WA-QB, not seasonally adjusted) through March 2019 (preliminary), and 2) Covered Employment (QCEW) through June 2018, shown as annualized four-quarter rolling averages, with wages expressed in 2019 dollars using CPI-U-RS (estimated).

  • Leave a Reply
    • Maralyn Chase

      Each year Washington high schools graduate about 80,000 — some of whom will go to college or directly enter the workforce if they can find a job. In the last 10 years (2008 to 2018) we have created ~ 440,000 new jobs — 4400 new jobs each year.

      The Bureau of Labor Statistics reported that only about 62% of the eligible civilians participated in the labor force. Somewhere we have almost 40% of the people who should/could be working are not actually working. And, of course as you know, they are not counted as being unemployed. They simply do not exist when we talk about the numbers in our workforce. They do exist, I believe, when we count the homeless and discouraged. We need to start talking about them as part of the unemployed civilian labor force. Thanks for all your work!

      May 6 2019 at 6:11 PM

    • Aaron Keating

      Good point, Maralyn. The official measure of unemployment excludes people who would actually like to have a job, but who haven’t been looking for one reason or another — as well as those would work more hours, but aren’t getting them. And while a statewide measure of unemployment is a useful barometer, it doesn’t show how widely the employment picture varies locally. I take a closer look those and other aspects of (un)employment here: http://www.opportunityinstitute.org/research/post/unemployment-and-underemployment-rates/. Thanks for your comment!

      May 13 2019 at 9:44 AM

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