State of Working Pennsylvania 2018

Stephen Herzenberg
Publication Date: 
August 30, 2018

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Executive Summary

“The State of Working Pennsylvania 2018,” Keystone Research Center’s 23rd annual review of the Pennsylvania economy and labor market finds that, nearly a decade into the current national economic expansion, many Pennsylvania workers are still waiting for a raise. The report points to three factors that help explain this. First, despite low unemployment, some slack remains in the job market. Second, employers—led by giant service-sector employers of millions of low-wage workers—ruthlessly use their market power over workers to repress wages. Third, national and state public policies, shaped by legislatures with Republican majorities and federal courts (including the Supreme Court) dominated by conservative justices, push mostly in the wrong direction. They keep rigging the economy further against ordinary workers. Where Pennsylvania’s current governor and attorney general have authority to act independently they have sought to lift wages. Faster and greater progress in Pennsylvania requires state lawmakers to row in the same direction.

The Pennsylvania economy has grown steadily since the current economic recovery began in the middle of 2009. Non-farm employment now exceeds the level in early 2010 by 8%. Unemployment has fallen to less than half its post-recession peak—4.2% in July 2018. Yet Pennsylvania workers’ wages remain stubbornly unmoved by steady economic growth.

  • Wages for workers throughout most of the Pennsylvania wage distribution fell in the 12 months ending in June 2018.
  • Over the past decade, wages have also fallen for most of the bottom 60% of Pennsylvania workers.

Meanwhile, top 1% incomes, which took a dive with the stock market crash in and after the Great Recession, are back on the fast track.

  • Top 1% earners took home one-third of the increase in Pennsylvania income from 2009-2015 (the latest period for which these data are available).
  • And Pennsylvania income other than typical wages and salaries (“non-withholding income”), which goes mostly to high earners (e.g., dividends, capital gains, and profits) increased a robust 7.8% in the last 12 months (i.e., the fiscal year ending in June 2018).

Our three-part explanation for why wages remain stagnant starts with labor market slack. One broad measure of such slack—“underemployment”—includes, in addition to the unemployed, part-time workers who want full-time work and “discouraged workers” who want jobs but have given up looking. Underemployment remains slightly higher today than at its highest level after the recession following the burst of the stock market bubble in the early 2000s. Underemployment also remains substantially higher than its lowest level before the Great Recession (9.4% versus 7.9%). And the employment-to-population ratio for Pennsylvanians aged 16 and over is well below the 2007 level (59.4% versus 61.7%).

A second reason that wages remain stagnant is that the market power of employers, including giant service corporations that together employ millions of low- and moderate-wage workers: H&R Block, McDonald’s and other fast food companies, and the like. Within their franchisees, many such companies use “non-compete agreements”—promises not to poach each other’s workers—to short-circuit competition for workers. Therefore, wages become less responsive to low unemployment in a tight labor market.

A third reason: public policy. Lawmakers in every surrounding state have increased their state minimum wage. Pennsylvania lawmakers have not. At the federal level, in June 2018 the U.S. Supreme Court reversed a longstanding policy and eliminated the contributions that public sector unions previously received from non-members those unions represent. This aims to weaken unions’ ability to bargain for higher wages and benefits for public workers, as well as their ability to push for policies that raise the wages of private workers (e.g., via a higher minimum wage or high construction worker wages on publicly funded jobs). Eager to kick Pennsylvania workers when they are down, some Pennsylvania lawmakers have jumped in the wake of this U.S. Supreme Court decision with state proposals aimed at maximizing its negative impact on union resources.

In sum, state policies that we summarized in “State of Working Pennsylvania 2016” as “The Agenda to Lower Pennsylvania’s Pay” remain influential with the majority caucus in the legislature. So far, these lawmakers must be considered successful: many of their constituents have inflation adjusted earnings that remain lower than wages for their counterparts 10 years ago.

Governor Wolf, while blocked in his efforts to raise the state minimum wage, has submitted a formal notice of proposed rulemaking to increase the threshold below which all Pennsylvania salaried workers receive overtime pay. And Attorney General Josh Shapiro has spearheaded an effort by attorneys general across many states to get companies to stop using non-compete agreements with lower-wage workers. In 2019 and beyond, a return to broadly shared prosperity requires Pennsylvania lawmakers to enact a more comprehensive agenda to raise the wages of incomes of Pennsylvania workers, such as the ones outlined in our “Agenda to Raise Pennsylvania’s Pay” in the “We the People – Pennsylvania” agenda online at

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