State of Working Pennsylvania 2013
A month ago, Pennsylvania received some good economic news: a landmark new study reported that upward mobility in the Keystone State since the late 1990s exceeded that in most parts of the United States. This report, focused on more recent trends, contains some bad economic news. It shows that Pennsylvania’s economy has performed poorly from the perspective of typical working families since the end of 2010. It also shows that wages have been flat for a longer period.
In the 32 months since 2010, ending July 2013, the state has experienced a gradual slowdown in job growth:
- From January 2010 to January 2011, the number of Pennsylvania jobs increased by 87,300.
- Over the next 12 months, job growth fell to 46,200, with a further decline to 35,000 in 2012.
- This year, through the month of July, Pennsylvania has created only 5,400 jobs.
Put another way, the state recorded as much job creation in the first full year after the end of the recession as it has in the subsequent two and a half years. (The trends in private sector jobs, detailed in the body of this report, are similar.)
Many states have not witnessed a slowdown in job growth since 2010. Pennsylvania ranked 46th among the 50 states for job growth since December 2010. This poor job growth performance is in line with, but slightly worse than, Pennsylvania’s performance compared to the nation and other states during the equivalent 32-month period in the last two economic recoveries.
Slowing job growth has resulted in persistently high unemployment in Pennsylvania. While the state’s unemployment rate was a percentage point or more below the national rate in 2009 and 2010, this Pennsylvania advantage has since disappeared.
Since 2010, Pennsylvania workers, similar to those in the United States as a whole, have also experienced a decline in their wages:
- In the bottom four-tenths of the wage distribution, Pennsylvania wages have declined by 4% to 5% since 2010.
- From the 50th to the 70th percentile wages have fallen by 2.5% to 3.8%.
- For most of the top third of the distribution (although not the 95th percentile), wages have declined by less or even increased slightly.
Since 2000, Pennsylvania workers — again similar to workers nationwide — have seen more than a decade of flat wages. Indeed, since 1979, a full third of a century, wages for median-wage Pennsylvania workers have increased (by about 10%) in only one half decade — the second half of the 1990s.
Wage stagnation has occurred despite steady productivity growth. Since 1979, according to new estimates provided by the Economic Policy Institute, Pennsylvania productivity has increased 61% — 15 times as much as the median wage.
With wages stagnating for most workers but productivity growth expanding the overall economic pie, it is no surprise that both top-end incomes have surged:
- Between 2010 and 2012, average CEO pay in the U.S. climbed by 15%. or by $1.7 million dollars.
- The top 1% in Pennsylvania captured 84% of all income growth between 2009 and 2010. (Both national data on top 1% income and Pennsylvania data on wage stagnation since 2010 indicate that the top 1% continued to garner the lion’s share of Pennsylvania income growth since 2012.)
As a new Economic Policy Institute report underscores, recent wage trends impede the U.S. economic recovery because middle-class families do not have the means to boost their consumption. Wage and employment trends that shrink the middle class also endanger the robust intergenerational mobility found in most Pennsylvania regions over the past half generation according to a powerful new study. (See Box 1.)
The conclusion of this report outlines a simple three-point agenda designed to increase middle-class purchasing power, accelerate Pennsylvania’s sluggish economic recovery, and revitalize upward mobility for the next generation — to revitalize the American Dream in Pennsylvania:
• Raise entry-level wages to $15 per hour.
• Invest in education from cradle to grave, which new research shows would boost long-run productivity growth as well as increase upward mobility.
• Enact policies that would increase civic engagement and voter turnout, especially among middle- and lower-income voters, who currently have lower rates of turnout than upper-income and more educated voters.
These recommendations represent a major departure from recent Pennsylvania public policies, which have reduced K-12 and higher education funding sharply, done nothing to promote higher wages (with some legislators advocating policies that would reduce wages further), and put in place a voter ID law now tied up in the courts but likely, if implemented, to reduce voter turnout among the less economically advantaged.
Policies, of course, reflect a state’s vision for the future. Current policies envision a Pennsylvania with slower economic growth, more income polarization, less opportunity, and greater civic disengagement that will reduce the middle class’s capacity to demand changes in policy.
What kind of Pennsylvania do you want?
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The rest of Keystone Research Center’s annual checkup on the Pennsylvania economy provides a comprehensive overview of employment, unemployment, wage, poverty, and income trends since 2010 — and in many cases over longer periods, sometimes as far back as 1979. While we offer our own interpretations of the trends, the report is deliberately data rich, with complete sources on where our information comes from, so that members of the media, policymakers, and the general public can examine the facts for themselves.