by Brian Kennedy and Dr. Patrick Jones
Income distribution is an important topic to watch because it can shed light on a lot of different socio-economic topics within a community. Is there a large concentration of low wage occupations? Has there been a hollowing out of middle-class job opportunities? The measure can also be used to determine whether economic development efforts are effectively courting new industries that provide higher paying jobs. Whatever your motivation, looking at the breakdown of jobs by earnings range over time can be a tool to understand the local economy.
The Spokane metro area has long occupied an economic niche of a regional service provider to its largely rural surroundings in Eastern Washington and Northern Idaho. This niche is expressed in a labor force showing a strong backbone of education, government, healthcare, retail trade, and financial workers. As the area economy evolves, competitive and diverse wages are critical, not only for improving the lives of current residents but also for enticing new talent to relocate here. In Indicator 2.4.7 we can track how the share of jobs based on their earnings range have changed in the last few years.
The graph presented shows a breakdown of jobs by three earnings brackets; under $30,000, as this is a good measure that shows individuals working but essentially at the federal poverty line; $30,000 to $50,000 for those that are in the middle tier, falling just below the average annual wage in the region; and those jobs sitting above the average annual wage, at $50,000 or more.
Over the four years measured, the share of jobs paying under $30,000 has shifted down in the Spokane metro area. What might be driving this? Is the evidence pointing to wage increases among the lower earners or are businesses simply hiring more individuals in the upper earnings brackets? While it is likely that a little of both forces are at play, the data seem to lean on employment growth in high wage occupations.
The graph shown here incorporates employment levels in all occupations throughout the Spokane Metropolitan Statistical Area, or Spokane MSA, (comprised of not only Spokane County but also Pend Oreille and Stevens Counties) and segments them out by earnings range.
Over the past four years, one can observe that the shares of Spokane MSA jobs have been shifting away from the lowest paying occupations. In 2016, nearly one in three jobs (about 30%) held by area residents reported annual earnings of $30,000 or less. That was double the statewide average, at about 14%. Moving into the more recent data (2019), we can observe that share halved to just 11.8%, or roughly on in every 8 jobs. Mathematically, if one share is falling the others should be rising. Here we see that about two thirds of those jobs went to middle earnings bracket of $30,000 to $50,000, growing by about 30,000 jobs or eleven percentage points, and the reminding third went to the higher income bracket over $50,000, growing by nearly 20,000 or seven percentage points.
If jobs are shifting to the middle and upper end of the earnings spectrum, what is occurring? Is there substantial wage growth in the lower wage occupations pushing once lower earning individuals into the higher brackets or has there been higher employment growth in the upper end?
The graph reveals in fact, that there more jobs being added to the middle and upper earnings tiers. From 2016 to 2019 the compound annual growth rate for the number of jobs earning $30,000 to $50,000 was 8%. The metro area added a little more than 30,000 jobs in this pay range. Similarly, workers in the upper end grew by 7%, adding nearly 20,000 jobs. On the flip side, the number of jobs supporting annual earnings of less than $30,000 fell by a compound annual rate of 19% and contracted over 35,000 jobs.
It would appear that employment growth in the upper annual wage tier is main driver for the change over the past four years. Could it be, however, that within those occupations individuals are simply earning more in 2019 than in 2016 and that these higher wages are pushing jobs that once paid under $30,000 over the threshold into a new earnings bracket?
Comparing the weighted average of the earnings of all occupations within the three tiers between 2016 and 2019 provides some insights into what has transpired. While there was quite a lot of variation of earnings changes across the occupations, there was limited mobility within the earnings ranges. In 2016 the weighted average earnings for those jobs paying an annual average under $30,000 was $26,569. By 2019 that had only shifted up slightly to $27,749. This indicates that the number of jobs is still fairly concentrated on the upper end of the earnings bracket.
While the earnings for the lower wage professions were increasing modestly, the same can’t be said for the middle and higher earners. For those jobs in the $30,000 to $50,000 range, the weighted average of annual earnings was $38,521 in 2016. By 2019 that had fallen slightly to $37,089. Those earning over $50,000 did fall as well, but only ever so slightly from $73,592 to $72,945.
This seems counter to the trend happening on Indicator 2.1.4, which depicts the overall average annual wage. The graph illustrates that the overall average annual wage has continued to rise from 2016 to 2019, increasing by nearly $6,000 to just over $50,000. The conflicting trends of falling wages in the middle and upper tier occupations suggests that the number of additional jobs that have been added have fallen above the overall average wage but below the $72,945 upper bracket average. In fact, 8 of the top 10 growing occupations fell within this band earnings band. These occupations include jobs such as accountants and auditors, buying and purchasing agents, kindergarten teachers, carpenters, mobile heavy equipment mechanics, and other computer occupations.
So, what does that all mean and what do these comparisons show? They indicate that wages within the middle and upper tier occupations didn’t really show signs of increasing wages. If the weighted averages had shifted up one could infer that individuals in these occupations would have seen their earnings increase. Given that the share of employment in these earnings brackets increased but the earnings stayed relatively the same, implies a quantity response: more jobs were added in these earning brackets although they were paying similar wages as they were back in 2016.
Despite the evidence leaning towards employment growth in higher wage occupations with wages staying relatively stagnant across occupational data, this isn’t entirely bad news. As new jobs are added at higher wages, businesses will start to compete for workers, implying higher wages in the future.