Utah’s wage levels — as measured by United States Bureau of Labor Statistics methods — are lower than the national average. But how much lower, I believe, is overstated. There are factors that need to be addressed that don’t show up in the statistics, yet heavily influence them. Exposing these factors will explain why Utah is lower than the national average and, I hope, make one more comfortable with Utah’s position.
One of the more often-cited wage measurements is average wage data from the Bureau of Labor Statistics (BLS). That data shows that Utah’s average wages are only 82% of the national average — the culmination of a slow and steady deterioration from the 96% average that Utah once enjoyed in 1981. Several years ago a fellow economist, looking at this data, asked me, “When will this turn around?” Something within that question instantly brought an answer to mind that I hadn’t seen before. My response, “Not in my lifetime.”
You see, I was born in 1958. I am a Baby Boomer. Keep that in mind. As for BLS and how it measures average wages, it is calculated by taking total wages earned in a quarter and dividing by total workers. Pretty simple. This can be done at the state level as well as the national level. In fact, it is Utah’s state average compared against the national average that produces the 82% shortfall. But that simple a calculation implies that all economies are equal. Experience reveals otherwise. Utah, I will show, is unique, and that uniqueness subtly underscores our statistics.
According to BLS, Utah has the highest percentage — 25% — of part-time employment in the nation. The way BLS calculates average wages — which makes no adjustments for full-time or part-time employment — means Utah naturally is going to be negatively impacted. That’s one uniqueness. But the bigger uniqueness comes within Utah’s demographic structure. We are the nation’s youngest state, with the nation’s youngest labor force. To enumerate, 47% of Utah’s labor force (age 16-65) is 35 years of age and younger. No other state tops 40%. The national average is 36%. Utah stands alone.
That national average is Baby Boomer dominated. They are in their prime earning years. Survey a room full of 30-year-olds (a proxy for Utah) and a room full of 50-year-olds (a proxy for the national average) and calculate the average wage. Bet you find the room full of 50-year-olds has a higher average wage than the room full of 30-year-olds, due to tenure, experience, and advancement. That’s the light bulb that clicked in my mind. It’s not so much a wage problem, it’s an experience shortfall.
Baby Boomers have dominated the national statistics from the time they entered the labor force in totality in the 1980s to their yet-to-happen labor force exit. Twenty-five years ago, when we Baby Boomers were the same age as Utah’s perpetually young population, Utah’s and the national averages were nearly equal. As we Baby Boomers aged and Utah’s high birth rate kept it young, average wages diverged as Baby Boomers became experienced and earned more. Unlike the nation, Utah birthed a second baby boom in the 1980s, and those young workers now impact heavily upon Utah’s average wage calculation. The U.S. aged while Utah stayed young. So as time progressed, Utah’s relationship to the nation moved down to 82%. Until the Baby Boomers no longer dominate the national picture, Utah’s wage in relation to the nation’s will not change, “in my lifetime.”
12 responses so far ↓
1 David Stringfellow // Jun 6, 2008 at 12:20 pm
Aggregate statistics are wonderful, but they often don’t tell people the right story. The average wage in Utah is one case in point. The change in the average wage over the last 25 years has more to do with demography than it has to do with wages. Mark has done an excellent job in explaining why the statistic looks the way it does. In a country with tremendous mobility of workers, should we expect anything less? I argue no. I hope this informs the many specious arguments for raising the wages of certain groups of workers just because as a group they earn 80% of the national average. As an example, I attended a Kaysville city meeting where the city administrator argued vigorously to the city council for a steep increase in funding for employees - the justification was that cities of similar size throughout the country on average pay their workers 25% more…
2 Steve Kroes // Jun 6, 2008 at 1:13 pm
David,
Glad to see you here! Do you have any insights on why so many people disagree with these statistics showing us closer to the average than we commonly think? For example, if you read the comments on KSL’s story about this brief from last night, it seems like 90% of the people commenting have an anecdote about making less money here than elsewhere.
Is it because we compare ourselves to people in California where incomes are higher? If that’s the case, it’ s an unfair comparison, since California is not the “average” state.
