Is Utah still a low-wage state? Through the years, our low wages and hardworking workforce attracted call centers and other operational centers. While we appreciate the jobs, we need household-sustaining salaries. In light of our low unemployment rate (3.1 percent in December 2017), it’s puzzling that wage growth has lagged the return of jobs after the Great Recession. The reasons for this are more complex than can be seen on the surface.
Carrie Mayne, chief economist for the Utah Department of Workforce Services, said, “When you think about wage data and wage measures, they are all about averages. What does the average Utah worker look like compared to the average worker elsewhere in the U.S.? What we immediately think of is the age of our workers. In Utah, we’re likely to have younger workers. Younger equals less experience and education, as well as less tenure with a company, so of course you’ll have lower wages. The low-wage story in Utah is really about the demographics of Utah’s workforce, specifically age.”
Moreover, Mayne says that the Great Recession created a huge reservoir of people looking for work. “That was a dynamic in our economy that we hadn’t seen since the Great Depression. It created a glut in labor supply … and kept wages depressed for quite some time.” She continues, “There was a lag in the markets while they adjusted to that expansionary economy, and growth has now finally kicked in over the last 12 to 18 months.” Note our labor market had not been hit this hard since the Great Depression.
Juliette Tennert, director of economic and public policy research at the Kem C. Gardner Policy Institute at the University of Utah, explains Utah had a large number of people who had left the labor force altogether during the recession. “Over the last few years, these marginally attached workers were coming back into the workforce. It also took some time for wages to grow because of these people,” she says.
Sounding the same note as Mayne about Utah’s mix of employees, Tennert says “the baby boomers are leaving the workforce, and those folks are relatively high wage earners compared to those replacing them.”
The Department of Workforce Services regularly reportson Utah’s wages adjusted for cost of living variations among various regions of the country. “The adjustments … reveal that the absolute values of Utah wages are undervalued because Utahans have greater purchasing power relative to national averages.” The adjusted wages report adds another wage variable: “Further, it needs to be noted that purchasing power is an imperfect measure of quality of life. Residents of rural areas have made a lifestyle choice that is often independent of wages.”
There is good news. U.S. Census data show Utah’s 2016 inflation-adjusted (real) median household income is $65,977, which is $8,360 higher than the national average and puts Utah in a tie for 10th among states. Utah’s real median household income is higher than all states in the Intermountain West except Colorado. Moreover, Utah’s 2016 real median family income is $3,000 higher than the national average.16 comments on this story
Our tight labor market has put upward pressure on wages. Another factor is that Silicon Slopes companies have pushed Utah’s average wage up, which benefits not only tech workers but Utah workers as a whole. While wage growth has lagged hiring, it has been on the increase.
There are costs to growth in wages. As average pay increases, Utah will become less desirable as a low-cost labor state. We will undoubtedly miss out on some company relocations and expansions. Also, businesses will have to raise their prices to absorb increased labor costs. This contributes to inflation, as we’ve seen on the national scene lately.
The market is working in favor of employees right now. It’s high time Utah workers’ wages increased.