News From Terre Haute, Indiana

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February 8, 2014

EYE ON THE PIE: Wage gap of Hoosiers to overall Americans widens

Sometimes it seems our political leaders know only four letter words like jobs. They often precede this with another four letter word: good.

What is a good job? Presumably, one that pays well, offers important benefits and provides reliable security over time.

Today, the emphasis in Indiana and most of the United States is on the number of jobs. Although the unemployment rate continues to fall, the nation, as of December 2013, was still 649,000 private sector jobs short of the level six years earlier.

This sounds worse than it is. That deficit of jobs is just -0.56 percent; for Indiana, however, the deficit percent is twice as high (-1.12 percent), or 28,900 jobs short of December 2007. Only 13 states had more jobs this past December than they did at the start of the recession on ’07.

Yet, there is much more to the story. How much are jobs paying? Is Indiana gaining or losing ground when we turn to the wages and salaries paid to workers?

The average hourly wage in December ’07 for the U.S. was $21.37 and rose by $2.94 (13.8 percent) to $24.31 in December ’13. Indiana’s average hourly earnings rose by $2.18 or 10.7 percent (31st among the states in the nation) over the same period.

The wage gap between Indiana and the U.S. widened during the recession and the recovery period to-date. While we were $1 per hour behind the nation in ’07, that gap is now $1.76. Thus the buying power of our workers, relative to those in other states, is reduced.

But wait, there is more to be considered. The Consumer Price Index for the nation rose by 11 percent from December ’07 to December ’13.

The average worker in the U.S. had a slight increase in real hourly earnings (approximately 2.8 percent), while the Hoosier worker experienced a small decline in real hourly earnings (0.3 percent).

Still, we don’t have the full story of the past few years. A worker’s take-home pay depends on the hourly rate times the number of hours worked. In the U.S., there was a decline in the average number of hours worked per week from 35 to 34.8  — that’s 12 minutes a week. In Indiana, we went from 35.7 hours per week to 34.9, a 48-minute reduction in average weekly working hours. More part-time jobs? Less overtime? I don’t know.

Whatever the cause of this decline in hours, the result was a significant increase in the gap between the average weekly earnings of a Hoosier worker and that of the average American worker.

In December ’07 that gap was $20.74; by December ’13 the gap between Indiana and the nation grew to $58.99 per week. Is this the economic progress our elected legislative and executive leaders travel the world to advance? Is this consistent with those boastful press releases we read about how well Indiana is doing because of our low business taxes and slack regulation?

Morton Marcus is an economist, writer, and speaker who may be reached at mortonjmarcus@yahoo.com.

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