Wages stagnate, benefits decline, study shows
HARRISBURG – Most Pennsylvania workers, like those nationwide, have seen wages stagnate and benefits drop over the last five years even as companies are posting record profits, according to a Harrisburg labor think tank. The Keystone Research Center, a non-profit researcher of economic and workforce issues financed, in part, by labor unions, released its annual “State of Working Pennsylvania” in time for Labor Day.
The report shows the national economy has climbed out the 2001 recession, with a 16 percent growth in company profits last year and a 17.7 percent growth in productivity since 2000.
But the benefits are not reaching most Pennsylvania workers. The median hourly wage, adjusted for inflation, dropped 2.3 percent from 2004 to 2005, from $14.55 an hour to $14.21.
The drop comes after workers received a 1.9 percent growth in wages since 2000, a reversal of fortune since the late 1990s economic boom. Median family income in Pennsylvania fell 7.2 percent from 2000 to 2004 after rising 14.5 percent from 1995 to 2000, according to the study.
At the same time, a five-year trend shows benefits have been cut. In the case of employer-based health insurance by 4.8 percent after an eight-year rise (although 2005 saw a slight increase). Pension coverage by employers declined by 6.4 percent in Pennsylvania during that time.
“Clearly gas costs and health care costs are part of what’s driving wages down but it’s not just that,” said Stephen Herzenberg, the author of the report and center’s executive director. “It’s a story about employers feeling they do not need to increase wages so they’re not.”
Why?
Herzenberg attributes workers’ problems to a soft labor market made worse by long term trends in the loss of good-paying manufacturing jobs, global trade, immigration keeping wages low, and the decline in unions.
“Policies tend to be about overall growth and with the assumption that overall growth will translate into increased living standards for average folk,” he said. “The data is clear that’s not true.”
Pennsylvania Chamber of Business and Industry Spokesman Gene Barr hadn’t reviewed the Keystone study, but agreed that stagnant worker salaries are due, in part, to a replacement of manufacturing jobs with lower-paying service sector positions.
“We’re just creating more jobs that don’t pay as well,” he said.
But Barr added that company profits tend to be cyclical, and Pennsylvania is losing out in business competition. A recent Forbes Magazine analysis ranked Pennsylvania the 41st state in the nation in its business climate.
Even education, once the ticket to better salaries, is not translating into salary hikes. Over the last few years wages have stagnated or dropped for college educated workers, according to the study. The median wage of a college graduate in Pennsylvania fell from $22.76 per hour in 2002 to $21.72 in 2005.
Wages for Pennsylvania workers with a high school education fared slightly better, with an 11-cent drop, from $12.70 in 2002 to $12.59 in 2005.
The stagnation is reaching all income levels except for the top 95th percentile where CEOs incomes sit. That level showed a 0.3 percent growth in Pennsylvania in 2004 to 2005, and a 0.6 percent growth nationwide. The average CEO earns more in one day than the average U.S. worker earns in a year, Keystone said.
Barr said CEO salaries are also subject to the labor market.
“If you reduce a CEO wage by $100,000 and spread it out over a 5,000-person company, you’re not going to get that much and you’re not going to have the skills that will make the company competitive,” Barr said.
Pennsylvania seems to mirror a nationwide trend that’s beginning to get some attention with the latest government economic and census data.
Wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
The Keystone Research Center used federal labor statistics, census numbers, Pennsylvania Department of Revenue data and analysis by several national think tanks to put together its report, including the Brookings Institute and the Economic Policy Institute.
“We’ve got to dig our teeth into what’s really going on that leads companies not to share the benefits of productivity growth,” Herzenberg said.
The Associated Press contributed to this story.
Alison Hawkes can be reached at 717-705-6330 or ahawkes@calkins-media.com