The State of Working Pennsylvania · The State of Working Pennsylvania 2012 is The Keystone Research Center’s deepest and most comprehensive recent look at the Pennsylvania economy

The State of Working Pennsylvania

2012

The Keystone Research Center

Harrisburg, Pennsylvania

Mark Price and Stephen Herzenberg

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TheKeystoneResearchCenter(KRC)wasfoundedin1996tobroadenpublicdiscussiononstrategiestoachieveamoreprosperousandequitablePennsylvaniaeconomy.Sinceitscreation,KRChasbecomealeadingsourceofindependentanalysisofPennsylvania’seconomyandpublicpolicy.TheKeystoneResearchCenterislocatedat412NorthThirdStreet,Harrisburg,Pennsylvania17101‐1346.MostofKRC’soriginalresearchisavailablefromtheKRCwebsiteatwww.keystoneresearch.org.KRCwelcomesquestionsorotherinquiriesaboutitsworkat717‐2557181,ortollfreeat888‐618‐2055.

AbouttheAuthorsMarkPrice,KRC’sLaborEconomist,holdsaPhDineconomicsfromtheUniversityofUtah.Hisdissertation,StatePrevailingWageLawsandConstructionLaborMarkets,wasrecognizedwithanHonorableMentioninthe2006ThomasA.KochanandStephenR.SleighBestDissertationAwardsCompetitionsponsoredbytheLaborandEmploymentRelationsAssociation.StephenHerzenberg,KRC’sExecutiveDirector,holdsaPhDineconomicsfromMIT.HeisacoauthorofLosingGroundinEarlyChildhoodEducation,publishedin2005bytheEconomicPolicyInstitute,andNewRulesforaNewEconomy:EmploymentandOpportunityinPostindustrialAmerica,publishedin1998byCornell/ILRPress.

Acknowledgments

TheauthorsthankLauraDresser,JoelRogersandEdoNavotoftheCenteronWisconsinStrategy(COWS)forprovidingtheinspirationforthisyear’sTheStateofWorkingPennsylvania,whichispatternedinpartafterTheStateofWorkingWisconsin2011.ThanksforinvaluabletechnicalassistancetotheteamattheEconomicPolicyInstitute(EPI),whichprovidessupporttoKeystoneResearchCenterandtheotherstatethinktankswithintheEconomicAnalysisResearchNetwork(EARN);thisteamincludesDougHall,DavidCooperandNatalieSabadish.ThankstoKRCsummerinternsAlanBowie,asenioratHowardUniversity,andPakManLam,asenioratPennsylvaniaStateUniversity,fortheirresearchassistanceinpreparingthisyear’sreport.ThankstoChristopherLilienthal,CommunicationsDirectorforKRCanditsPennsylvaniaBudgetandPolicyCenter(PBPC),andtoJamarThrasher,KRCCommunicationsAssociate,foreditorialassistanceandguidance,andtoStephanieFrank,KRCOfficeManager,forproducingthechartsandfiguresinthisreport.

SupportKRC

TheworkoftheKeystoneResearchCenterissupportedbygrantsfromcharitablefoundations,researchcontractswithvariousorganizations(includinglocal,state,andfederalgovernments),andcontributionsfromorganizationsandindividualswhoshareKRC’svisionofbroadlysharedprosperityinPennsylvania.TolearnhowyouoryourorganizationcansupportTheKeystoneResearchCenter,pleasevisitTheKeystoneResearchCenterwebsiteathttp://keystoneresearch.org,orcall717‐255‐7181.TheIRShasdesignatedKRCasafederaltax‐exempt,nonprofit,501(c)(3)corporation.KRCisalsoregisteredasacharitableorganizationwiththePennsylvaniaDepartmentofState’sBureauofCharitableOrganizations.TheofficialregistrationandfinancialinformationofKeystoneResearchCentermaybeobtainedfromthePennsylvaniaDepartmentofStatebycallingtollfree,withinPennsylvania,1‐800‐732‐0999.Registrationdoesnotimplyendorsement.

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Contents ExecutiveSummary................................................................................................................................................................5

Chapter1:TheGreatRecession&aLostDecade.....................................................................................................10

Pennsylvania’sEconomy,TheGreatRecessionandtheRecovery...............................................................11

DramaticDeclineinJobs................................................................................................................................................12

Pennsylvania’sManufacturingBaseinDecline....................................................................................................15

IncreasingUnemploymentandUnderemployment...........................................................................................21

ASlowRecoveryThatCouldHaveBeenWorse...................................................................................................24

ALostDecade.....................................................................................................................................................................31

SomeBasicFactsonthePennsylvaniaEconomy................................................................................................32

Pennsylvania’sPopulationandWorkforceGrowing.........................................................................................32

LaborForceParticipationRatesRevealaStrongandWidelySharedWorkEthic................................33

KeySectorsinPennsylvania........................................................................................................................................34

TheMiddleClassChallengePresentedbyHealthCareandSocialAssistance........................................34

Chapter2:Wages&WageDisparity..............................................................................................................................37

TheLong‐TermPerspective:SlowWageGrowth...............................................................................................38

FallingHealthInsuranceandOtherBenefitsatWork.......................................................................................39

TrendsinWagesforDemographicGroups............................................................................................................40

TheGenderGapinWages.............................................................................................................................................41

TheBlack/WhiteGapinWages..................................................................................................................................43

TheEducationalGapinWages....................................................................................................................................44

ThePowerofAssociateDegrees................................................................................................................................45

WagesbyIndustryandOccupation..........................................................................................................................47

UnionsandWagesinPennsylvania...........................................................................................................................48

Chapter3:Poverty‐WageJobs.........................................................................................................................................50

TrendsinPoverty‐WageJobs......................................................................................................................................51

WhereAreAllThoseBadJobs?...................................................................................................................................52

Chapter4:IncomeandPoverty.......................................................................................................................................54

MedianFamilyIncomeBelowIts2000Level.......................................................................................................54

WheretheMoneyGoes...................................................................................................................................................55

PovertyinPennsylvania................................................................................................................................................56

Chapter5:ThreeDecadesofIncomeInequality.......................................................................................................58

UnequalIncomeGrowth:It’sLonelyontheTop.................................................................................................59

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TheRaceResumestoSurpassthe1920sAgeInequality.................................................................................60

Chapter6:Conclusion..........................................................................................................................................................61

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Executive Summary

TheStateofWorkingPennsylvania2012isTheKeystoneResearchCenter’sdeepestandmostcomprehensiverecentlookatthePennsylvaniaeconomyandhowithasperformedforworkingandmiddle‐classfamilies.Thecentralfindingsarestraightforward:ThePennsylvaniaeconomyisperformingpoorlyfromtheperspectiveofmiddleandlow‐incomefamilies—overthelastyear,thelastdecade,andthelastthirdofacentury.Althoughgrowthinproductivityandthesizeoftheoveralleconomicpiehavebeensufficienttosupportrisinglivingstandards,wagesandincomesformostfamilieshavestagnated—forthosewithfull‐timejobsaswellasthosewhocan’tfindasmuchpaidemploymentastheywant.1PolicyintheShortRun:WhyAreWeHittingtheEconomicBrakes?TheperformanceofthePennsylvaniaeconomyreflectspolicychoices—poorpolicychoices—inboththeshortrunandthelongrun.Intheshortrun,Pennsylvanianeedsmorejobsandlessunemployment.Thecurrentunemploymentrateequalsabout8%,andhasrisenrecently,moreinPennsylvaniathannationally.Predictably,sustainedhighunemploymentledtofallingwagesformostPennsylvaniaworkersin2011.Whyisthispredictable?Becauseoureconomylackspoliciesandinstitutionsthatbakeinbroadsharingofincreasesintheeconomicpiewhenunemploymentisnotlow—policiessuchasaminimumwageindexedtoinflationandproductivitygrowth,andinstitutionssuchascollectivebargainingagreementsthatcovermostworkersinanindustryorregion.TheonlytimethebenefitsofeconomicgrowthwerebroadlysharedinthelastthirdofacenturywasalsotheonlytimethattheUnitedStatesandPennsylvaniahadsustainedunemploymentbelow5%—thesecondhalfofthe1990s.WhilePennsylvanianeedsmorejobsandlessunemploymenttoachievebroadlysharedprosperity,inthepastyeareconomicausteritypoliciesatthefederalandstatelevelhaveincreasedPennsylvania’sshortageofjobsbyanestimated74,000.(Thisshortage,or“jobdeficit,”equalsjoblosssincetheGreatRecessionbeganinDecember2007combinedwiththeadditionaljobsneededtokeeppacewiththegrowthoftheworking‐agepopulation.)PolicyintheLongerRun:ALostDecade…andMore.Inthelongerrun,therehasalsobeenadisconnectbetweenrisingproductivityandstagnatingwagesandincomes.Overthelast—or“lost”—decade,from2000to2010,forexample,medianfour‐personfamilyincomeinPennsylvaniadeclinedby$6,100fromits2000peak(of$82,818).Duringtheshorteconomicexpansionfrom2002totheendof2007,thetop1%ofPennsylvaniataxpayerscaptured54%ofallincomegrowthinPennsylvania.Goingbackfurther,tothelate1970s,growthhasalsofailedtotranslateintorisinglivingstandardsacrosstheboard.Againthiswasthepredictableresultofpolicychoices—policychoicesunfriendlytoworkingfamiliesbutveryfriendlytothewealthiestAmericans.Pickapolicyarearelatedtotheeconomy—wageandtaxlaws,tradeagreementsthatestablishrulesgoverningtradeandinvestmentflowsacrossnationalborders,lawsgoverningunionsandworkers’powerin

1Adjustedforinflation,U.S.productivity—outputperhour—inthenonfarmbusinesssectorincreasedby84.8%between1979and2011.

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bargainingwithemployers,lawsregulating(orderegulating)specificindustries,thesocialsafetynet—andalmostwithoutexceptionnationalandstatepolicieshavetiltedagainstmiddle‐andlow‐incomefamilies.Insomecases,policieshavebeentailoredveryexplicitlytosuitmulti‐nationalcorporationsthatwanttoproducefortheU.S.marketfromlow‐wageoffshoreplatforms,ortoallowbillionairehedgefundmanagerstopaylowerincometaxratesthanmiddle‐classfamilies.WillPolicyLookingForwardLeadtoAnotherLostDecade?Whilethefirstyearofthecurrentdecade(2010)startedwellforPennsylvania,withthestaterankednearthetopbasedonjobgrowth,in2011thelossofjobsformorethan25,000teachers,firstrespondersandotherpublicservantscontributedtoPennsylvania’sfalltowardsthebottomofthestatejobrankings.Pennsylvania’sjobgrowthin2012hasbeennegative,sofar.ConsensuseconomicforecastspredictcontinuedhighunemploymentinthenationandinPennsylvaniaforthenextseveralyears.Indeed,theEconomicPolicyInstitute’sforthcomingStateofWorkingAmericaprojectsthattheincomesofthemiddlefifthoffamilieswillbelowerin2018thanin2007and2000.Similartothelastdecade,robustincomegrowthislikelytoreturnforonlyatinysliverattheverytop.In2010,thefirstfullyearofeconomicrecovery,Pennsylvania’stop1%sawitsaverageincomesgrowby11%.This1%ofPennsylvaniataxpayerscaptured76%ofallincomegrowthinthestatein2010.Thetop1%ofthistop1%(anestimated620taxpayers)enjoyedanaverageincomeincrease,adjustedforinflation,of$1.75millionin2010.(Thisisaconservativeestimateofthe2010increaseforPennsylvania’s1%.)Insum,polarizedgrowthandanotherlostdecadeformostfamiliesisapredictableresultofacontinuedfailuretoaddresstheshort‐termproblemsofinsufficienteconomicdemandandjobcreation,andthelong‐termproblemofstagnantwagesandincomes.TheproblemswithanotherlostdecadegobeyondthethreattothelivingstandardsofPennsylvania’sbroadmiddleclass.Moreyearsofpolarizinggrowthwillresultinlevelsofinequalitythatexceedthoseofthelate1920s.Suchinequalityisbadnewsnotjustforthemiddleclassbutforthenationasawhole,andforthreereasonscoretotheidentityofAmerica.First,veryhighinequalityisincompatiblewiththeAmericanDreamofwidespreadopportunity—andAmericansarealreadymorelockedintotheeconomicstatusoftheirbirththanpeopleofmostotheradvancednations(forreferences,seeChapter6).Second,countrieswithveryhighinequalityalsotendtoexperiencelowereconomicgrowth.(Amongotherexplanationsforthis,polarizedsocietiesstruggletopersuadetheeconomicelitetoinvestintheeducationofthepopulationasawhole.)Third,veryhighlevelsofeconomicinequalityreinforcethepoliticalproblemthatcontributedtopoorpolicychoicesinthefirstplace:theexcessiveresponsivenessofourdemocracytotheverywealthyandourpoliticalsystem’slackofresponsivenesstoordinaryfamiliesandthepublicgood.Insum,anotherlostdecadethreatensthreetreasuredAmericanandPennsylvanianvalues:widespreadmobility,arobusteconomy,anddemocracy.ANewDirection:Whilethereisnopastyearquitelikethecurrentone,oneparallelis1936.In1936,whiletheU.S.economyhadbeguntorecoverfromtheGreatDepression,itwasfarfromhealthy.Theunemploymentratewasstill17%,roughlytwicetoday’slevel.Moreover,thepolicychoicesthatwouldgovernAmericancitizensmovingforwardremaineduncertain.EvenPresidentRooseveltacquiescedtoausterityeconomicsin1937,triggeringafive‐percentage‐pointincreasein

