State of Working PA: Slowing Job Growth, Falling Wages Impede Recovery

PA, recognized recently for having high rates of upward mobility, could see a reversal unless policymakers respond to growing worker discontent and recommit to broadly shared prosperity
Date of Press Release: 
August 28, 2013

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Read the State of Working PA 2013

HARRISBURG, PA (August 28, 2013) — On the 50th Anniversary of Martin Luther King Jr.’s “I have a dream” speech and the day before fast-food worker protests are expected to spread to 35 cities, the Keystone Research Center released its new State of Working Pennsylvania report showing there is ample reason for discontent among Pennsylvania workers. Since 2010, job growth in Pennsylvania has slowed, wages have fallen across the board, and the number of poverty-wage jobs in the commonwealth has jumped by 11 percent.

“The silver lining here,” said economist and Keystone executive director Dr. Stephen Herzenberg, “is that a growing chorus of American workers have a dream of a different economy that pays workers at least $15 per hour. That economy is within reach and, our new report shows, badly needed.”

The State of Working Pennsylvania is Keystone’s annual review of how working Pennsylvanians are faring in today’s economy. It examines both recent and long-term economic trends.

This year’s report found that slowing job growth in Pennsylvania — even relative to the nation’s halting recovery — has meant persistently high unemployment. While the state’s jobless rate stayed a percentage point or more below the national rate in 2009 and 2010, this Pennsylvania advantage has since disappeared, with state unemployment at or above the national rate for most of the past year.

The report also found that in recent years — and over longer periods — most middle-class Pennsylvania families have seen their wages stagnate, even though productivity in the economy has grown.

These recent economic trends come on the heels of good Pennsylvania economic news last month, the Keystone researchers said, when a new study by Harvard and Berkeley economists reported that most parts of the state outpaced the rest of the U.S. in intergenerational upward mobility from the late 1990s to 2010-2011.

“Pennsylvania has scored high marks on upward mobility, but if we keep shrinking the middle class, the tide will turn and the next generation will fall behind,” said Dr. Mark Price, Keystone’s labor economist and a co-author of the report.

46th in Job Growth Since January 2011

Between January 2010 and 2011, the first full year following the Great Recession, Pennsylvania added 87,300 new jobs, but that figure dropped to 46,200 between January 2011 and 2012 and to 35,000 between January 2012 and 2013, the report found. Through July 2013, the state added only 5,400 jobs, putting it on track to add fewer than 11,000 jobs in the current year. Pennsylvania ranked 46th in job growth since January 2011.

“Pennsylvania added nearly as many jobs in the first full year following the Great Recession as it did in the two and a half years since,” said Dr. Price.

Researchers explained that they focused on job growth trends from January 2011 to July 2013 because that is when federal recovery dollars were cut off and federal budget cuts enacted. It is also the period during which the Legislature enacted substantial state cuts to education funding and other services. As a result, Pennsylvania has seen a loss of 45,000 federal, state, and local public-sector jobs during that time period.

“Policymakers have been hitting the economic brakes when they should be hitting the accelerator,” said Dr. Herzenberg.

Wages Dropping as Economy Falters

The report found more bad news on wages following a “lost decade” in which most Pennsylvania workers experienced flat or falling wages, and a recession and slow recovery that have made family-sustaining jobs harder to come by. After adjusting for inflation, wages have fallen for low-, middle-, and high-wage workers alike since 2010, even though productivity in the economy has grown.

From 2010 to 2012, low-wage workers at the 10th percentile saw their earnings fall by 3.8% to $8.37 an hour, while a worker earning the state’s median wage saw earnings fall by 2.6% to $16.77 an hour. High-wage earners at the 90th percentile saw their pay fall by 1.6% to $37.45 an hour, while those at the 95th percentile saw earnings fall by 4.3% to $48.06 an hour.

Recent job and wage trends undermine the economic recovery, researchers noted, as more low- and middle-income families are unable to buy the goods and services that will propel the economy forward. These same trends shrink the middle class, which, as the Harvard and Berkeley economists noted, jeopardizes upward mobility.

“The fewer good jobs, or jobs of any kind, in lower-income communities, the less chance poor children have of escaping the economic station of their birth,“ Dr. Herzenberg said.

Policies that Work for the Middle Class

Pennsylvania needs a new direction, researchers wrote, led by policymakers who will commit themselves to broadly shared prosperity and advance policies that promote the American Dream, the idea that people who work hard and play by the rules should be able to share in our nation’s expanding economic pie.

“Fast food workers and workers at Pittsburgh’s giant UPMC health-care network are both aiming for roughly $15 per hour,” said Dr. Herzenberg, “and that is about the right target.” Both a much higher minimum wage and area-wide unions in service industries could quickly move toward this target, he added.

Based on the Harvard-Berkeley study’s identification of factors that increase mobility, the authors also made two other recommendations: invest in education from cradle to grave, which boosts the economy in the short run as well as opportunity and growth in the long run; and enact policies that increase citizen engagement and voter turnout, especially among middle- and lower-income families to whom policymakers have been unresponsive.

“Recently Pennsylvania has had a policy trifecta that slows the recovery, reduces education funding especially for vulnerable communities, and seeks to suppress the vote and voice of low-income people,” said Dr. Price. “We need to flip that switch to put Pennsylvania back on the path to shared prosperity.”

Read the State of Working PA 201