stateofworkingiowa

Wages

Let’s start with the basic trajectory of wages over the last generation. In Iowa, as in the rest of the country, the median wage (half of all workers earn more, half earn less) slipped during the 1980s, recovered during the full-employment boom of the late 1990s, and then leveled off. Across this span, the Iowa median tracks below national trends and below regional trends — measured against either the other West North Central states (Minnesota, Kansas, Nebraska, the Dakotas and Missouri) or the broader Midwest (adding Wisconsin, Michigan, Illinois and Indiana) region. When we examine trends in more detail we find that low-wage workers in Iowa make about the same as low-wage workers everywhere else. But at the higher wages, Iowa workers fall further and further behind. Higher wage jobs are simply scarcer in Iowa than in most states.

Figure 1. INTERACTIVE Iowa Median Wage Lags Nation, Region
State, U.S. and Regional Wage (median), 1979-2013

Figure 1
Source: Economic Policy Institute analysis of Current Population Survey.

 

During the dismal 1980s, workers at all wage levels lost ground, but the upturn of 1995–2000 turned this around — bringing sustained wage growth to even the lowest-paid Iowans. Then from 2000 to 2007, wage gains were hoarded by the highest-paid 40 percent of workers, while the rest saw stagnating or declining wages.

Figure 2. INTERACTIVE Wage Growth Lags at Iowa Median, Lower Incomes, 1979-2013

Figure 2 SWISource: Economic Policy Institute analysis of Current Population Survey.

 

For men, the losses are even starker, especially during the 1980s. Real wages begin falling for low-wage men in the mid-1970s, and this spread across all but the highest percentiles through 1979-1989 and through the first half of the 1990s (1989-1995). Some relief in the late 1990s is short-lived: Wage growth grinds to a halt in 2000–2007 and then retreats — for all but highest earners — from 2007–2013. Iowa women workers, by contrast, do relatively well: All but the lowest wage decile see impressive wage gains across the full 1979-2013 era. Low-wage women lose a lot of ground in the 1980s, but do better than their male peers during the 1990s boom.

We can see, in these demographic and chronological patterns, a number of factors at work. High unemployment in the early and mid-1980s undercut the prospects of all workers at the median or below. Conversely, the tight labor markets of the 1990s delivered general and substantial gains. The divergent records of these two eras were also shaped (especially for men in the middle wage groups) by declining unionization in the 1980s and beyond, and (especially for low-wage women) by the declining value of the minimum wage throughout the 1980s. And, across the full era, globalization and industry shifts pushed job growth into low-wage services and further undermined middle-class wages.

The key point here is not just that wages have stagnated, but they have done so over an era in which the productivity and educational attainment of Iowa workers have improved dramatically. The Iowa economy has grown steadily since the end of the Second World War. For the first generation of this era, economic growth lifted with it the wages and earnings of most Iowans. But, beginning in the mid-1970s, wage growth slowed — even as the economy continued to grow. The last generation has been marked by a stark disconnect between productivity growth (up about 60 percent in Iowa since 1979) and slow or stunted wage growth: Median compensation (a measure that includes the value of job-based health coverage) has grown less than 12 percent over that same span. It is not the health of the economy, in other words, that has battered Iowa’s workers — but a dramatic change in the distribution of its rewards. Increased productivity has not been shared with workers in higher wages, as was common in previous eras, but captured in business profits.

Figure 3. INTERACTIVE Productivity Rises as Wages Stagnate
The Productivity-Compensation Gap, 1979-2013

Figure 3

 Source: EPI analysis of unpublished total economy data from Bureau of Labor Statistics, Labor Productivity and costs program; employment data from Bureau of Labor Statistics, Local Area Unemployment Statistics; and Bureau of Economic Analysis, State/National Income and Product Accounts public data series.

 

Some of this growing wage gap is shaped by education: The median wage for those with less than a high school education has fallen by more than 20 percent since 1979 (the numbers here are for the West North Central Region, since the sample size is too small to yield results for just Iowa). The median wage for those with just a high school diploma has fallen slightly. And the median wage for those with a university education has risen about 20 percent. In 1979, in other words, the median wage for a worker with a university education was $6.84 higher than the median wage for a worker who had not graduated high school; today that gap has doubled to almost $14/hour.