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unemploymentby1939.RatherthanconsolidatingtheNewDealastheUnitedStatesdidstartingin1938,thegovernmentcouldhavemadeadifferentsetofpoliticalandpolicychoicesthatwouldhaveprolongedhighunemploymentandbroughtareturnto1920slevelsofinequality.InsteadtheUnitedStatesmadepolicychoicesthatliftedlivingstandardsforAmerica’sworkingfamiliesoverfourdecadesandcreatedthemostpowerfuleconomytheworldhadeverknown.IfAmericaandPennsylvaniamakethewrongpolicychoicesinthenextfewyears,theywillmissagoldenopportunityforanothergenerationofbroadlysharedprosperity.Butthewrongchoicesoverthenextfewyearsarenomoreinevitablethanweretherightchoicesfrom1938onward.Theendofthisreportoutlinesthreesimplestepstochartapositivenewdirection,allofthemaimedatrestoringthethreecoreAmericanvaluesthreatenedbypolarizinggrowth.1. Thefirstandmostessentialstepisthatourstateandournationcommitthemselvestobroadly

sharedprosperity.Candidatesforofficeshouldbeaskedtoendorsethreebasicvalues:theAmericanDream,theideathatpeoplewhoworkhardandplaybytherulesshouldbeabletoshareinournation’sexpandingeconomicpie,andacommitmenttoademocracythatisresponsivetopeopleratherthanwealthandmoney.InPennsylvania,wecouldcallthisthe“ContractwiththeKeystoneState.”

2. Thesecondstepisimplementationofan“InvestmentintheFuture”planthatbolstersourinfrastructure,manufacturingsector,education,skills,andscientificresearchinawaythatgrowsjobsintheshortrunandlaysthefoundationforlong‐rungrowth.

3. ThethirdstepshouldbewageandincomespoliciesthatrestorealevelofequityinAmerica

thatiscompatible,inthelongrun,withwidespreadmobility,astrongeconomy,andaresponsivedemocracy.

Thenextseveralpages,“TheStateofWorkingPennsylvaniaataGlance:JusttheFacts,”containafullersummaryofthekeyfindingsinthebodyofthisreport.Thereportitselfprovidesanexplanationofthenumbers,alongwithmanyeasy‐to‐readchartsandcompletesources.OurintentinreleasingamorecomprehensivereportthisyearistoprovideanauthoritativereferencemanualformembersofthePennsylvaniamedia,policymakers,andthepublicastheyevaluatepolicyandelectoralchoicesoverthenextyear.

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Box1.TheStateofWorkingPennsylvaniaAtaGlance:JusttheFacts

Chapter1:TheGreatRecessionandtheLostDecadePennsylvaniafamiliesmadelittleprogresseconomicallyinthelastdecade.

Totalnon‐farmemploymentinPennsylvaniaandtheUnitedStateswerevirtuallyunchangedin2011comparedto2000(Figure1.10).

Inflation‐adjustedmedianfour‐personfamilyincomefellinboththeUnitedStatesandPennsylvaniainthe2000sbyslightlymorethan$6,000(Figure1.11).

Thestatelost300,000manufacturingjobssince2000(Figure1.4).Pennsylvaniaworkersfaredsomewhatbetterfrom2007‐11thankstotheAmericanRecoveryandReinvestmentAct,federalautosectorintervention,andalowerunemploymentratethannationally.

From2007to2011,thePennsylvaniaunemploymentratehoveredapercentagepointormorebelowtheU.S.unemploymentrate.(Table1.8andFigure1.6).

In2009‐11,federalincomesupports(e.g.,unemploymentinsuranceandfoodstamps)forthoseonthefrontlineoftherecession,andtargetedfederaltaxcuts,helpedpreventamuchsharperfallindisposableincomethatcouldhaveprolongedanddeepenedthedownwardspiraloftheeconomythatbeganin2008(Figure1.7).

InPennsylvaniamanufacturing,jobgrowthfrom2009to2011centeredinfivesubsectorsthatbenefittedfromtherescueofGeneralMotorsandChryslerfrombankruptcyin2009.

Since2011,however,Pennsylvania’seconomyislosinggroundcomparedtootherstates.

Thestate’sjobshortfallincreasedbyover74,000fromJuly2011toJuly2012tojustover301,000.(Thisshortfall—or“jobsdeficit”—equalsjoblosssinceDecember2007plusthenumberofjobsneededtokeeppacewiththegrowthoftheworking‐agepopulation.)

Thestateranked8thmeasuredbypercentjobgrowthin2010but38thinthe12‐monthperiodendinginJuly2012(Tables1.2and1.3).Afterbeingwellbelowthenationalrateforseveralyears,thestate’sunemploymentrateisnowapproachingthenationalrate.

Thestatelostjustover25,000publicsectorjobsin2011alone,mostofthemjobsinelementaryandsecondaryschools(Table1.10).Cutsinpublicsectorjobsfurtherundercutdemandatprivatesectorbusinesseswherelaidoffteachersandfirstrespondersshop.

WhilemanufacturingemploymentinPennsylvaniagrewby11,700sinceJanuary2010,this2.1%increasewaslessthanhalfthe4.6%increasenationally(Figure1.5).

Chapter2:Wage&WageDisparityWagetrendsalsotellthestoryofthelostdecadeandthelostthirdofacentury,exceptforthesharedprosperityofthesecondhalfofthe1990s.

Pennsylvaniaworkersearnedthesameorlessin2011thanafullbusinesscycleearlier,in2002.Bycontrast,workersenjoyedwageincreasesinthepreviouseconomiccycle(1993to2002)(Figure2.1andTable2.1).Eventhe95thpercentileworkersawa0.6%fallinwagesfrom2002to2011,afterariseof24%from1993to2001.

Despitebeingbettereducatedandmoreproductive,thetypicalPennsylvaniaworkerin2011earnedonly63centsmoreperhourthanin1979—$1,310moreperyearforafull‐time,full‐yearworker(Figure2.2).

Employer‐basedhealthcarecoverageforprivate‐sectorPennsylvaniaworkersdeclinedfrom76.1%to60.8%between1979‐81and2008‐10.

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SomePennsylvaniagroupsexperiencedparticularlylargefallsinhourlywagesduringthelastthreedecades.In1979‐81,thetypicalPennsylvaniablackmale’shourlywagesliftedthem$3,500abovetheirU.S.counterpart(ifbothworkedfull‐time,fullyear)(Figure2.5).By2011typicalPennsylvaniablackmenearned$700lessinayearthanU.S.blackmales.

Pennsylvaniawomendidexperiencelargeincreasesinwagesfrom1979to2011(Figure2.6).Women’smedianwageinPennsylvaniaremains83%ofthetypicalman’swage.

Chapter3:Poverty‐WageJobsLower‐wageworkersinPennsylvaniahavemadelittleprogressinathirdofacentury.Low‐wagejobsareheldmostoftenbycertaindemographicgroupsandalsoconcentrateinserviceindustries.

In2011,aquarterofPennsylvaniajobspaida“povertywage”—anhourlywagetoolowtoliftafamilyoffouroutofpovertyifthepersonworkedfull‐time,full‐year(Figure3.1).

PercapitaincomeinPennsylvaniagrew61%between1979and2011—ameasureofthesizeofthetotaleconomicpiethatreflectsbigincomeincreasesatthetop.Despitegrowthintheoverallpie,theshareofworkerswithpovertywagejobshardlychanged(Table3.1).

In2011,30%ofblackwomen,27%ofwhitewomen,andmorethanathirdofallblackmaleswereemployedinpovertywagejobs(Table3.1).

WorkersinServiceandSalesOccupationsaccountfor57%ofallpovertywagejobs.Sevenin10povertywagejobsareinjustthreeindustries;LeisureandHospitality;WholesaleandRetailTrade;andEducationandHealthServices(Table3.2).

Chapter4:IncomeandPovertyWhiletheoveralleconomicpieexpands,highunemploymentandunderemploymentcombinedwithflatorslightlydecliningwagesamongmostworkershaveledtostagnantmiddle‐classincomesandpersistentpovertyduringtheLostDecade.

Adjustedforinflation,medianincomeoffour‐personPennsylvaniafamiliesislowertodaythan10yearsago,fallingby$6,100since2000,from$82,800(Table4.1andFigure4.1).

ThepovertyrateinPennsylvaniaandnationallyishigherthanin2000andhardlychangedfromtheearly1980s)(Figure4.3).

AsmallershareofthePennsylvaniapopulationandofPennsylvaniachildrenliveinpovertyorarelow‐income(incomesbelowtwicethepovertyrate)thannationally(Figures4.3‐4.5).

Chapter5:ThreeDecadesofIncomeInequalityWhilemostfamiliessawlittleimprovementintheirlivingstandardssince1980,thehighest‐income1%ofU.S.andPennsylvaniataxpayershaveenjoyeddramaticincomegrowth.

Thetop1%inPennsylvaniaandtheUnitedStatesnowtakeshome20%ofallincome,upfrom9.2%in1973intheU.S.(Pennsylvaniaestimatesonlygobacktothemid‐1990s.)

Duringtheeconomicexpansionfrom2002to2007,theincomesofthetop1%inPennsylvaniagrewby50%andthetop1%captured54%ofallincomegrowth(Table5.1).

Thefirstfullyearofthecurrenteconomicrecovery(2010)markedastartlingreturntothepre‐recessionpatternofunevenincomegrowth.In2010,theincomeofthetop1%inPennsylvaniagrewby11%andthisgroupcaptured76%ofallincomegrowthinthestate.

In2010,theincomesoftheveryrichestPennsylvanians—the620taxpayerswhomakeupthetop1%ofthetop1%—weresurging.Ourpreliminaryestimateisthattheaverageincomesofthisgroupgrewby$1.7million(to$18,480,207)in2010.Nationally,thetop1%ofthetop1%experiencedanincomeshikein2010of21.5%,morethan$4.2million.

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Chapter 1: The Great Recession & a Lost Decade

WhilemanyotherstatessufferedmorejoblossesandhigherunemploymentthanPennsylvania,theGreatRecessionstillhitPennsylvaniaworkershard.InJuly,afullthreeyearsaftertheofficialendoftherecession,theunemploymentrateinPennsylvaniaremainedhighat7.9%.Thestate’seconomicforecasterGlobalInsightdoesnotexpecttheunemploymentratetoreachitspre‐recessionlowof4.5%anytimeinthenext10years.2Worsestill,Pennsylvania’sjobmarketforthesecondsummerinarowhasstalled,withunemploymentrisingbyahalfapercentagepointandnonfarmpayrollsfallingby3,600jobssinceDecember2011.

RecenttrendsinPennsylvaniapartlyreflecttroublesintheglobaleconomy,asmuchofEuropehasdippedbackintoarecession,weighingdownjobgrowthhereathome.Beyondthoseglobalheadwinds,theU.S.economyremainsmiredinitsownnegativefeedbackloop:highunemploymentdepressesincomegrowth,whichholdsbackspendingonconsumergoods;this,inturn,leadsemployerstolimitnewhiring,startingthecyclealloveragain.Asaresult,employmentgrowthislikelytoremaintooslowtobringdowntheunemploymentrateinthenearfuture.

Compoundingweakprivate‐sectorjobgrowth,Pennsylvaniapolicymakerscontinuetopracticeausterityeconomics—theideathatreducingpublicspendingwhiletheeconomyisweakwillresultinasurgeinprivate‐sectorjobgrowth.Thisapproachcomesattheexpenseofbadlyneededlong‐terminvestmentsthatstrengthenthePennsylvaniaeconomy,suchascapitalbuildingprojects,roadsandbridges,andeducation.PennsylvaniaGovernorTomCorbetthas,intwoconsecutivebudgets,collectedbutnotspentmorethanahalfbilliondollarsintaxrevenue,ineffectsettingasideasizableamountofrevenueforarainydayevenwhileitisrainingheavilyrightnow.Withconstructionpriceslowerthantheywillbefordecades,neitherGovernorCorbettnortheGeneralAssemblyhavetakenstepstoincreaseinvestmentsinPennsylvania’saginginfrastructure.Beyondunspenttaxrevenues,thecommonwealthcouldhavemadekeyinvestmentsinPennsylvania’seconomybyenactingareasonabletaxonMarcellusgasdrilling.TwogovernorsandtwogeneralassemblieshavefailedtoenactadrillingtaxonMarcellusshalegasextractionsimilartotheWestVirginiatax,givingupahalfabillioninrevenuebetweenmid‐2009andmid‐2012.3

AusterityeconomicswithinPennsylvaniaandnationally—inpartbecauseoftheendofRecoveryActfederalassistanceforstateandlocalgovernments—hitPennsylvania’seconomyhardin2011.ThepublicsectorinPennsylvaniashed25,000jobsin2011,with20,000ofthoselossesoccurringinschooldistricts.Sofarin2012thestoryissimilar,withthepublicsectorsheddinganother5,700jobsandtheunemploymentraterisingto7.9%inJuly.

