Wages Increase …But So Does Inflation

From 2006 through 2016 the average wage – including full- and part-time jobs – increased 20 percent in Benton County, 21 percent in Clatsop County, 16 percent in Columbia County, 27 percent in Lincoln County, and 27 percent in Tillamook County. That seems pretty good, until we remember that inflation increased also during that time. After adjusting for inflation, real wages fell 1.6 percent in Benton County, 1.1 percent in Clatsop County, and 5.2 percent in Columbia County. Wages rose 4.0 percent in Lincoln County, and 3.4 percent in Tillamook County over the 10 years.

The drop or modest growth in inflation-adjusted wages contrasts with the fact that output per worker probably increased considerably over the time period. There is no data for productivity in these counties, but nationally the output per hour for nonfarm business workers increased 12.6 percent from 2006 through 2016 – much more than the change in real wages.

Reverse Lake Wobegon Effect

Average wages in all five counties are less than the statewide average wage and Clatsop, Columbia, and Lincoln counties lost ground in comparison with the state in 2016.

In years past, only a few counties managed to have average wages that exceeded the statewide average. In 2014, Benton County slipped under the statewide average. This left four counties, Clackamas, Morrow, Multnomah, and Washington, with average wages that were more than the statewide average. The three metro counties recovered more quickly from the recession and have many high-tech, executive, and finance jobs that pay well. The result is a reverse Lake Wobegon effect; 32 of Oregon’s 36 counties are below average when measuring wages.

The Brighter Income Picture

Northwest Oregon typically fares better when it comes to per capita personal income. Income includes rental income, dividends, interest, and transfer payments in addition to earnings. Total income is divided by the total population to get per capita income. These additions to earnings tend to level the playing field a bit between Oregon’s counties.

Per capita personal income from 2005 through 2015 (the latest year available) grew by 25 percent in Benton County, 37 percent in Clatsop County, 35 percent in Columbia County, 33 percent in Lincoln County and by 36 percent in Tillamook County. After adjusting for inflation, however, these growth rates fell to 1.0 percent for Benton County, 11.1 percent for Clatsop County, 9.3 percent for Columbia County, 7.3 percent for Lincoln County and 10.4 percent for Tillamook County. Oregon’s inflation-adjusted per capita income grew 9.2 percent over the period.

Although all five of the counties had per capita incomes that were less than the statewide per capita income, all but Benton County had incomes closer to the statewide per capita income than their wages were to the statewide average wage. Said another way, average residents in Clatsop, Columbia, Lincoln, and Tillamook counties are more like the average state resident in income than in wages.

Benton County is the exception when it comes to per capita income. Benton County’s per capita income was about $1,500 below the statewide average in 2014. It fell to about $2,100 behind the state in 2015. Although the level of per capita income increased from 2014 to 2015 in Benton County, its position relative to the state average fell.

Trends

Two trends in per capita income work to offset the lower wages found in the counties. The first is the increase in transfer income coming into the counties, the second is demographic change. Transfer income includes Social Security, disability, veterans’, and Medicare payments. Inflation-adjusted per capita transfer income grew by 39 percent in Benton County, 50 percent in Clatsop County, 63 percent in Columbia County, 37 percent in Lincoln County, and 41 percent in Tillamook County from 2005 through 2015. Growth in transfer income is much faster than in most other types of income.

The demographic reason income is relatively higher than wages is that the counties tend to gain workers and lose children – who usually don’t work. So even though jobs may not be high paying, if a higher percentage of the population is working or receiving retirement income then the average income per person will go up. This trend of increasing per capita income may change as baby boomers retire from the workforce and their grandchildren are born, but so far it is holding.

In short, the two measures of financial well-being describe slightly different things. Average wage describes the quality of jobs in an area, and per capita income describes how financially well off a population is. Jobs in northwest Oregon pay considerably less than average in Oregon, but northwest Oregon’s population is closer to average financially because many people are working or receive money from government social security programs.

Education and Earnings

Two major influences on people’s income and wages are their occupation and their education. Occupational wages are the subject of another article on www.QualityInfo.org. The effect of education on earnings and unemployment is shown in the accompanying graph.

Many of the skills in demand by employers are acquired through education, an observation confirmed by data compiled by the U.S. Bureau of Labor Statistics. In general, the more education a person acquires the more skills they attain and less competition they have in the labor market. As the chart shows, someone with a bachelor’s degree earns more than twice as much on average as a person without a high school diploma. The large relative jumps in earnings occur in attaining a high school diploma (+38%) and a bachelor’s degree (+48%).

Also note that the unemployment rate varies dramatically when educational attainment is considered. In 2016, the U.S. unemployment rate for those ages 25 and older with a bachelor’s degree was 2.7 percent. At the other end of the scale, jobseekers who had not completed high school faced tougher job prospects; their jobless rate was 7.4 percent in 2016.

Information provided by worksource Oregon