Online Summary

Pennsylvania Wages Still Flat in 2006

Stephen Herzenberg
Mark Price

Analysis by the Keystone Research Center of new data from official government sources indicates that, for the fifth straight year in a row, wages for most workers in Pennsylvania and the United States have stagnated.

Despite a strong economic expansion and healthy productivity growth, wages have not kept pace with inflation since 2002 for Pennsylvania workers at most education levels and across the wage distribution. These trends stand in marked contrast to the economic expansion of 1995-2000, during which wages rose for most workers as productivity increased.

These newest statistics document these trends:

• Five years into an economic expansion that began in November 2001, wages for most Pennsylvanians have not yet recovered to 2002 levels (2002 was the year in which wages peaked for most groups of workers).
  • Adjusting for inflation, at no point in the distribution did wages increase by more than 1.5% between 2005 and 2006. At most wage levels, earnings climbed by less than 1% in 2006. High earners experienced a fall in earnings.
    
  • Virtually every point in the wage distribution up to the 95th percentile workers experienced a fall in wages between 2002 and 2006.
  • Except for the highest earners, these wage trends are similar to those for the United States as a whole.
• Pennsylvania earnings continue to stagnate at almost every education level. The only exception is workers with less than a high-school degree, and even these workers have seen a wage increase of less than 2% since 2002. College-educated workers in Pennsylvania now earn 7% less, in inflation-adjusted terms, than did at their wage peak in 2001.
• While wages remained flat, U.S. inflation-adjusted corporate profits rose 17% from 2005 to 2006, and productivity climbed 2.1%.

These data clearly indicate that Pennsylvania needs an innovative economic plan to repair the broken link between wages and productivity growth, as well as one that will sustain strong recent productivity growth for the long term.
With the partial exception of 1995-2000, the link between middle-class (and low-wage workers') earnings and productivity growth has been broken now for three decades.

The Prescription for Prosperity: An Economic Agenda for Pennsylvania's Future, developed and endorsed by a broad coalition of Pennsylvania groups, outlines an agenda that would expand economic opportunity and security while also investing in the future to sustain productivity growth.

For a more comprehensive analysis of trends in wages, benefits, income, poverty, unemployment, and other key indicators of the well-being of working Pennsylvanians, see The State of Working Pennsylvania 2006, online at www.stateofworkingpa.com.