2PennsylvaniaFastFactsJuly2012Edition,PennsylvaniaDepartmentofLaborandIndustry,availableonlineathttp://www.paworkstats.state.pa.us/admin/gsipub/htmlarea/uploads/PA_Fast_Facts.pdf3MichaelWood,“Pennsylvania'sNaturalGasTaxGiveawayExceeds$500MillionMark,”ThirdandState,http://thirdandstate.org/2012/august/pennsylvanias‐natural‐gas‐tax‐giveaway‐exceeds‐500‐million‐mark

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Pennsylvania'sjobsdeficit,orthedifferencebetweenthenumberofjobsPennsylvaniahasandthenumberitneedstoregainitspre‐recessionemploymentrate,stoodat301,300inJuly.Thatnumberincludesthe103,400jobsPennsylvanialostfollowingtherecessionplusthe197,900jobsitneedstokeepupwiththe3.4%growthinpopulationthatPennsylvaniahasexperiencedinthe55monthssincetherecessionbegan.

Westartthischapterwithareviewoftrendsineconomicgrowthfollowedbyamoredetailedreviewofthejobsandunemploymentpictureinthecommonwealth.

Pennsylvania’s Economy, The Great Recession and the Recovery

PercapitaincomepresentedinFigure1.1representsonemeasureofthesizeandgrowthofPennsylvania’seconomysince1979.(Alldatainthisreportareadjustedforinflationandexpressedin2011dollarsunlessotherwisenoted).Between2008and2009,percapitapersonalincomedeclinedby2.7%inPennsylvania,alargerdeclinethaninpreviousrecessions,eventhedeeprecessionoftheearly1980s.TheGreatRecessionwaslesssevereinPennsylvaniathaninthenationasawhole,whichexperienceda4.8%declineinpercapitaincomefrom2008to2009.

PercapitaincomeinPennsylvaniahasbeengrowingsince2009and,asof2011,washigherthanbeforetherecessionbegan.Despitetworecessions,percapitaincomehasgrownby8%since2000.

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Table1.1comparesgrowthsince2000inpercapitaincomeinPennsylvania,thenation,andPennsylvania’ssixborderingstates.OfPennsylvania’sneighbors,onlyWestVirginiahasexperiencedmoregrowthsince2007.Since2000,Maryland,NewYorkandWestVirginiahaveenjoyedmorepercapitaincomegrowththanPennsylvania.

WhilethePennsylvaniaeconomyhasgrownsince2000,aswewillseeinChapter2,littleofthatgrowthhasshownupinthepaychecksofthetypicalworker.Instead,thisgrowthhasaccruedtothetop1%ofPennsylvaniahouseholds,aswedetailinChapter5.Toexplainthesetrends,wewillnowlooktothekeyfactorsthatdrivethegrowthanddistributionofincomesintheeconomy:jobsandunemployment.

Table1.1PerCapitaPersonalIncomeandPerCapitaIncomeGrowth,Pennsylvania,U.S.,andBorderingStates(2011dollars)

State 2000 2007 2011 PercentChange2007‐2011

PercentChange2000‐

2011Pennsylvania $39,313 $42,208 $42,478 0.6% 8.1%UnitedStates $39,582 $42,836 $41,663 ‐2.7% 5.3%Delaware $40,483 $43,163 $41,635 ‐3.5% 2.8%Maryland $45,273 $50,787 $51,038 0.5% 12.7%NewJersey $50,480 $54,492 $53,181 ‐2.4% 5.4%NewYork $45,201 $51,885 $50,545 ‐2.6% 11.8%Ohio $37,462 $38,148 $37,791 ‐0.9% 0.9%WestVirginia $28,947 $31,983 $33,513 4.8% 15.8%Source.KeystoneResearchCenterbasedonBureauofEconomicAnalysisdata

Dramatic Decline in Jobs

TheGreatRecessionofficiallybeganinDecember2007.Modestjoblossesofabout600jobspermonthoccurredinPennsylvaniathroughAugust2008,butbetweenAugust2008andMarch2009,thestate’sjoblossesmushroomedtomorethan21,000jobsamonth.FromMarchtoFebruary2010(thelowpointor“trough”ofemployment),thepaceofjoblossdecelerated,asprovisionsoftheAmericanRecoveryandReinvestmentAct(ARRA)andpoliciesthatstabilizedfinancialmarketsbegantotakeeffect.TheU.S.economyexitedtherecessioninJune2009.FromthebeginningoftherecessionthroughFebruary2010,thePennsylvaniaeconomyshedatotalof242,600jobs(adeclineof4.2%).Evennow,asFigure1.2shows,Pennsylvaniaemploymentisonlyatthesamelevelasitwasatthepeakofthe1990seconomicexpansion.

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ConsistentwithPennsylvania’ssomewhatlesssevererecession,thestateenjoyedrobustjobgrowthintheremainderof2010adding9,000jobspermonth.PercentjobgrowthinPennsylvaniaputthecommonwealthamongthetop10statesin2010(seeTable1.2).

Table1.2RankofEmploymentGrowthinPennsylvaniaandNeighboringStates2009to2010

StateDecember2009

(thousands)

December2010

(thousands)Change Rank

PercentChange Rank

Pennsylvania 5,578 5,660 82,500 4 1.5% 8UnitedStates 129,319 130,346 1,027,000 0.8% Delaware 411 417 6,500 35 1.6% 7Maryland 2,504 2,532 27,900 17 1.1% 19NewJersey 3,862 3,844 ‐18,700 50 ‐0.5% 49NewYork 8,495 8,592 97,700 3 1.2% 16Ohio 5,002 5,057 54,900 8 1.1% 20WestVirginia 742 748 6,300 37 0.8% 31Source.KeystoneResearchCenterbasedonCESdata

Thepaceofjobgrowthinthecommonwealthslowedmarkedlyin2011withthePennsylvaniaeconomyaddingjust3,500jobseachmonth.Thepaceofjobgrowthhascontinuedtobeweakin2012,withemployerssheddingjustover500jobspermonththroughJuly.Table1.3marksasharp

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reversalinfortuneforPennsylvaniacomparedtoTable1.2.WhileinthefirstfullyearoftherecoveryPennsylvania’sjobgrowthoutpacedmostotherstatesandtheUnitedStatesasawhole,Pennsylvaniahaslaggedthenationinjobgrowthoverthepast12months.Duringthepast12months,Pennsylvaniaaddedjust20,000jobs,ranking38thoutof50statesasmeasuredbypercentjobgrowth.

Table1.3RankofEmploymentGrowthinPennsylvaniaandNeighboringStatesJuly2011toJuly2012

StateJuly2011(thousands)

July2012(thousands) Change Rank

PercentChange Rank

Pennsylvania 5,689 5,709 20,000 25 0.4% 38UnitedStates 131,407 133,245 1,838,000 1.4% Delaware 417 417 ‐200 42 0.0% 42Maryland 2,548 2,571 22,600 24 0.9% 31NewJersey 3,859 3,900 40,200 15 1.0% 27NewYork 8,695 8,809 113,300 3 1.3% 22Ohio 5,087 5,187 100,300 4 2.0% 12WestVirginia 755 756 500 41 0.1% 41Source.KeystoneResearchCenterbasedonCESdata

Asmentionedearlier,Pennsylvania'sjobsdeficit—thedifferencebetweenthenumberofjobsPennsylvaniahasandthenumberitneedstoregainitspre‐recessionemploymentrate—nowstandsat301,300.Bycomparison,lastyear’sjobsdeficitstoodat227,100jobs.ThisincreaseisoneillustrationofthesubparrecentperformanceofPennsylvania’slabormarket.4Thejobsdeficithas

4MarkPrice&StephenHerzenberg,TheStateofWorkingPennsylvania2011,September2011,availableonlineathttp://keystoneresearch.org/sites/keystoneresearch.org/files/KRC_SWP_2011.pdf

Table1.4TotalNon‐FarmEmployment,Pennsylvania,U.S.,andBorderingStates(thousands)

State 1980 1990 2000 2007 2009 2011

PercentChange2000‐2011

Pennsylvania 4,753 5,173 5,694 5,801 5,618 5,687 ‐0.1%UnitedStates 90,528 109,487 131,785 137,598 130,807 131,359 ‐0.3%Delaware 259 348 421 439 417 417 ‐0.8%Maryland 1,712 2,173 2,455 2,608 2,524 2,548 3.8%NewJersey 3,060 3,635 3,995 4,079 3,895 3,856 ‐3.5%NewYork 7,207 8,214 8,638 8,734 8,556 8,683 0.5%Ohio 4,367 4,882 5,625 5,428 5,073 5,083 ‐9.6%WestVirginia 646 630 736 758 746 754 2.5%Source.KeystoneResearchCenterbasedonCESdata

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grownsubstantiallybecausejobgrowthinPennsylvaniaisnotkeepingpacewithgrowthintheworking‐agepopulation.

InordertodepletethecurrentjobsdeficitbyJuly2015,Pennsylvaniamustadd11,000jobspermonth.Inthelast12months,Pennsylvaniahasaddedfewerthan1,700jobsamonth.

Despitepoorrecentperformance,Pennsylvania’srelativejobperformanceoverthepast11yearshasbeenclosetothenation’sandinthemiddleoftherankingsamongthestatesinourregion.Maryland,WestVirginiaandNewYorkhadmorejobgrowththanPennsylvaniasince2000,whileDelaware,NewJersey,andespeciallyOhiohadmuchbiggerjoblossesthanPennsylvania(Table1.4).

WenowturnourattentiontoakeypartofthePennsylvanianeconomy,themanufacturingsector.

Pennsylvania’s Manufacturing Base in Decline

ManufacturingremainsanintegralpartofthePennsylvaniaeconomy,representingonein10ofallnon‐farmpayrolljobsin2011.5TheGreatRecessionreducedmanufacturingemploymentby15%(alossof98,200jobs),strikingthesecondbodyblowofthedecadetothissector(Figure1.4).SinceitstroughinJanuary2010,manufacturinghasregained11,700jobs(2.1%),butthisgrowthlagsthe4.6%nationalrecoveryinmanufacturingemploymentsinceJanuary2010(Figure1.5).

5UsingadifferentemploymentserieswhichincorporatesfarmandotheremploymentsourcesavailablefromtheBureauofEconomicAnalysismanufacturingaccountsfor8%oftotalemployment

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WhyDoesManufacturingMatterToTheMiddleClass?

Oneofthekeyadvantagesofamanufacturingjobisthatitpaysbetter,comparedtoothersectorsandcontrollingforworkerandjobcharacteristics.UsingananalysisofU.S.dataincludedinapaperbytheMetropolitanPolicyProgramattheBrookingsInstitution,theKeystoneResearchCenterestimatedthat,aftercontrollingforcharacteristicsthatinfluenceearnings,likeeducationandoccupation,theaverageweeklywageinmanufacturing($605.18)was8.4%higherthaninnon‐manufacturingindustries($558.29).AsillustratedinFigure1.3,thiswagepremiumwaslargerforlow‐wageworkers(11.1%)thanforhigh‐wageworkers(3.8%).Thesedatademonstratethateventodayamanufacturingjobremainsanimportantpathwayforworkerstoenterthemiddleclass.

ToreadmoreonManufacturingandEconomicPolicyseeWhyDoesManufacturingMatter?WhichManufacturingMatters?APolicyFrameworkbySusanHelper,TimothyKrueger,and

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Table1.5presentsemploymentdatainthemanufacturingsectorusingtheQuarterlyCensusofEmploymentandWages(QCEW),adifferentdatasourcethanwetypicallyusetosummarizeemploymenttrends.6TheQCEWprovidesmoredetaileddataonemploymentchangeovertherecessionandrecovery.BecauseQCEWdataarenotseasonallyadjusted,wereportdatainthesamemonthindifferentyearsandcannotmatchexactlytheperiodoftherecession,December2007toJune2009,orthepreciseperiodofthemanufacturingrecoverythatstartedinJanuary2010.

Table1.5

ManufacturingEmploymentChangebyManufacturingSubsector

ManufacturingSubsector(ThreedigitNAICS)

December2007toDecember2009


Change PercentChange


TotalCoveredEmploymentinthePrivateSector (252,664) ‐5.1% 148,088 3.1%

Manufacturing (94,528) ‐14.4% 4,527 0.8%

Foodmanufacturing (1,645) ‐2.4% 261 0.4%

Beverageandtobaccoproductmanufacturing (348) ‐5.1% (101) ‐1.6%

Textilemills (1,290) ‐25.5% (183) ‐4.9%

Textileproductmills (1,038) ‐20.1% (117) ‐2.8%

Apparelmanufacturing (2,712) ‐27.8% (958) ‐13.6%

Leatherandalliedproductmanufacturing (215) ‐20.5% 93 11.1%

Woodproductmanufacturing (7,638) ‐27.7% (1,694) ‐8.5%

Papermanufacturing (1,949) ‐7.3% (675) ‐2.7%

Printingandrelatedsupportactivities (5,852) ‐16.7% (2,649) ‐9.1%

Petroleumandcoalproductsmanufacturing (476) ‐7.3% 106 1.7%

Chemicalmanufacturing (3,063) ‐6.6% (1,142) ‐2.6%

Plasticsandrubberproductsmanufacturing (3,955) ‐10.3% 318 0.9%

Nonmetallicmineralproductmanufacturing (4,371) ‐16.4% (1,893) ‐8.5%

Primarymetalmanufacturing (7,637) ‐17.8% 4,078 11.6%

Fabricatedmetalproductmanufacturing (15,203) ‐16.6% 4,723 6.2%

Machinerymanufacturing (11,725) ‐20.5% 2,629 5.8%

Computerandelectronicproductmanufacturing (7,083) ‐18.0% (194) ‐0.6%

Electricalequipmentandappliancemfg. (2,612) ‐9.7% 2,274 9.4%

Transportationequipmentmanufacturing (5,084) ‐11.9% 467 1.2%

Miscellaneousmanufacturing (3,689) ‐12.2% (623) ‐2.3%Source.KeystoneResearchCenterbasedonQuarterlyCensusofEmploymentandWages

6TheQCEWisasurveyofemploymentandwagesintheeconomybasedonadministrativefilingscompletedbyalmostallemployers—i.e.,thosethatparticipateintheunemploymentinsurancesysteminPennsylvania.ThemostrecentemploymentdatacurrentlyavailablefromtheQCEWisforDecember2011.ComparethistoCurrentEmploymentStatistics(CES),thenormaldatasourceforjobnumbers,forwhichdataareavailablethroughJuly2012.Onanannualbasis,employmentcountsintheCESarebenchmarkedtoQCEWdata,becauseoftheaccuracyoftheQCEW.

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Table1.6ManufacturingEmploymentChangebySelectedManufacturingSubsectors

ManufacturingSubsector(fourdigitNAICS)





Primarymetalmanufacturing (7,637) ‐17.8% 4,078 11.6%Ironandsteelmillsandferroalloymfg. (1,691) ‐11.9% 1,127 9.0%Steelproductmfg.frompurchasedsteel (1,364) ‐17.7% 302 4.8%Aluminaandaluminumproduction (1,486) ‐34.4% 240 8.5%Othernonferrousmetalproduction (349) ‐5.6% 703 11.9%Foundries (2,747) ‐26.5% 1,706 22.4%

Fabricatedmetalproductmanufacturing (15,203) ‐16.6% 4,723 6.2%Forgingandstamping (1,975) ‐17.6% 878 9.5%Cutleryandhandtoolmanufacturing (701) ‐20.6% (79) ‐2.9%Architecturalandstructuralmetalsmfg. (3,649) ‐15.0% 290 1.4%Boiler,tank,andshippingcontainermfg. (514) ‐9.0% (437) ‐8.4%Hardwaremanufacturing (363) ‐29.3% (79) ‐9.0%Springandwireproductmanufacturing (1,164) ‐31.0% 171 6.6%Machineshopsandthreadedproductmfg. (3,539) ‐15.6% 3,322 17.3%Coating,engraving,andheattreatingmetals (1,022) ‐16.3% 390 7.4%Otherfabricatedmetalproductmanufacturing (2,276) ‐17.3% 267 2.5%

Machinerymanufacturing (11,725) ‐20.5% 2,629 5.8%Ag.,construction,andminingmachinerymfg. (3,022) ‐26.6% 1,169 14.0%Industrialmachinerymanufacturing (1,870) ‐29.6% 156 3.5%Commercialandserviceindustrymachinery (990) ‐19.6% (337) ‐8.3%HVACandcommercialrefrigerationequipment (661) ‐11.1% (386) ‐7.3%Metalworkingmachinerymanufacturing (3,212) ‐24.2% 823 8.2%Turbineandpowertransmissionequipmentmfg. (535) ‐15.0% 431 14.2%Othergeneralpurposemachinerymanufacturing (1,435) ‐12.2% 773 7.5%

Electricalequipmentandappliancemfg. (2,612) ‐9.7% 2,274 9.4%Electriclightingequipmentmanufacturing (547) ‐20.0% (4) ‐0.2%Householdappliancemanufacturing 48 10.8% 60 12.2%Electricalequipmentmanufacturing (105) ‐1.4% 100 1.4%Otherelectricalequipmentandcomponentmfg. (2,008) ‐12.4% 2,118 14.9%

Transportationequipmentmanufacturing (5,084) ‐11.9% 467 1.2%Motorvehiclemanufacturing n.a. n.a. n.a. n.a.Motorvehiclebodyandtrailermanufacturing (2,940) ‐29.9% (1,787) ‐25.9%Motorvehiclepartsmanufacturing (1,231) ‐15.6% 1,528 23.0%Aerospaceproductandpartsmanufacturing 2,026 22.5% 572 5.2%Railroadrollingstockmanufacturing (1,570) ‐21.1% 1,685 28.7%Shipandboatbuilding n.a. n.a. n.a. n.a.Othertransportationequipmentmanufacturing (1,009) ‐17.2% (1,834) ‐37.7%

Note.Shadedrowsaremanufacturingsubsectorsthatpostedgainsintherecovery(December2009toDecember2011)nearlyequivalenttoorexceedingtheirlossesduringtherecession(December2007toDecember2009).Source.KeystoneResearchCenterbasedonQuarterlyCensusofEmploymentandWages

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ThedatainTable1.5revealsthatnomanufacturingsubsectorinPennsylvaniaescapedsubstantialjoblossesduringtherecession.Theyalsorevealthatgrowthinmanufacturingemploymentduringtherecoveryhasbeenlargelyinfivemanufacturingsubsectors:primarymetals;electricalequipmentandappliances;fabricatedmetalproducts;machinery;andtransportationequipmentmanufacturing(allshadedinGreyinTable1.5).InTable1.6(previouspage),webreakdownthesefivemanufacturingindustriesintotheirmoredetailedsubsectors;shadedingreyarethosesectorsthathaveseenjobgrowthduringtherecoverynearlyequivalenttoorexceedingtheirlossesduringtherecession.7Thosefivesectorsare:othernonferrousmetalproduction,machineshopsandthreadedproductmanufacturing,otherelectricalequipmentandcomponentmanufacturing,motorvehiclepartsmanufacturing,andrailroadrollingstockmanufacturing.

Duringtherecovery,thosesectorsthathavepostedstrongemploymentgrowthlargelyreflectPennsylvania’shistoricalstrengthsinmanufacturingaswellastherobustrecoveryinautomanufacturingfollowingtherescueofGeneralMotorsandChryslerfrombankruptcy.(MotorvehiclepartsmanufacturinghasaddedbackmorejobsthanitlostduringtherecessioninPennsylvania.)

Table1.7comparesjoblosssince2000inthemanufacturingsectorintheUnitedStatesasawhole,inPennsylvania,andamongitsborderingstates.

Table1.7ManufacturingEmployment,Pennsylvania,U.S.,andBorderingStates(1000s)

State 1990 2000 2007 2009 2011PercentChange2000‐2011

Pennsylvania 950 864 659 574 564 ‐34.7%UnitedStates 17,695 17,263 13,879 11,847 11,733 ‐32.0%Delaware 46 42 33 28 26 ‐38.1%Maryland 199 172 132 119 113 ‐34.3%NewJersey 530 422 311 266 254 ‐39.7%NewYork 982 749 552 476 458 ‐38.9%Ohio 1,060 1,021 771 629 638 ‐37.5%WestVirginia 82 76 59 51 50 ‐34.8%Source.KeystoneResearchCenterbasedonCESdata

7Table1.4presentsemploymentdatabythree‐digitNAICScodeandTable1.5presentsdatabyfour‐digitNAICScode.

TheChinaToll

RobertScottoftheEconomicPolicyInstituteestimatesthattheU.S.TradeDeficitwithChinahasdisplaced101,200Pennsylvaniajobsbetween2001and2011.Mostofthosejobslosseswereinmanufacturing.

http://www.epi.org/publication/bp345‐china‐growing‐trade‐deficit‐cost/

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MarylandandPennsylvaniasufferedthesmallestlossofmanufacturingemploymentsince2000,sheddingjustoverathirdoftheirmanufacturingworkforces,59,100and300,100,respectively.Withthenationandourneighboringstateslosingnotlessthan30%ofmanufacturingemploymentovertheperiod,thelast11yearshavebeenagrimoneformanufacturinganditscapacitytocreatemiddle‐classjobs.

Increasing Unemployment and Underemployment

Afterreaching4.2%inearly2007,thePennsylvaniaunemploymentrateclimbedtoapeakof8.7%inFebruary2010,surpassingthepeakunemploymentratefollowingboththe1990and2001recessions.ThreeyearsaftertheendoftheGreatRecession,stateunemploymentremainsabove7%and,inrecentmonths,hasbeenheadingbacktoward8%(Figure1.6).

Withmenconcentratedinmanufacturingandconstruction,thetwosectorshardesthitbytherecession,Pennsylvania’sunemploymentrateamongmenremainsabove8%.Asintherestofthecountry,thestate’sunemploymentrateamongwomenhasbeenlowerthanformen(Table1.8).

UnemploymentratesforAfricanAmericansandHispanicsinthecommonwealthremaininthedoubledigitsandsubstantiallyhigherthanforwhites.Theunemploymentrateforyoungworkersages16‐24ismorethandoubletheunemploymentrateforotheragegroups.Workerswhodidnotcompletehighschoolfacesubstantiallyhigherunemploymentratesthanmostworkers.

Table1.8UnemploymentRates,PennsylvaniaandU.S.,2011

Demographic Pennsylvania UnitedStatesAll 7.8% 8.9%GenderMale 8.3% 9.4%Female 7.2% 8.5%

Age16‐24yrs 14.2% 17.3%25‐54yrs 6.9% 7.9%55yrsandolder 6.0% 6.6%

Race/ethnicityWhite 6.7% 7.2%Black 12.9% 15.9%Hispanic 14.4% 11.5%Asian/Pacificislander 10.7% 7.2%

EducationLessthanhighschool 16.6% 17.8%Highschool 9.2% 11.1%Somecollege 8.2% 9.4%Bachelor'sorhigher 4.6% 4.5%

Source.EconomicPolicyInstituteanalysisofCPSdata

Definition

Unemploymentratescounttheshareofthelaborforcethatisnotcurrentlyworkingbutisactivelyseekingemployment.Moreprecisely,theunemployedmustmeetallofthefollowingcriteria:theyhadnoemploymentduringagivenweek,theywereavailableforworkatthattime,andtheymadespecificeffortstofindemploymentsometimeduringthepreviousfour‐weekperiod.Personslaidofffromajobandexpectingrecallneednotbelookingforworktobecountedasunemployed.

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WorkerswithaCollegeEducationDoNotEscapetheHardships ofRecessions

AsTable1.8makesclear,workerswithonlyahighschooldiplomain2011hadunemploymentratesthatweretwicethoseofcollegegraduates.Thus,workerscansignificantlyreducetheirchancesofbeingunemployedbygoingtocollege.ButasTable1.9illustrates,acollegeeducationdoesnotpreventgraduatesfromexperiencingtheincreasedhardshipthatcomeswitharecession.TodayacollegegraduateinPennsylvaniaistwiceaslikelytobeunemployedasacollegegraduatebeforetherecessionstarted.

Table1.9UnemploymentRatesbyEducationinPennsylvania2007and2011

Education 2007 2011PercentChange

Lessthanhighschool 11.1% 16.6% 50%Highschool 4.9% 9.2% 88%Somecollege 3.8% 8.2% 116%Bachelor'sorhigher 1.8% 4.6% 156%Source.EconomicPolicyInstituteanalysisofCPSdata

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Keepinmindthattheunemploymentrateisaconservativemeasureofwhatlabormarketstatisticianscalltheunderutilizationoflabor.Itfailstocapturepeoplewhoworkpart‐time

becausetheycan’tfindafull‐timejoborpeoplewhohavestoppedlookingforajobbecausetheydon’tbelievetheycanfindone.Thebroadestmeasureofthelabor‐marketslackthattakesintoaccountthesefactorsiscalledtheunderemploymentrate(seeboxabovewiththefulldefinition).

In2011oneinsevenworkersinPennsylvaniawereunderemployedcomparedtooneinsixU.S.workers(Table1.10).Oneinfourworkers16‐24yearsofage,oneinfiveAfrican‐AmericansandnearlyoneinfourHispanicswereunderemployedin2011.Astartlingoneineveryfourhighschooldropoutsandoneinsixhighschoolgraduatescouldn’tfindenoughworkin2011.

Table1.10UnderemploymentRates,PennsylvaniaandU.S.,2011

Demographic Pennsylvania UnitedStatesAll 13.9% 15.9%GenderMale 14.3% 16.1%Female 13.5% 15.7%


Race/ethnicityWhite 12.3% 13.1%African‐American 20.6% 24.8%Hispanic 23.8% 22.1%Asian/Pacificislander 16.2% 13.4%


Source.EconomicPolicyInstituteanalysisofCPSdata

Definition

Underemploymentratesincludefourgroups:(1)theunemployed,(2)discouragedworkers(thosewhohavegivenuplookingforworkinthelastyear),(3)part‐timeworkerswhowouldpreferfull‐timework,and(4)thosewhofaceasubstantialbarriertowork,suchaslackoftransportationorchildcare(thislastgrouptendstobeverysmall).

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A Slow Recovery That Could Have Been Worse

AlthoughofficiallytheGreatRecessionbeganinDecember2007,thefullextentoftheimpactofthecollapsinghousingbubbledidn’tbecomeapparentuntilSeptember15,2008whenthefinancialservicesfirmLehmanBrothersfiledforbankruptcyafterfailingtosecurecriticalaidfromtheBushadministration.Withinaday,thefalloutfromasimilarpotentialbankruptcyatAmericanInternationalGroup(AIG)rockedfinancialmarketsandpromptedaseriesofinterventionsbytheFederalReserveandtheBushadministrationinthebankingandautosectors.ThesepolicieswereaimedatavoidingpolicymisstepsthatdeepenedandlengthenedtheGreatDepressionofthe1930s.

Inpartbecausetheseeventsunfoldedoverthecourseofthe2008presidentialelectionandtransition,aneconomicstimuluspackagewasdelayeduntiltheAmericanRecoveryandReinvestmentAct(ARRA)passedCongressinmid‐February2009.BetweenSeptember2008andMarch2009,thePennsylvanialabormarketlostastunning144,500jobs.

Wereitnotforthefullrangeoffederalinterventions,includingARRA,Pennsylvaniacouldhavelostasmanyas400,000jobs,sendingtheunemploymentrateto15%.Instead,thestate’sunemploymentratepeakedat8.7%,andPennsylvaniaemploymentlossoverthewholeoftheGreatRecessionwas243,000jobs.8

Asjoblossesandcutsinworkhoursacceleratedin2008andearly2009,incomesgeneratedinthemarket‐basedeconomyinPennsylvaniacratered.Betweenthe3rdquarterof2008andthe3rdquarterof2009,incomesderivedfromprovidingservicestothemarketeconomydeclinedby7%.However,overthissameperiod,disposablepersonalincomepercapita—theincomeavailabletoPennsylvaniahouseholdstopurchasegoodsandservices—declinedbyjust1%.Governmenttransfers,suchasforSocialSecurity,unemploymentinsuranceorpublichealthcareandtaxcuts,madethedifference.

Figure1.7illustratestheimpactoftherecessionandthefederalinterventionsincludedinARRAonpersonalincomeinPennsylvania.Thebluelinerepresentspersonalincomeminustransferspercapitaaproxyfortheincomesearnedinthemarket.Thesolidblacklinerepresentsdisposablepersonalincomepercapitaortheincomehouseholdshaveavailabletospendongoodsandservices.Thedashedblacklineinbetweenprovidesaroughsenseofhowimportantfederaltax

8243,000isthenumberofjobslostbetweenDecember2007andthetroughofemploymentinPennsylvaniawhichwasFebruary2010.TheofficialendoftherecessionwasJune2009asdefinedbytheBusinessCycleDatingCommitteeattheNationalBureauofEconomicResearch(NBER).TheNBERconsidersmorethanjustemploymentinidentifyingbusinesscyclepeaksandtroughs.

TheRecoveryActWorked

EconomicRecoveryPartTwo:WeNeedMoreActiononJobsandWages:ReviewstheimpactthroughDecember2010onemploymentandunemploymentatthestateandlocallevelinPennsylvania.

http://keystoneresearch.org/sites/keystoneresearch.org/files/Economic‐Recovery‐Part‐2.pdf

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cuts,taxcreditsandARRAbenefits—suchasextendedunemploymentinsuranceandfoodstamps—weretopreventinglargerdeclinesinconsumerspending.9

Iffederalpolicymakershadsatontheirhandsinthewakeoftherecession,disposableincomepercapitalikelywouldhavedeclinedby$2,500betweenthe3rdquarterof2008andthe3rdquarterof2009.Instead,disposablepersonalincomepercapitaoverthisperioddeclinedbyjustunder$400percapita.Deficit‐financedfederaltaxcutsandcredits,andenhancedunemployment,socialsecurityandfoodstampbenefitsbluntedthedeclineinconsumerspendingintheprivateeconomy.Withoutthisfederalaction,PennsylvaniaincomewouldhavedeclinedmuchmorethanitdidandthePennsylvaniaeconomywouldhaveexperiencedsignificantlygreaterjoblossthanitdid.

Althoughmarket‐basedincomesbegantorecoverinthelastquarterof2009,theyhaveyettomatchtheirpre‐recessionpeak—areflectionofthecontinuedhighlevelofunemploymentstillboggingdowntheeconomy.

9ItdoessobyassumingthatthehistoricrelationshipbetweenpercapitadisposablepersonalincomeandpersonalincomeminustransfersinPennsylvaniawasmaintainedfrom2008totheendof2011.

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Figure1.8tracksemploymentgrowthfromthestartoftherecoveryineachofthelastthreerecessions.InPennsylvania,employmentgrowthsincethebeginningoftherecoveryinJune2009hasbeenstrongerthanineitherthe1990orthe2001recession.However,becausethejoblossesassociatedwiththisrecessionweremoresubstantialthanineitherofthelasttworecessions,Pennsylvaniaremainswellbelowfullemployment.Inaddition,jobgrowthhasbeendecliningrecently,asnotedearlier.

Complicatingmattersfurther,thecurrentCongress,electedin2010,hasfailedtoextendaidtostateandlocalgovernmentsbeyondwhatwascontainedintheARRA.Atthestatelevel,GovernorCorbettandthePennsylvaniaLegislaturehavechosentorelyexclusivelyonbudgetcutstoaddresstheexpirationoffederalARRAaidratherthantakeabalancedapproachthatincludesbudgetsavingsandnewrevenue.Inaddition,surplusesofmorethanhalfabilliondollarshavebeencarriedforwardineachofthelasttwostatebudgets.

Adirectresultofexpiringfederalaidandstatebudgetcutswasthelossoftensofthousandsofpublic‐sectorjobsin2011.Figure1.9presentsthechangeinemploymentsincethestartoftherecoveryinthethreemostrecentrecessions,revealingthatthelossofpublic‐sectorjobsisuniquetothecurrentrecovery.

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Thirty‐sevenmonthsaftertheofficialendofthe1990recession,employmentinPennsylvania’spublicsectorhadclimbedby5,900jobs.Inthesameperiodfollowingtheendofthe2001recession,Pennsylvania’spublicsectorhadadded9,900jobs.The2007recessionofficiallyendedinJune2009,andsincethenthePennsylvaniapublicsectorhasshed31,000jobs.10

10Notethatmostoftheincreaseintemporarypublic‐sectoremploymentassociatedwith2010censusoccurredinthefirstsixmonthsof2010.

AusterityEconomicsInAction

AnalysisbyBryceCovertandMikeKonczalfindsthat70percentofpublicsectorjoblossesatthestateandlocallevelin2011wereinjust12states.Thesewereallstates,suchasPennsylvania,thatembracedausterityeconomics:theyundertookdeepcutstoaddressfiscalchallengesratherthanabalancedapproach:Alabama,Indiana,Maine,Michigan,Minnesota,Montana,NewHampshire,NorthCarolina,Ohio,Pennsylvania,WisconsinandTexas.TheCovertandKonczalanalysissuggeststhatthedeteriorationinPennsylvania’srecentjob‐growthrankingisnotarandomeventbutapredictableresultofpolicychangessince2010.

http://www.rooseveltinstitute.org/sites/all/files/GOPProjectSlashingPublicWorkforce.pdf

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TheQuarterlyCensusofEmploymentandWages(QCEW),asnotedearlier(inthediscussionofmanufacturingemploymenttrends),provideslesstimelybutmoredetaileddataonchangesinemploymentbyindustry.

ThemostcurrentdataavailablefromtheQCEWareforDecember2011.Table1.11breaksdownPennsylvania’semploymentgrowthbysectorfromtheQCEWin2011,showingthattherewasalossof25,000public‐sectorjobsthatyear,withthebulkofthemconcentratedinlocalgovernment.Table1.12breaksdownlocalgovernmentemploymentoverthissameperiod,revealingthat19,000localjoblosseswereinElementaryandSecondaryschools,whichfacedsignificantfundingcutsinthe2011‐12statebudget.Table1.13providesdetaileddataonpublic‐sectorjoblossesatthestatelevel.

Table1.11

EmploymentchangeDecember2010toDecember2011bySectorinPennsylvania

SectorDecember2010

December2011 Change

PercentChange

TotalCovered 5,555,783 5,595,135 39,352 0.7%

Private 4,813,921 4,878,519 64,598 1.3%

Public 741,862 716,616 (25,246) ‐3.4%

Federal 104,525 101,951 (2,574) ‐2.5%

State 140,146 137,526 (2,620) ‐1.9%

Local 497,191 477,139 (20,052) ‐4.0%Source.KeystoneResearchCenterbasedonQCEWdata

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Table1.12

EmploymentchangeDecember2010toDecember2011bySectorinPennsylvania

SubsectorofLocalGovernmentinPennsylvania December2010

December2011


LocalGovernmentTotal 497,191 477,139 (20,052) ‐4.0%

Utilities 10,113 10,179 66 0.7%

Heavyandcivilengineeringconstruction 2,855 2,835 (20) ‐0.7%

Transitandgroundpassengertransportation 7,712 7,996 284 3.7%

Supportactivitiesfortransportation 1,485 1,416 (69) ‐4.6%

Otherinformationservices 2,204 2,122 (82) ‐3.7%

Professionalandtechnicalservices 21 42 21 100.0%

Administrativeandsupportservices 1,648 2,394 746 45.3%

Wastemanagementandremediationservices 435 467 32 7.4%

Educationalservices 314,248 294,526 (19,722) ‐6.3%

Elementaryandsecondaryschools 296,966 277,591 (19,375) ‐6.5%

Juniorcolleges 17,111 16,630 (481) ‐2.8%

Nursingandresidentialcarefacilities 10,763 10,406 (357) ‐3.3%

Socialassistance 2,209 2,961 752 34.0%

Performingartsandspectatorsports 436 379 (57) ‐13.1%

Museums,historicalsites,zoos,andparks 112 112 0 0.0%

Amusements,gambling,andrecreation 557 538 (19) ‐3.4%

Foodservicesanddrinkingplaces 932 940 8 0.9%

Personalandlaundryservices 1,358 1,307 (51) ‐3.8%

Executive,legislativeandgeneralgovernment 102,694 101,362 (1,332) ‐1.3%

Justice,publicorder,andsafetyactivities 25,132 25,092 (40) ‐0.2%

Courts 3,987 3,991 4 0.1%

Policeprotection 9,766 9,662 (104) ‐1.1%

Legalcounselandprosecution 1,043 992 (51) ‐4.9%

Correctionalinstitutions 6,046 6,097 51 0.8%

Paroleofficesandprobationoffices 597 582 (15) ‐2.5%

Fireprotection 3,583 3,650 67 1.9%

Administrationofenvironmentalprograms 1,442 1,382 (60) ‐4.2%

Community&housingprog.administration 5,132 5,109 (23) ‐0.4%

Administrationofeconomicprograms 1,103 1,092 (11) ‐1.0%Note.Asaresultofnon‐disclosureofdatabytheBureauofLaborStatisticsthesumofdatabysubsectorwillnotsumtoequalthelocaltotal.

Source.KeystoneResearchCenterbasedonQCEWdata

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Table1.13

EmploymentchangeDecember2010toDecember2011ForStateGovernment

SubsectorofStateGovernmentDecember2010

December2011 Change

PercentChange

StateGovernmentTotal 140,146 137,526 (2,620) ‐1.9%

Animalproductionandaquaculture 131 116 (15) ‐11.5%

Heavyandcivilengineeringconstruction 6,441 6,401 (40) ‐0.6%

Foodandbeveragestores 4,780 4,554 (226) ‐4.7%

Professionalandtechnicalservices 4,392 4,380 (12) ‐0.3%

Administrativeandsupportservices 1,728 1,543 (185) ‐10.7%

Educationalservices 37,854 37,594 (260) ‐0.7%

Collegesanduniversities 37,550 37,305 (245) ‐0.7%

Ambulatoryhealthcareservices 704 695 (9) ‐1.3%

Hospitals 4,557 3,999 (558) ‐12.2%

Nursingandresidentialcarefacilities 6,887 6,654 (233) ‐3.4%

Socialassistance 7,811 7,490 (321) ‐4.1%

Museums,historicalsites,zoos,andparks 216 211 (5) ‐2.3%

Amusements,gambling,andrecreation 238 240 2 0.8%

Executive,legislative&gen.government 9,624 9,242 (382) ‐4.0%

Justice,publicorder,andsafetyactivities 24,734 24,159 (575) ‐2.3%

Courts 1,022 1,011 (11) ‐1.1%

Policeprotection 6,051 5,970 (81) ‐1.3%

Legalcounselandprosecution 733 676 (57) ‐7.8%

Correctionalinstitutions 15,649 15,178 (471) ‐3.0%

Paroleofficesandprobationoffices 1,063 1,071 8 0.8%

Administrationofhumanresourceprog. 6,233 6,152 (81) ‐1.3%

Administrationofenvironmentalprog. 5,511 5,666 155 2.8%

Administrationofeconomicprograms 4,897 4,892 (5) ‐0.1%Note.Asaresultofnon‐disclosureofdatabytheBureauofLaborStatisticsthesumofdatabysubsectorwillnotsumtoequalthestatetotal.

Source.KeystoneResearchCenterbasedonQCEWdata

WenowturnourattentiontotrendsinemploymentoverthelastsevendecadesandbrieflytoincomesoverthelastthreedecadestorevealtheconsequencesofweakemploymentgrowthonincomegrowthinthePennsylvaniaeconomy.

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A Lost Decade

Tworecessionsinadecademaketheperiodfrom2000‐2010theworstintermsofjobcreationinPennsylvaniasince1940(Figure1.10).

Weakjobgrowthinthelastdecadetranslatedintofallingincomes.Ourdataonincomesatthestatelevelonlyextendbacktothe1980s,butthepatternofincomegrowthfollowsthatofjobgrowth.Medianfour‐personfamilyincomegrewalmosttwiceasfastinthe1990sasitdidinthe1980s,butinthelastdecade,itactuallydeclined.Medianfour‐personfamilyincomeinPennsylvaniadeclinedby$6,136in2010from$82,818in2000(Figure1.11).11

Thesedatamakeclearthatstrongjobgrowthisnotjustimportantfortheunemployedoryounggraduates;itisalsoanecessaryingredientfor

11Thedatasourceformedianfour‐personfamilyincomeseriesforPennsylvaniaswitchesin2004‐05fromtheMarchCurrentPopulationSurveytotheAmericanCommunitySurvey.Otherincometimeserieswhicharemeasuredusingthesameinstrumentacrossthewholeperiodalsodemonstrateadeclineinincomesoverthepastdecade.Medianhouseholdincome,availableforPennsylvaniafrom2000to2010fromtheMarchCurrentPopulationSurvey,declinedfromits2000levelby$4,940to$48,144in2010.MedianhouseholdincomeasmeasuredintheAmericanCommunitySurveydeclinedoverthesameperiodby$927to$49,288in2010.AveragetaxableincomeinPennsylvaniaestimatedfromPennsylvaniaDepartmentofRevenue(DOR)andInternalRevenueService(IRS)datadeclinedfromits2000levelby3,641to$51,289in2010(SeeChapter5formethodologicaldetailsontheconstructionofthetaxableincometimeseries).

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broad‐basedgrowthinincomes.

Inthenextsection,webrieflyreviewPennsylvania’spopulationgrowthandlaborforcecharacteristicsbeforereturning,inChapter2,totheimpactofweakjobgrowthonthewages.

Some Basic Facts on the Pennsylvania Economy

Pennsylvania’s Population and Workforce Growing

AsshowninTable1.14,Pennsylvania’spopulationgrewby3.4%from2000to2010,asthecommonwealthaddedjustover420,000people.Ofsixneighboringstates,half—Delaware,MarylandandNewJersey—grewfaster.

Pennsylvania’slaborforcein2011stoodat6.3million.ThePennsylvanialaborforceissubstantiallymorewhite(83%)thanthelaborforceofthenation(67%)(Table1.15).

Table1.14PopulationandPopulationGrowth,Pennsylvania,U.S.,andBorderingStates,2000‐2010

State 2000 2010 PercentChange

Pennsylvania 12,281,054 12,702,379 3.4%UnitedStates 281,421,906 308,745,538 9.7%Delaware 783,600 897,934 14.6%Maryland 5,296,486 5,773,552 9.0%NewJersey 8,414,350 8,791,894 4.5%NewYork 18,976,457 19,378,102 2.1%Ohio 11,353,140 11,536,504 1.6%WestVirginia 1,808,344 1,852,994 2.5%Source.U.S.CensusBureau

Table1.15LaborForceDemographics,PennsylvaniaandU.S.,2011Demographic Pennsylvania UnitedStatesGenderMale 53.1% 53.4%Female 46.9% 46.6%

Race/ethnicityWhite 82.9% 67.3%African‐American 8.9% 11.1%Hispanic 4.7% 14.9%Other 3.5% 6.7%



Source.EPIanalysisofCPSdata

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Labor Force Participation Rates Reveal a Strong and Widely Shared Work Ethic

In2011,63.2%ofadultsparticipatedinthePennsylvanialaborforce,aboutapercentagepointlowerthanthenationalaverageof64.1%(Table1.16).Laborforceparticipationratesbyagegrouprevealthat60.6%ofpeopleages16to24participateinthelabormarketcomparedto55%ofworkersinthisagegroupnationally.AmongPennsylvaniaadultsages25to54,81.8%participateinthelabormarket,two‐tenthsofapercentagepointhigherthanthenationalaverage.Itisamongadults55andolderthatPennsylvanialaborforceparticipationratesfalloffcomparedtothenationalaverage:38.2%ofPennsylvaniaadults55andolderparticipateinthelabormarketcomparedto40.3%nationally.

Figure1.12examinesthechangesinlaborforceparticipationratesformenandwomeninPennsylvaniaandtheUnitedStatesbetween1979and2011.Theyrevealthefamiliarpatternofrisingparticipationofwomenoverthisperiodandalongrungradualdeclineinmen’slaborforceparticipation.In1979,just

Table1.16LaborForceParticipationRatesbyDemographic,PennsylvaniaandU.S.,2011Demographic Pennsylvania UnitedStatesAll 63.2% 64.1%GenderMale 69.7% 70.5%Female 57.1% 58.1%


Race/ethnicityWhite 63.7% 64.1%African‐American 58.9% 61.3%Hispanic 61.7% 66.5%Asian/Pacificislander 61.5% 64.7%


Source.EPIanalysisofCPSdata

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shyofthreeoutoffourmeninPennsylvaniawereworkingorlookingforwork.Thatsharehasdeclinedbyroughlyfivepercentagespoints,to69.7%in2011.ForwomeninPennsylvaniaandthenation,participationinthelaborforcehasbeenontheupswingoverthissameperiod.In1979,46.1%ofwomeninPennsylvaniaparticipatedinthelabormarket,afigurethathasincreasedby11percentagepointsto57.1%in2011.

Key Sectors in Pennsylvania

GrossDomesticProduct(GDP),presentedinTable1.15,showsthetotalvalueofallgoodsandservicesproducedinPennsylvania.In2011,PennsylvaniaGDPwas$578billion.ThelasttwocolumnsofthetablepresenttotalemploymentasmeasuredbytheBureauofEconomicAnalysis(BEA)in2010.Unliketheemploymentfigureswehavepresentedthusfar,theemploymentdatamaintainedbytheBEAalsoincludecountsoffarmingandsoleproprietorshipemployment.ThemostcurrentemploymentcountsavailablefromtheBEAarefor2010,whichwepresentalongside2011GDP.

OfallthemajorindustrialsectorsinthePennsylvaniaeconomy,thethreelargestsectorsasashareofeitherGDPoremploymentareManufacturing,HealthCareandSocialAssistance(discussedinmoredetailinthenextsection)andGovernment

Intheprivatesector,Manufacturingaccountsfor12%ofGDPand8%oftotalemployment,andHealthCareandSocialAssistanceaccountsfor10%ofGDPand13.9%oftotalemployment.ContrastthesetwosectorswithMining,whichcapturescoalmining,oilextractionandmostoftheeconomicactivityassociatedwithMarcellusShalenaturalgasextraction.MininginPennsylvaniain2011accountedfor1.3%ofGDPand0.2%ofemployment.

ThepublicsectorinPennsylvaniaaccountedforjustshyof$59billionineconomicactivity(10.2%ofallGDP)andemploys11.6%oftheworkforce.

The Middle Class Challenge Presented by Health Care and Social Assistance

HealthCareandSocialAssistanceincludestheofficesofphysicians,hospitals,nursinghomesandchildCareproviders.Whileoverallprivate‐sectoremploymentplungedduringtheGreatRecession,HealthCareandSocialAssistanceadded29,000jobs(Table1.16).Jobgrowthhascontinuedinthissectorastheoveralleconomybegantorecover,addinganother28,700jobsbetweenDecember2009andDecember2011.NoothersectorinthePennsylvaniaeconomytodaybettercapturesthechallengeswefaceinstrengtheningthemiddleclass.

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Table1.17

PennsylvaniaGrossDomesticProductandEmploymentByIndustry

Sector

GrossDomesticProduct

(millionsof2011dollars)

PercentofTotalGDP

Employment2010

PercentofTotal

Employment

Total $578,839 7,137,155

Privateindustries $519,654 89.8% 6,237,184 87.4%

Agriculture,forestry,fishing,&hunting $3,551 0.6% 17,620 0.2%

Mining $7,413 1.3% 41,541 0.6%

Utilities $11,273 1.9% 22,526 0.3%

Construction $19,732 3.4% 354,776 5.0%

Manufacturing $70,958 12.3% 589,431 8.3%

Durablegoods $37,606 6.5% 353,357 5.0%

Nondurablegoods $33,352 5.8% 236,074 3.3%

Wholesaletrade $34,026 5.9% 243,980 3.4%

Retailtrade $33,321 5.8% 765,013 10.7%

Transportationandwarehousing $16,571 2.9% 254,648 3.6%

Information $22,561 3.9% 108,890 1.5%

Financeandinsurance $47,920 8.3% 397,113 5.6%

Realestateandrentalandleasing $64,572 11.2% 248,692 3.5%

Professional,scientific,andtechnicalservices $46,258 8.0% 458,446 6.4%

Managementofcompaniesandenterprises $19,140 3.3% 123,069 1.7%

Administrative&wastemgmt.services $14,832 2.6% 356,721 5.0%

Educationalservices $12,857 2.2% 272,950 3.8%

Healthcareandsocialassistance $59,916 10.4% 994,847 13.9%

Arts,entertainment,andrecreation $6,513 1.1% 153,001 2.1%

Accommodationandfoodservices $13,481 2.3% 445,407 6.2%

Otherservices,exceptgovernment $14,758 2.5% 388,513 5.4%

Government $59,185 10.2% 825,358 11.6%

Source.KeystoneResearchCenterbasedonBEAdata

HealthCareandSocialAssistancepowerfullyillustratestheriseinearningsinequalitysince1979betweenworkersbasedoneducationalcredentials(SeeChapter2formorediscussiononthistopic).ThehighestpayingPennsylvaniaoccupationsinthissectorincludesurgeons($92.15perhour);thelowestpayingoccupationsincludechildcareworkers($9.98perhour)andhomehealthaides(10.36perhour).12AccordingtotheOccupationalHandbookoftheBureauofLaborStatistics(BLS),theentrylevelcredentialforhomehealthaidesislessthanahighschooleducationandforchildcareworkersitisahighschooldiploma.AswedetailinChapter2,thewagesofworkerswithlessthanahighschooldiplomaarelowertodaythantheywerein1979andhavestagnatedforbothmenandwomenwithhighschooldiplomas.ThePennsylvaniaDepartmentofLaborandIndustryprojectsemploymentgrowthinPennsylvaniainbothoftheselow‐paidoccupationswillbeabove

12Meanhourlywages,May2011OccupationalEmploymentandWageEstimates,OccupationalEmploymentStatistics(OES)availableonlineathttp://www.bls.gov/oes/oes_dl.htm

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average(6.4%)through2020,withjobsincreasingamonghomehealthaidesby32%andamongchildcareworkersby9.8%.13

Whiletheselow‐payingcaringjobscanoffergreatnon‐financialrewardstotheworkerswhocarefortheyoung,theelderly,andthedisabled,theyarealsochronicallyamongtheworstinpayandbenefits.AsManufacturingemploymenthasdeclinedandemploymentinHealthCareandSocialAssistancehasincreasedoverthelastseveraldecades,inequalityhasincreasedandjobqualityerodedforworkerswithoutpost‐secondarycredentials.Inthefuture,amajorchallengeistoimproveoutcomesforconsumersinthesesectors,jobqualityforworkers,andaffordableaccesstothesecriticalservices.Thischallengewillbeeasiertoachievebecausethecostoflower‐paidworkersisrelativelylow(especiallyinacutehealthcare)asashareoftotalcosts.Inaddition,improvingjobscansavemoneybyreducingworkerturnoverandalsoimprovinghealthcarequality.

Table1.18ChangeinEmploymentinHealthCareandSocialAssistancebySubsector2007to2011

HealthCareandSocialAssistance(ThreedigitNAICS)





TotalCoveredEmploymentinthePrivateSector (252,664) ‐5.1% 148,088 3.1%Healthcareandsocialassistance 29,297 3.4% 28,741 3.3%Ambulatoryhealthcareservices 12,722 4.8% 11,616 4.2%

Officesofphysicians 4,136 3.9% 1,625 1.5%Officesofdentists 540 1.7% 303 0.9%Officesofotherhealthpractitioners 3,493 10.4% 3,320 9.0%Outpatientcarecenters 1,095 3.6% 2,523 8.1%Medicalanddiagnosticlaboratories 75 0.7% 101 0.9%Homehealthcareservices 2,408 7.2% 2,879 8.0%Otherambulatoryhealthcareservices 975 5.3% 865 4.5%

Hospitals (3,227) ‐1.2% 1,744 0.7%Generalmedicalandsurgicalhospitals (5,358) ‐2.2% (97) 0.0%Psychiatricandsubstanceabusehospitals 368 4.5% 656 7.6%Otherhospitals 1,763 9.1% 1,185 5.6%

Nursingandresidentialcarefacilities 5,843 3.1% 4,700 2.4%Nursingcarefacilities (1,165) ‐1.5% 1,352 1.8%Residentialmentalhealthfacilities 2,984 6.5% 2,338 4.8%Communitycarefacilitiesfortheelderly 4,994 8.9% 2,059 3.4%Otherresidentialcarefacilities (970) ‐9.4% (1,049) ‐11.2%

Socialassistance 13,959 10.8% 10,681 7.5%Individualandfamilyservices 13,732 19.1% 11,016 12.9%Emergencyandotherreliefservices (16) ‐0.3% 202 3.2%Vocationalrehabilitationservices (449) ‐3.5% (1,671) ‐13.5%Childdaycareservices 692 1.8% 1,134 2.9%

Source.KeystoneResearchCenterbasedonQuarterlyCensusofEmploymentandWages

13PennsylvaniadataisavailablefromthePennsylvaniaDepartmentofLaborandIndustryavailableonlineathttp://www.paworkstats.state.pa.us/gsipub/index.asp?docid=412.ForthenationaldataseetheOccupationalOutlookHandbookathttp://www.bls.gov/ooh/home.htm

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Chapter 2: Wages & Wage Disparity

AsChapter1madeclear,thePennsylvanialabormarketmorethanthreeyearsaftertheendoftheGreatRecessionhasnotbeenaddingenoughjobstokeepupwiththegrowthintheworking‐agepopulation.Worsestill,therewerefewerjobsinPennsylvaniainJuly2012thanthereweremorethanadecadeearlier,inJuly2000.Thelackofemploymentisparticularlychallengingforthosewhohavelosttheirjobsorthosegraduatingfromhighschoolandcollegeinthelastthreeyears.Lesscommonlyunderstoodistheimpactofhighunemploymentandweakjobgrowthonwagegrowthforthemajorityofpeoplewhohavepaidemployment.

AsFigure2.1andTable2.1illustrate,therewasbroad‐basedalthoughsomewhatunequalgrowthinhourlyearningsamongPennsylvaniaworkersbetween1993and2002,aperiodinwhichthestate’seconomyaddedmorethan4,500jobsamonth.Allworkersgainedsomegroundduringthatperiod.Low‐wageworkersatthe10thpercentilesawtheirearningsrise14%,orbyjustover$1perhour,to$8.66by2002.Thetypicalworker(whoearnsatthemedian)sawearningsrise10%,to$14.58perhour.Still,inequalityroseduringthisperiodasthehighest‐wageworkersexperiencedthemost

Table2.1Hourlyearningsbypercentile1993,2002and2011inPennsylvania

Percentile 1993 2002 2011Percentchange

1993‐2002 2002‐201110th $7.60 $8.66 $8.19 13.9% ‐5.4%20th $9.39 $10.45 $10.02 11.2% ‐4.0%30th $11.30 $12.38 $12.05 9.5% ‐2.7%40th $13.26 $14.58 $14.26 10.0% ‐2.2%

50th(Median) $15.34 $16.65 $16.43 8.5% ‐1.4%60th $17.72 $19.24 $19.00 8.5% ‐1.2%70th $20.42 $23.12 $22.87 13.2% ‐1.1%80th $24.67 $27.61 $27.95 11.9% 1.2%90th $30.81 $37.38 $37.04 21.3% ‐0.9%95th $38.00 $47.15 $46.87 24.1% ‐0.6%

Source.KeystoneResearchCenterbasedonCPSdata

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growthinhourlyearnings;thoseatthe90thand95thpercentilesawtheirearningsrisebymorethan20%between1993and2002.

Contrastthosetrendswiththeperiodbetween2002and2011whentheeconomyaddedfewerthan600jobsamonth.AlmosteverygroupofPennsylvaniaworkerslostground,althoughmuchlikeinthe1990s,thehighest‐wageworkersheldontomorethanthoseatthebottom,wholostthemost.

Withunemploymentprojectedtoremainstubbornlyhighintheyearsahead,themosttroublingquestionishowmuchmoreofthegainsinhourlyearningsmadeinthe1990swillworkersinPennsylvaniahavetogiveup?

Inthenextsection,weexploretrendsinwagesforthetypicalPennsylvaniaworkersince1979.Intherestofthischapter,weexaminetrendsinhealthandpensioncoverageaswellaswagetrendsbygender,raceandeducation,showinghowwageinequalitybasedonthesecharacteristicshasrisenover‐time.

The Long‐Term Perspective: Slow Wage Growth

Figure2.2illustratesmedianhourlywagesinPennsylvaniaandtheUnitedStatesfrom1979to2011.(Allfiguresarein2011dollars).WagesforthetypicalworkerinPennsylvaniadeclinedsharplyintheearly1980sandby1990remained2.3%belowtheir1979high.The1991recessionreducedwagesagaininPennsylvania,erodingmostofthegainsaccruedduringtherecoveryofthelate1980s.Thestrongerrecoveryinthe1990sresultedinmuchstrongerwagegrowthinthelatterhalfofthatdecade.WagesforPennsylvaniaworkersrose8%between1990and

2001.Withthe2000sincludingperiodsofhighunemploymentatthestartandendofthedecade,wagegrowthfrom2001to2011wasonceagainnegative,falling1.4%.

Despitebeingbettereducatedandmoreproductive,thetypicalPennsylvaniaworkerearnedonly$16.43perhourin2011,or63centsmorethanin1979;forafull‐timeworkeremployedall52weeksoftheyear,thatamountedtojust$1,310moreperyear.Whilethetypicalworkerenjoyedanincreaseinwagesof4%overthelast33years,percapitapersonalincomeinPennsylvania

TheBrokenLink

LawrenceMishelinTheWedgesBetweenProductivityandMedianCompensationGrowthfindsthegapbetweenproductivityandcompensationgrowthwaslargerinthe“lostdecade”thanatanypointinthepost‐WorldWarIIperiod.

http://www.epi.org/publication/ib330‐productivity‐vs‐compensation/

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increasedby$33,168,or61%.Partofthediscrepancybetweenwageandpersonalincomegrowthisattributabletotherisingshareofhealthcarebenefitsandpensionsintheoverallcompensationofworkers(forthoseemployeesfortunateenoughtoreceivesuchbenefits).Anothercomponentistheincreasingshareofincomegrowththathasbeenflowingtothetop1%ofPennsylvaniahouseholdsinrecentdecades(seeChapter5formoredetails).

Falling Health Insurance and Other Benefits at Work

Whilemedianwageshavegrownverylittleoverthepastthreedecades,thepercentageofworkersreceivingwork‐basedbenefitshasdeclined.AsillustratedinFigure2.3,employer‐basedhealthcarecoverageforprivate‐sectorworkersinPennsylvaniahasdeclinedsince1979‐81by15percentagepoints(adeclineof20%)toabout61%in2008‐2010.Nationaldataalsomakeclearthatthoseworkerswhostillreceivehealthcoveragefromanemployerhaveovertimebeensaddledwithhigherdeductiblesandrequiredtopayalargershareofthemonthlypremiumforcoverage.14

TheshareofPennsylvaniaworkersparticipatinginapensionplanatworkhasalsodeclined:from60%in

14Seethe2011Kaiser/HRETEmployerHealthBenefitsSurvey(EHBS)availableonlineathttp://ehbs.kff.org/pdf/8226.pdf

DecliningJobQuality

JohnSchmittandJanelleJonesoftheCenterforEconomicPolicyResearchinWhereHaveAlltheGoodJobsGone?summarizenationaldataontrendsinwages,healthcareandpensioncoverage.ThesetrendsdocumentaseveredropintheeconomicrewardsofU.S.jobsovertime.

http://www.cepr.net/index.php/publications/reports/where‐have‐all‐the‐good‐jobs‐gone

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1979‐81to50%in2008‐2010.Overtime,thequalityofpensionbenefitsforworkerswhostillreceivethemhasdeclined,nationaldatashow,asemployershaveshiftedawayfromdefinedbenefitpensionplansto401(k)‐typeplans.15

Trends in Wages for Demographic

Groups

UnderlyingoveralltrendsinwagesinPennsylvaniaaredivergenttrendsfordifferentdemographicgroups.HourlyearningsforthetypicalmaninPennsylvaniahavedeclinedbetween2000and2011,atrendthatalsoholdsseparatelyforwhite,blackandHispanicmen.Figure2.4demonstratesthedivergingfortunesofmenandwomenoverthepastseveraldecades.Between1979and2011wagesforthetypicalmaleinPennsylvaniadeclinedby8%,closelymatchingthedeclineformennationally(7.5%).MeninPennsylvaniahaveneverfullyregainedthegroundlostintheearly1980s.Whilemendidpostwagegainsinthe1990s,tworecessionsinthe2000sbroughtareturntodecliningwagesformen.

Womenhavefaredsignificantlybetteroverthewholeperiod,enjoyingwagegainsinPennsylvaniaofnearly25%since1979.Forawomanworkingfull‐time,earningsrosefrom$11.99perhourin1979to$14.97in2011,anincreasethatboostsannualpay(forafull‐time,full‐yearworkerwith2,080annualworkhours)nearly$6,200.

15FornationaldataontheshifttodefinedbenefitpensionplansseeFactsFromEBRI,EmployeeBenefitResearchInstitute,June2007availableonlineathttp://www.ebri.org/pdf/publications/facts/0607fact.pdf.Formoreonthepitfallsof401(k)‐typeplansseeRobertHiltonsmith,TheRetirementSavingsDrain:Hidden&ExcessiveCostsof401(k)s,Demos,May2012,availableonlineathttp://www.demos.org/publication/retirement‐savings‐drain‐hidden‐excessive‐costs‐401ks

Table2.1MedianHourlyWagesbyGender,Race,andEthnicityinPennsylvania,2000and2011

Demographic 2000 2011PercentChange

AllWhite $16.56 $16.99 2.6%Black $13.49 $13.88 2.9%Hispanic $12.44 $12.21 ‐1.9%

MenWhite $19.51 $18.80 ‐3.6%Black $14.27 $13.91 ‐2.6%Hispanic $12.96 $12.67 ‐2.2%

WomenWhite $13.87 $15.24 9.9%Black $13.12 $13.86 5.6%Hispanic $11.26 $11.82 5.0%

Source.KeystoneResearchCenteranalysisofCPSORGdata

Table2.2MedianHourlyWagesbyGender,Race,andEthnicityinUnitedStates,2000and2011

Demographic 2000 2011PercentChange

AllWhite $17.32 $17.77 2.6%Black $13.69 $13.88 1.4%Hispanic $12.46 $12.21 ‐2.0%

MenWhite $19.90 $19.76 ‐0.7%Black $14.55 $14.25 ‐2.1%Hispanic $12.76 $12.73 ‐0.3%

WomenWhite $14.92 $15.88 6.4%Black $13.03 $13.12 0.7%Hispanic $11.02 $11.76 6.7%


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Table2.1alsopresentsearningsbyraceandethnicity,revealinglargegapsinearnings.ThetypicalblackworkerinPennsylvaniaearned$13.88perhourin2011,laggingbehindwhitesbymorethan$3.00perhour.Hispanicsfaredworse,earning$12.44anhour,justover$4.00lessperhourthanthetypicalwhiteworker(over$8,500peryearlessforfull‐time,full‐yearwork).Comparedtowhitemen,thetypicalblackandHispanicmanearns$5.23and6.55lessperhour,respectively.Amongwomen,the gapsaresomewhatsmaller,withlessthanadollarperhourseparatingwhiteandblackwomen’searnings.Hispanicwomenfallshortofthewagesofwhitewomenby$2.61perhour.

The Gender Gap in Wages

Whilewomenhaveenjoyedearningsgainsinthelastseveraldecades,agendergapremainsinthewagesofPennsylvaniamenandwomen.

In2011,thetypicalwomaninPennsylvaniaearned17%lessthanthetypicalman(Table2.4).

AsFigure2.4illustrates,thegendergaphasnarrowedsubstantially,althoughattimesthatnarrowinghasoccurredasmen’swageshavefallen.