3 Mark Knold // Jun 6, 2008 at 1:48 pm
Steve, I have run across the attitudes and comments that you have cited in your feedback to David also in the past. You can always find expections to the overall picture, whether in a positive direction or a negative. The ones who experience the negative direction have anger attached to it, while those experiecing the positive have contentment. Anger stimulates lashing out and commenting. Contentment stimulates no response at all. I have found when you read any comment board in relation to any subject or issue (check the local papers for this on many subjects), the overwhelming majority of the comments are either negative or against. I have concluded that the anger on the negative side spawns the need to comment, so therefore the comment pool that gets generated will always have an “anti” bias to it.
Also, I do find that many of the comments are from those who come from California, where naturally wages are higher. But so is the cost of living, and that usually doesn’t show up in their comments or analysis.
4 David Stringfellow // Jun 6, 2008 at 2:07 pm
As a social scientist I looked at the posts and would describe the 90% concentration of comments decrying the wage level in Utah as small sample or self selection bias. There are more than 1 million workers in Utah, at the time I read KSL’s posts there were 103 comments.
More broadly, the accuracy of people comparing their own wage to what they think they would get paid in another state for the same work is likely fuzzy.
Your point about comparison to California has broad implications about relative wages - the cost of living in many areas of the country is significantly different from that in Utah.
Apart from those factors, economic theory holds out a seemingly bold predicition regarding the labor market’s relative wage level in Utah and the rest of the country - they are the “same” after adjusting for the millions of variables (not just age, experience, education…but preference for mountains, living close to family networks,…) impacting the supply and demand of labor.
To believe that there is some kind of Utah wide bias impacting our wages realtive to the rest of the country would be oddly conspiratorial (especially since we would have to be biased against ourselves for it to work).
5 Steve Kroes // Jun 7, 2008 at 4:50 pm
OK, Mark, but I don’t want to inhibit comments here by labeling commenters as negative!
6 Chris Douglas-Roberts // Jun 8, 2008 at 7:46 pm
Mark: I find it interesting that Utah is one of the youngest states in terms of working age demographics. Does this have any impact on Utah’s ability to retain hardworking, upwardly mobile employees? It would appear that these individuals tend to go out of state once they become successful or gain marketable skills, especially when there is such a demand for younger workers in the rest of the U.S.
7 Mark Knold // Jun 9, 2008 at 12:09 pm
Chris: It is quite inevitable that Utah will lose some of its young educated workers to other states. The primary reason being that the Utah economy (any economy for that matter) is unable to expand at a fast enough pace to absorb the large volume of Utah-born new young workers (especially the volume coming in throughout this decade).
If you look at the Utah population age tree in the Foundation report, look at the width of the 35-39 age branch. Then look at the expanded width of the 25-29 branch (even the 30-34 width also). This gives a graphic illustration of how much the Utah economy had to expand to be able to accommodate all of these new workers. It just doesn’t happen overnight. Utah gave it a good shot once the overall economic environment improved in 2004, evidenced by close to 5% employment growth rates in 05, 06, and 07. But the economy can only expand so fast, and it usually can’t expand fast enough to accommodate all of these new workers. So there is a natural and expected amount of these young Utah workers who will HAVE to look elsewhere. In other words the inflow of the SUPPLY of labor exceeds the creating and expanding DEMAND for labor.
Utah does have a strong and unique cultural foundation, and what we have observed throughout time is that a number of these young Utah workers may leave and work in other states for some time, but there are many who, when they reach their 30’s, work their way back to Utah, to be closer to family and culture. That serves as somewhat of a counterbalance to losing them at a younger age.
As for older workers who might go elsewhere, that’s inevitable too. Labor is very mobile and we all envision that things are “greener on the other side.” Yes we can lose older Utah workers to other states, but we also have workers from other states leave their states and come here. I had an e-mail from an older worker a few weeks ago who said he landed a job in Utah making California wages while now living with Utah’s lower cost of living. He was quite happy.
Here is something I have noticed in new data recently developed by the Census Bureau. This data allows us to compare the overall pay levels of most states by ten year age groups (15-24, 25-34, 35-44, etc.). Here is what I have noticed. Utah’s young age groups are paid less than are the same age groups in other states. But when you get to the 45 and over age groups, Utah pays these older workers at or above the other states. That made sense to me and here is how it works, nothing more than natural supply and demand. If you have an excess of something, you pay less for it. If it is in short supply, you will pay more for it. In Utah, we have a glut of young workers. Therefore, businesses don’t have to pay as much for younger workers in Utah as is necessary in other states who don’t have as many younger workers. Conversely, those states have an excess of older workers and Utah does not. Therefore, Utah businesses have to be more aggressive in their pay offerings to older workers because they are in shorter supply here in Utah than in other states. Nothing more than simple supply and demand at work.