Figure 4. Gap Widens, Stabilizes for College Wage Premium
Median Wage by Educational Attainment (West North Central States)

Figure 4Source: Economic Policy Institute analysis of Current Population Survey.

 

All of that increase in the college wage premium came from 1979 to 2000, however. The educational payoff has slowed in recent years; not even the college educated have seen real wage gains since 2000. In fact, the rewards of pushing beyond high school can no longer be taken for granted. In 1979-1981, about three quarters of Iowa’s low-wage workers (those earning less than $10/hour in 2012 dollars) claimed a high school education or less, and only about 25 percent had some college education or better. By 2009-2011, these numbers had nearly reversed: Just over 20 percent of low-wage workers came from the “less-than-high-school” cohort, and more than 44 percent had some college under their belts. (See Figure 5).

Figure 5. Education Rises for Low-Wage Workers in Iowa
Low-Wage Workers by Education, 1979-81 and 2009-11

Figure 5Source: John Schmitt and Janelle Jones, Low Wage Workers by State (Center on Economic and Policy Research, 2012), at http://www.cepr.net/index.php/blogs/cepr-blog/low-wage-workers-by-state

 

Underlying the weakness of wages and earnings — in Iowa and across the nation — is a dramatic decline in the quality of jobs. A nasty combination of recession, inflation, union decline, concessionary bargaining, and deindustrialization through the 1970s and early 1980s undercut wages for those at the median wage and below. As business refocused its managerial and political energies on cutting costs, the employment relationship itself began to deteriorate — not only with the losses of union coverage, but with relentless waves of downsizing and outsourcing. The patterns for the subsequent decades were clear: less security and job tenure, longer bouts of unemployment, more part-time work (much of it involuntary), more nonstandard “contingent” or “temporary” work arrangements.

This has been accompanied by a steady erosion of workplace benefits, so that real compensation has slipped even further. Employment-based health care has fallen off since its peak in the early 1970s, much more sharply for low-wage workers. And, as coverage has slipped so too has its quality: Premiums and out-of-pocket costs continue to run well ahead of inflation, especially for family coverage. And, while employment-based pension coverage has not fallen as steeply, the coverage that remains offers less value and less security. If we look to a higher threshold, the share of “good jobs” — those that pay a living wage, and offer job-based health and retirement coverage — we can see these trends clearly. In 1979, almost 28 percent of jobs met this modest threshold; in 2011, less than 25 percent did so — a decline that was even sharper for male workers (from 37 to 29 percent)

We can also see this playing out in the persistently high share of low-wage work. About one in four American workers are in low-wage jobs (those paying less than two-thirds of the median wage), a share that is growing — and easily the highest rate among our democratic and developed peers. In 31 states (as of 2011), more than a quarter of the workforce work at a wage insufficient to pull a full-time worker above the poverty level. Across our most recent business cycles, low-wage workers have suffered the brunt of economic downturns and enjoyed few of the fruits of economic booms or recoveries. Since 2007, the lion’s share of recovery jobs are in lower-wage occupations than those lost during the preceding recession. And projections of future job growth are heavily skewed toward low-wage service occupations.

Abetting all of this are remarkably weak labor market institutions and policies. The minimum wage — not raised in Iowa since 2008 — sets a meager floor at $7.25 per hour, far below levels that Iowa Policy Project research has demonstrated to be necessary for a family to meet a basic-needs budget. Workers lack voice or bargaining power. Employment standards are accompanied by little serious enforcement of those (overtime, minimum wages, tipped wages) that do exist. Indeed many public policies (in the form of contracts, concessions, and tax breaks) actively sustain and subsidize low wages and lousy jobs. In the face of both declining workplace benefits and the shrinking rewards of education and hard work, the broader promise of economic security has collapsed. Shared prosperity rests on policies and institutions (collective bargaining, a decent minimum wage, strong labor standards, etc.) that sustain the bargaining power of workers. In the absence of those institutions, only exceptional stretches of full employment have interrupted the failure of the wages, incomes and living standards of ordinary Iowans to benefit from the fruits of economic growth.

Next: Jobs >>>

  1. […] housing, food or energy assistance. ****  Iowa Policy Project, The State of Working Iowa 2014, https://stateofworkingiowa.org/wages-2/ # # # # […]

Comments are closed.

%d bloggers like this: