The State of Working Pennsylvania 2015

Authors: 
Mark Price
Authors: 
Stephen Herzenberg
Publication Date: 
September 2, 2015

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Executive Summary

The release of July’s job numbers (the latest available) for Pennsylvania did not generate much attention: the unemployment rate remained unchanged at 5.4% and total nonfarm jobs were up by a respectable 8,000 jobs. Buried in the numbers, however, was some better news than Pennsylvania has had in some time: over the past year Pennsylvania created 66,500 jobs, an increase of 1.1%. That pace of growth ranks Pennsylvania 34th out of the 50 states. That’s roughly the average Pennsylvania rank since 1990: but it’s the best 12-month performance in July since 2011, when the state ranked 26th.

Pennsylvania’s job growth is back to normal!

That’s not the kind of headline that sells newspapers or, in this digital age, gets retweets and favorites. And even this modest improvement is currently at risk: just as Pennsylvania has shaken off the economy-wide impact of the loss of 33,000 jobs in the education sector thanks to budget cuts in 2011, the state’s new Democratic governor and Republican-led House and Senate remain, as of September 3rd, locked in a standoff over the 2015-16 state budget. 

Every week that the budget deadlock continues increases the risk to the state’s economy. All Pennsylvania public schools and many service providers receive a portion of their operating budget from the state. Without a state budget, these schools and service providers have to dip into their cash reserves to meet payroll and pay vendors. When those funds run out, furloughs will follow. Those layoffs and the resulting reduction in consumer spending could throw the Pennsylvania economy back into neutral.

This year’s The State of Working Pennsylvania finds that this new threat to the state’s economy comes at a time when there is substantial excess capacity in the Pennsylvania labor market. As of July, the share of the working-age population with a job stood at 59.3% — just over two percentage points below the level before the Great Recession.  The situation is no better for prime-age workers (25 to 54 years of age), 77.4% of whom had a job in the most recent year, which is almost 3 percentage points lower than before the Great Recession.

To examine monthly job growth since the late 90s in your county and metropolitan area go to http://goo.gl/QdJkFS   

If the Pennsylvania labor market were close to full employment (as it was in December 2007) there would be 226,000 more people in the commonwealth with a job than there are now. This “job deficit” exists because the monthly pace of job growth in this expansion, 4,100 jobs per month, is only just over half the pace of the late 1990s when the Pennsylvania economy added, on average, 7,400 jobs per month.

Slow job growth and a labor market still short of full employment have resulted in stagnant wages and little growth in income in Pennsylvania. Real wages for the typical (median-wage) Pennsylvania worker are down 2% since 2001.  That loss in real earnings doubles (to 4% to 5.1%) for the bottom 30% of workers. The bottom 70 percent of Pennsylvania workers have also seen their wages decline in the current economic recovery, between 2009 and 2014.

Falling real wages for the majority of workers have been accompanied by the breathtaking growth in the gap between the incomes of most families and the highest earners (CEOs, financial executives, and other high earners in the private sector). While market incomes (income before taxes and transfers such as unemployment insurance payments) fell 5% for the bottom 99% of Pennsylvania families since 2001, the top 1% have seen their real market incomes climb 27%.

To examine the change in income for the top 1% and bottom 99% in your county and metropolitan area go to http://goo.gl/HlQc42

Wage and income trends since 2001 contrast with Pennsylvania’s economic performance from 1997 to 2000, when an economy close to full employment and enjoying rapid job growth generated a 6% increase in real earnings for the typical Pennsylvania worker and boosted earnings for the bottom 30 percent of workers by 9% or more.  Market incomes for the bottom 99% of families in the late 1990s grew 9.1%. Although income growth was more broadly shared in the late 1990s, the top 1% of Pennsylvania families still managed to enjoy a greater rise in market incomes of 19.2%.

In order for the majority of Pennsylvania families to see real income growth in the years ahead we will need a combination of faster job growth and economic policies that actively seek to raise wages for more workers.   

Some specific policies that could achieve this combination include:

  • Pennsylvania can raise the wages of 1.2 million workers by increasing the minimum wage to $10.10 per hour. (See the number of workers impacted by county and metropolitan area here http://goo.gl/ORvzvJ)
  • Policymakers in Washington, D.C., are in the process of updating the rules that govern overtime (the requirement that workers be paid 1.5 times their regular pay rate for each hour of work per week beyond 40 hours) for salaried workers. The weekly salary below which salaried workers automatically qualify for time-and-a-half would rise from $455 per week to $933. This proposal would make 493,000 more Pennsylvania salaried workers eligible for overtime. On an hourly basis this rule change would extend overtime protection to workers currently earning between roughly $11.50 and $23 per hour, a substantial part of Pennsylvania’s middle class.
  • Pittsburgh and Philadelphia have enacted earned sick leave, which guarantees workers a certain number of paid sick days for each hour worked. Legislation has been introduced in the Pennsylvania Senate that would entitle all workers in Pennsylvania to accrue one hour of paid leave for every 30 hours of work up to seven days of earned leave each year. This legislation would benefit well over one million Pennsylvania workers.
  • The Federal Reserve should NOT raise interest rates until the national economy is much closer to full employment, and there is actual evidence (currently completely lacking) of a threat of inflation.
  • The Wolf Administration should develop a comprehensive action plan to achieve its goal of more “jobs that pay,” spelling out specific executive and legislative actions that will lift wages and incomes for the Pennsylvania 99 percent by 10 percent by the year 2018.

By lifting wages, these policies will also create more “economy-boosting jobs,” fueling consumer demand and generating a virtual circle of faster job growth, falling unemployment, and continuing wage growth.

In sum, our message to Pennsylvania policymakers this Labor Day is two-fold: first, “do no harm” – enact a sustainable state budget NOW that reinvests in education, communities, and jobs, and avoids a repeat of the economy-sapping budget mistakes of 2011.

Second, do some good: enact policies that will lift wages and incomes starting, in Pennsylvania, with a minimum wage increase.

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