The problem is Utah has so many more younger workers than it does older workers that the volume of young workers and their wages overwhelms the volume of older workers and their wages. That is why our Utah wage statistics are low in the national comparison.
I have attached a web link to an economic profile I did of Utah about a year ago (it needs to be updated). But look at the last slide (may take a while to load; grab the scroll bar on the right and drag it to the bottom). It will give an illustration of what I am talking about.
8 Steve Kroes // Jun 9, 2008 at 3:21 pm
Mark,
Very cool info in the slide show. I like the info you just explained about the earnings of different age groups, too. Thanks for providing that additional insight.
One question I have is this: do Utah companies have problems finding enough experienced managers, since we have a smaller percentage than the U.S. of people in those middle to upper working-age groups? You mentioned that Utah firms have to pay more to get them, but is there any notable concern or complaining in the business community that they can’t find those managerial workers even with the better pay?
9 Mark Knold // Jun 10, 2008 at 11:57 am
Steve, I don’t have a close enough pulse with the business community to answer with impunity yea or nay on the having-trouble-finding-managers issue. Most of what I get or hear is anecdotal comments about labor shortages, and middle or upper managers don’t usually come up during that discussion. I’m assuming that even if companies need to bring in managers from out of state, that it isn’t a problem.
10 Bill Winner // May 11, 2009 at 9:29 pm
Depends on who you’re asking .I live in St. George, Our median income is 32K per year, about 30 percent lower than Salt Lake and about 10K less than Denver. Yet Companies out here continue to outsource jobs and insource illegal aliens(yes some of us Americans can read Spanish and watch for the help wanted ads in the
throw away papers from the grocery store.).I saw this article, because if you say anything you are a hippy liberal( I happen to be a conservative
LDS member) however, Our cost of living is about 10 percent lower than Salt Lake, in other words, the amount of disgressionary money , that many families have, is dwindling. I just quit a job that I was making minimum wage at. I often worked more than 40 hours a week and did’nt get overtime. When I quit, my bishop said I should have gotten something first. (my wife also told the bishop that I had been cheated on my last 2 checks and then he understood. If we are not careful it will be like it was in the depression. People will continue to work for less and less. The upward mobile in our beloved state do not comprehend this. Yet even in Salt Lake the number of hurting individuals and families continues to soar. I love Utah and I believe we will prevail.Nonetheless, to do so we need to find a way to “spread the wealth”, without socialism. That will come by keeping jobs in Utah, and matching wages to the cost of living. More money means more spending , so on and so on. Simple yes, please do it now!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-from a man who is making less money than he did 20 years ago( and yes I went to college and I am 51 years old)
11 Ryan Cooley // Jun 1, 2010 at 9:33 pm
Not to burst anyone’s bubble, but the average wage in the US is not about $54K/yr. Pretty low when you think about the cost of owning a home being almost half that (sadly it should be more like 25%, for those who are actually budgeting correctly, but who can these days?)
Utah’s average wage in 2009 was about $38K/year. Anyone else see a difference of around 70%?
Also, so how do our baby boomers match up to other baby boomers nationally? I’m just curious? Last I checked, the last of them were just about set to retire.
Still, you can check other facts around the country by checking the average starting wages for jobs around the country at salary.com. You’ll see the discrepancy is smaller, but it’s still there. For example, for the position I’m in, Utah wages in Salt Lake County are 96% of the national average for starting wages. It’s still lower, and will probably always be lower since Utah has one of those “steady” economies that never really enjoys any “booms” let alone much in the way of increases. But it also usually weathers most lulls pretty well also, with jobs still managing to remain below the national average.
12 Ryan Cooley // Jun 1, 2010 at 9:35 pm
I should also mention that while we have one of the lowest wage averages nationally, we also enjoy a cost of living around 110% of the national average. Guess that means we’re all either living beyond our means or our means are in such high demand that it has outpaced our ability to pay for it.
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