Author: Jeff Rosenthal
We’ve heard a variety of accounts of wages rising since the recession began. Explanations generally show some degree of positive news, from recently rising wages to wage growth becoming more broadly shared to the nature of wage growth by firms. A Wall Street Journal article from January highlighted an interesting feature of this post-recession period: less educated workers showed higher percentage wage growth than more educated workers. One of the possible explanations for this was that some states had risen their minimum wage over this time period. This makes sense, but North Carolina follows the federal minimum wage - which last increased 70 cents to $7.25/hour in 2010.
We decided to look into wage growth by educational attainment using different data sets for North Carolina workers since January 2009i.
What do we see?
We see some slightly disparate findings in terms of degree of growth, but by and large, we find a key consistency across data sets: Since the recession, the least educated workers in North Carolina had wages that have grown faster than more educated workers.
Below are examples of inflation-adjusted average weekly wages from the Current Population Survey (CPS) for North Carolina workers:
As expected, workers with more education had higher wages than those less educational attainment. The trends by education for inflation-adjusted wages show a decline in real average wages post-recession for the most educated workers with a Master’s Degree or Above.
Percentage-wise, the inflation-adjusted average weekly wage for workers with a Master’s or above are 7.2% lower in 2017 than in 2009 while the same measure for workers with only a High School Degree have inflation-adjusted average weekly wages that are 9.6% higher in 2017 than 2009.
These trends show growing wages for high school educated workers and comparatively flat wages for the most educated workers.
The results for North Carolina workers from the American Community Survey (ACS) show similar trends- with the greatest growth in inflation-adjusted wages for those with Less than a High School Degree, and a decline in inflation-adjusted wages for those with a Master’s Degree or above.
Differences in the ACS data and CPS data are that the ACS only goes through 2016, and the results for workers with only high school attainment show slightly declining wages, and not increasing wages.
Finally, the Quarterly Workforce Indicators (QWI) roughly confirms the inverse relationship between education and post-recession wage growth for North Carolina workers. Please note that the QWI data combines Bachelor’s Degree and Master’s Degree and Above.
What's going on?
Although the data sources are disparate and may tell slightly different stories, taken together, many of the overall trends are the same for North Carolina as they are for the United States. Data differs on whether wages for those with Bachelor’s degrees or some post-secondary education have risen or fallen over the past seven years, but we have confidence reporting that they haven’t changed too much. For North Carolina’s lesser-educated individuals, wages grew faster than their more educated counterparts, even without a change in our minimum wage laws. This is a positive sign for those who are reliant on these jobs. However, there’s too much distance been wages of various educational groups to anticipate a convergence or an appreciable decrease in the gap, even in the long-term.
One of the possible reasons for this may be due to tightening labor markets for particular types of workers. The Wall Street Journal article cited that the growth of wages for lower-educated workers could be due to a tightening labor market for people with less education. Internal data analyses we’ve conducted using the supply-demand methods seen in this blog article confirm the increasing tightness for less educated workers and no significant tightening for very highly educated workers from both before the recession (2007) and since the height of the recession in 2010[ii]. With more competition, wages for these entry jobs would rise to counteract possible difficulty hiring these entry level workers, as seen in the 2016 Employer Needs Survey. The slow or declining wage growth for highly educated workers in North Carolina could be due to an increase in the supply of workers with Bachelor’s and Master’s degrees. While one could speculate that these trends could be due in part to demographic factors such as age with young highly educated Millennials flooding the job market, the percentage of professional degree holders aged under 35 has not changed from 2007-2016 according to ACS data, and the CPS data showed fairly similar age distributions in 2007 and 2016.
i. For the Current Population Survey, for ease of data analysis, we compiled annual data with average weekly wage. For the Quarterly Workforce Indicators, we used quarterly data with average monthly earnings. For the American Community Survey, we used annual data with annual earnings in annual-adjusted dollars.
ii. Thanks to Andrew Berger-Gross for this suggestion and analysis.