February 9, 2015 | By Richard C. Longworth

Midwestern Wages–Flat As A Midwestern Landscape

It’s no news that most Americans aren’t sharing in this country’s economic growth. Even when the overall economy grows, as it does most years, almost none of that growth ends up in the pockets of the nation’s workers.

Some new statistics from Adam Belz, economics reporter for the Minneapolis Star-Tribune, give vivid evidence of how bleak this situation is. Belz (contact him at adam.belz@startribune.com to join in) runs an invaluable daily aggregator of news, mostly economic and mostly Midwestern, but also including anything that strikes his wide-ranging interest.

Right now, he says he’s working on a story about why wages aren’t going up more for workers. The story has yet to appear but he’s posted some statistics and given me permission to use them here.

The upshot is that median wage growth for American workers, adjusted for inflation, has been basically flat – less than 1 percent per year, mostly less than half a percent per year – for the first 14 years of this century. This holds true for almost every state except for oil-booming North Dakota: even there, the recent plunge in oil prices is likely to bring wages back to earth pretty soon.

Apart from North Dakota, the statistics from Midwestern states are particularly grim. Wages actually shrunk since 2001 in only two U.S. states and they’re both Midwestern – Michigan and Indiana.

Over the 13-year period, wages in Michigan fell 3.7 per cent, or by an average of 0.3 per cent per year. Wages in Indiana declined by 1.8 percent since 2001, or an average of 0.1 percent per year. In both states, the cause is certainly the decline in the U.S. auto industry: if the national recession began in 2008, it hit Auto Alley a decade earlier.

In both states, the decline in wages was concentrated in the first decade of the century. In both, wages,  like the auto industry itself, have rebounded in the past two or three years, but only modestly – about 0.1 per cent per year.

Otherwise, the returns from Midwestern states are much the same, and make sad reading. In this century, workers in Illinois, Wisconsin and Minnesota gained 0.2 percent per year: in Ohio, 0.1 per cent per year, and in Missouri, absolutely nothing – 0.0 percent per year.

Iowa was a relative bright spot, with gains of 0.6 percent per year, or 7.8 percent total wage increase since 2001. It should be noted, however, that this still leaves Iowa with the lowest per capita median income in the Midwest, only $780 per week, if Great Plains states such as Nebraska and South Dakota aren’t counted. Iowa’s weekly income of $780 places it 41st in the nation, not far above such southern backwaters as Arkansas and Mississippi.

Indiana, incidentally, ranks just above Iowa, in 40th place nationwide. But because of its wage decline in recent years, its weekly wage of $784 is only $4 above that of Iowa. Given Iowa’s growth rate, Indiana is now probably the poorest state in the Midwest.

Belz’s statistics cover both the last five years, since 2009, and the last 13, since 2001. The recession fell in between. For the most part, wage increases since 2009 are marginally higher, reflecting both the recovery from that recession and the degree to which workers didn’t share in the pre-recession prosperity of the Bush years.

As mentioned, these wage figures are all adjusted for inflation. Belz also included statistics for selected states for wage increases before adjusting for inflation.

So wages have been rising – but generally just barely enough to keep pace with inflation. Most workers have seen their wages go up a bit, in terms of what they will buy. If these workers feel that they’ve been working hard since 2001 but haven’t got ahead, they’re right.

(Remember, these statistics reflect wages, which means they only count workers who are actually working. These days, the labor force participation rate – that is, the percentage of people of employable age who are actually working – is at its lowest level since 1978: for men, it’s lower than it’s ever been.)

It’s interesting to compare these wage statistics with the economy’s growth. The statistics for wages before accounting for inflation are given above: here’s the annual growth rate in gross domestic product, figures on the same basis: the source is the U.S. Bureau of Economic Analysis.
  • 2001 – 2.19%
  • 2002 – 3.76%
  • 2003 – 6.42%
  • 2004 –6.31%
  • 2005 – 6.52%
  • 2006 – 5/12%
  • 2007 – 4.4%
  • 2008 – minus 0.92%
  • 2009 – 0.11%
  • 2010 – 4.56%
  • 2011 – 3.64%
  • 2012 – 3.47%
  • 2013 – 4.57%
  • 2014 – 4.05%
Overall, the nation’s gross domestic product, in real terms, has grown 21 percent since 2001, and 10 percent since 2009. Nationally, wages have gone up 3.9 percent since 2001 and 1.7% since 2009.  

About

Richard Longworth is nonresident senior fellow on global cities at The Chicago Council on Global Affairs and author of On Global Cities and Caught in the Middle: America’s Heartland in the Age of Globalism, on the impact of globalization on the American Midwest. He also was a distinguished visiting scholar at DePaul University and adjunct professor of international relations at Northwestern University, and is a mentor at the Harris School at the University of Chicago.

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