Table2.4RatioofWomen'sMedianWagetoMen's,PennsylvaniaandU.S.,1979‐2011

Year PA US1979 61% 63%1989 71% 73%2000 73% 78%2011 83% 84%


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MoreontheGenderWageGap

Therearedifferencesbetweenmenandwomenintermsofwhateconomistscallproductivity‐relatedcharacteristics.Forexample,becausewomenaretheprimarycaregiverinmostfamilieswithchildren,thetypicalwomenwillhavelesslabormarketexperiencethanthetypicalman.Lessexperiencetendstoresultinlowerearningsformenandwomenwithsimilareducationandinsimilaroccupations.AstatisticalmethodcalledtheOaxacadecompositionattemptstodeterminehowmuchofthegenderwagegapcanbeexplainedbysuchproductivity‐relateddifferencesinindividualcharacteristics.InGenderWageDisparityinthePittsburghRegion:AnalyzingCausesandDifferencesintheGenderWageGap,SabinaDeitrick,SusanB.HansenandChristopherBriemoftheUniversityCenterforSocialandUrbanResearchattheUniversityofPittsburghusethismethodtoconcludethatabout24%ofthegenderwagegapintheUnitedStatescanbeexplainedbydifferencesinproductivity‐relatedcharacteristics.Inotherwords,forawomanwhoearned78centsforeverydollaramanearnedin2000,onlyabout5centsofthe22‐centgapcouldbeexplainedbyproductivity‐relatedcharacteristics.Therestofthegapisverylikelytheresultofcontinueddiscriminationagainstwomeninthelabormarket.

http://www.ucsur.pitt.edu/files/frp/DeitrickGenderWageDisparity12‐07.pdf

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The Black/White Gap in Wages

Blackandwhitemenexperiencedsubstantialdeclinesinearningsfrom1979‐81to1995‐97inPennsylvania.Thetypicalwhitemaleexperienceda6%reductioninearningsoverthisperiod,andthetypicalblackmalesawa17%declineinearnings.Asaresult,thewagegapbetweenwhiteandblackmeninPennsylvaniawidenedoverthisperiodfromjustunder$3.00perhourtonearly$5.00perhour,whereithasstayedthrough2011.ThislossofincomeforblackmeninPennsylvaniaalsoreversedtheirearlierwageadvantageoverblackmenintheUnitedStates.In1979‐81,thetypicalblackmaleemployedfull‐timeinPennsylvaniaearned$3,500morethanthetypicalblackmaleintheUnitedStates.By2011,thatadvantagehaddisappeared,withthetypicalU.S.blackmaleearningjustover$700moreperyearthanthetypicalblackmaninPennsylvania.

AslightlyslowerpaceofgrowthinhourlywagesofblackwomeninPennsylvaniacomparedtothenationalmedianforblackwomenleadtoaconvergenceinwagesbetween2009‐2011and1979‐81,althoughthetwogroups’relativewagesbetweenthesetwoendpointsfluctuate.Overthewholeperiod,thewagesofwhitewomeninPennsylvaniaandthenationgrewby32%,whilePennsylvaniablackwomensawtheirhourlyearningsrisebyjust15%.

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The Educational Gap in Wages

OneofthesinglemostimportantfactorsindeterminingwagelevelsintheU.S.economyiseducationalattainment.Inparticular,thebenefitfromcollegecompletionhasbeenrisingovertime,whilethewagesofthosewithoutacollegedegreehavestagnatedor,inthecaseofhighschooldropouts,fallen.WhilethisisgoodnewsfortheroughlythreeintenPennsylvanianswhohaveacollegedegree,itmeanstheother70%ofworkershavefounditincreasinglyhardto

getahead.

Figure2.7andFigure2.8makecleartherisingadvantageofcollegecompletionformenandwomeninPennsylvaniaaswellasthedecliningfortunesofthosewithfewercredentials.In1979,amalecollegegraduateinPennsylvaniacouldexpecttoearn$5.53moreperhourthanthetypicalmalehighschoolgraduate;forafull‐timejob,thatworksouttojustover$11,500moreinannualincome.By2011,at$28.22perhour,thetypicalmalecollegegraduatecouldexpecttomake$12.09moreperhourthanthe

typicalworkerwhohasonlycompletedhighschool;forafull‐timejob,thattotalsmorethan$25,000ayearinadditionalincome.Between1979and2011,malecollegegraduatessawa13.7%riseinwages.Forthetypicalmaleworkerwithonlyahighschooldiploma,wagesfell16%overthesameperiod,andformalehighschooldropouts,thewagelossoverthisperiodisastunning38%.

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AswasthecaseforwomeningeneralinPennsylvania,wagegrowthforwomenofalleducationallevelshasbeenstrongerinrecentdecadesthanithasbeenformen.Womenwithcollegedegreesexperienceda33%increaseintheirearningsbetween1979and2011.Womenwithhighschooldiplomasorsomecollegeexperiencedonlya6%increase,whilefemalehighschooldropoutssawtheirwagesdeclineby19%overthisperiod.Thetypicalfemalecollegegraduatesawherhourlyearningsrisefrom$17.13anhourin1979to$22.72anhourin2011.Amongwomen,thepremiumforcollegecompletionclimbedonanannualbasis(forafull‐time,full‐yearworker)from$11,319peryearin1979tomorethan$21,400ayearin2011.

The Power of Associate Degrees

ThedatafromtheprevioussectiononearningsforPennsylvaniaworkerswith“somecollege”obscurestheimpactofakeycredentialonearnings.The“somecollege”categorycanbebrokenintothreegroups:1)thosewhohaveattendedsomeamountofcollegeatanytypeofpostsecondaryinstitutionbuthavenotcompletedadegree;2)thosewhohavecompletedanassociate(AA)degreeinanoccupationalorvocationalarea;and(3)thosewhohavecompletedanacademicAAdegree.Itisonlypossiblesince1992todistinguishbetweenworkerswhohadattendedcollegebutnotcompletedanydegreeandthosewhohadobtainedeitheranacademicorvocationalAAdegree.

Whenearningsarecombinedforthesethreedifferentgroupsofworkers,thereisverylittledifferenceinearningsbetweenPennsylvaniaworkerswith“somecollege”andthosewhosimplycompletedhighschool.PresentedinTable2.5andFigure2.9aremoredetaileddataonearningsbyeducationthatillustratemuchmoreclearlytheearningsadvantagetoPennsylvaniaworkerswhoobtainanAAdegreeoverthosewhoonlyhaveahighschooldiploma.

Overall,PennsylvaniaworkerswithanacademicorvocationalAAdegreeearnedanannualwagepremiumoverthetypicalhighschoolgraduateofalittlemorethan$4,000.Thereislittledifference

Table2.5MedianWages(2011dollars)andShareofWorkersbyEducation:PennsylvaniaandU.S.,2011

Pennsylvania UnitedStatesWage Dropouts $9.97 $9.99HighSchool $14.48 $13.52SomeCollege,NoDegree $13.38 $13.60AssociateDegree $16.43 $16.06Occupational/Vocational $16.31 $16.67Academic $16.60 $16.56

Bachelor'sDegreeorHigher $24.82 $25.02LaborForceShare Dropouts 8.0% 10.3%HighSchool 35.6% 28.4%SomeCollege,NoDegree 15.0% 19.2%AssociateDegree 10.6% 10.0%Occupational/Vocational 4.7% 4.6%Academic 5.9% 5.5%

Bachelor'sDegreeorHigher 30.8% 32.0%ShareWithinAssociateDegrees Occupational/Vocational 44% 46%Academic 56% 54%

Source.KeystoneResearchCenteranalysisofCPSOrgdata

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inearningsbetweenworkerswithonlyahighschooldiplomaandthosewhohavesomecollegebutno degree.Thesedatahighlighttheimportanceofcredentialsaswellasthevalueoftaxpayer investmentsinAssociateDegree‐grantinginstitutionsinPennsylvania,especiallythestate’scommunitycolleges.

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Wages by Industry and Occupation

Table2.6presentsmedianwagesintheperiod2009‐2011byindustryandoccupationinPennsylvania.Industryandoccupationaredifferent,butrelated,waysofdescribingthelaborforce.Presentingdataby“industry”organizesemployersaccordingtotheproductsandservicestheyprovide.Forexample,“construction”includesallworkerswhoareemployedbyfirmsthatconstructbuildings,roadsandbridges.Itincludeseveryonefromsecretariesinconstructioncompaniestocarpenters.“Occupation”groupsworkersbaseduponthekindofworktheydo.“Constructionandextractionoccupations”includeworkersemployedintheconstructionindustrybutalsocarpentersandelectriciansemployedinallotherindustries.Secretariesinconstructioncompaniesinthisgroupingappearinthecategory“officeandadministrativesupportoccupations.”

Pennsylvania’shighest‐median‐wageindustryis“publicadministration”($20.85)followedby“financialactivities”($19.78).Thelowest‐payingindustriesinthecommonwealthare“leisureandhospitality”

Table2.6PennsylvaniaMedianWagesbyIndustryandOccupation,2009‐2011

IndustryandOccupation MedianWage

Overall $16.73

Industry

Agriculture,forestry,fishing,andhunting $10.55

Mining $19.38

Construction $19.49

Manufacturing $18.51

Wholesaleandretailtrade $12.82

Transportationandutilities $19.26

Information $19.36

Financialactivities $19.78

Professionalandbusinessservices $18.96

Educationalandhealthservices $17.98

Leisureandhospitality $9.19

Otherservices $14.46

Publicadministration $20.85

Occupation

Management,business,andfinancialoccupations $25.28

Professionalandrelatedoccupations $23.89

Serviceoccupations $10.42

Salesandrelatedoccupations $12.30

Officeandadministrativesupportoccupations $14.83

Farming,fishing,andforestryoccupations $9.46

Constructionandextractionoccupations $19.57

Installation,maintenance,andrepairoccupations $23.58

Productionoccupations $15.52

Transportationandmaterialmovingoccupations $14.39


MoreOnPayInThePublicSectorInPennsylvania

PublicVersusPrivateEmployeeCostsinPennsylvania:ComparingApplestoApples,byLaborandEmploymentRelationsProfessorJeffreyKeefeofRutgersUniversity

http://keystoneresearch.org/publications/research/public‐versus‐private‐employee‐costs‐pennsylvania

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($9.19)and“agriculture,forestry,fishingandhunting” ($10.55).Consideringwagesbyoccupation,thehighest‐payingoccupationsinPennsylvaniaare“management,businessandfinancialoccupations,”andthelowestpaidare“farmingfishingandforestry”($9.46)and“serviceoccupations”($10.42).

Unions and Wages in Pennsylvania

Thedeclineinunionmembershipisoneofthemajorreasonsbehindtheriseinincomeinequalityoverthelastseveraldecades.16Byraisingthebargainingpowerofworkers,unionsensurethatrisingproductivitytranslatesnotonlyintorisingprofitsforcompaniesbutalsorisingwagesforworkers.Evennon‐unionworkersbenefitfromhighlevelsofuniondensity,asnon‐unionemployerstendtoraisewagestobettercompetewithunionizedemployersforskilledlaborand/ordiscourageworkersfromunionizing.Asunionshavebecomelessprevalentintheeconomy,awidegaphasopenedupbetweenwageandproductivitygrowth,contributingtotheconcentrationofincomegrowthamongthehighest‐earninghouseholds.

Alesswellunderstoodbutimportanteffectofunionsistoraiseproductivitybypromptingemployerstocompeteinproductmarketsbasedonservice,qualityandotherfactors—andnotsimplybypayingworkerslowwages.Becauseunionsraisewages,theyprovideanincentiveforemployerstoincreaseinvestmentinlabor‐savingtechnologythathelpsoffsethigherwagecosts.In16LawrenceMishel,Unions,inequality,andfalteringmiddle‐classwages,EconomicPolicyInstitute,August2012,availableonlineathttp://www.epi.org/publication/ib342‐unions‐inequality‐faltering‐middle‐class/

MoreonUnions

TheUnionsoftheStatesbyJohnSchmittprovidesadetailedstate‐by‐stateanalysisofunionmembershipbystate.

http://www.cepr.net/documents/publications/unions‐states‐2010‐02.pdf

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industrieslikeconstruction,unionsandunionizedemployershaveestablishedmulti‐employerapprenticeshipsystemsthatprovidesophisticatedon‐the‐jobandclassroominstruction,raisingproductivityandembeddinginconstructionpricesthecostoftrainingeachnewgenerationofskilledcraftsmen.Thesesystemsarevirtuallynonexistentinthenon‐unionconstructionindustrybecausetheirpersistencedependsonthepresenceofauniontoensurethatallemployersandworkerswhobenefitfrominvestmentsinapprenticeshippaytomaintainthosesystemsovertime.Thisisoneconcretewaythatunionsimproveproductqualityaswellasequity.

Pennsylvaniahasmorethan700,000unionmembers,thefourth‐largestnumberofunionmembersandthe15thmostunionizedworkforceinthecountry.AsillustratedinFigure2.10,uniondensityin1983was27%andhasfallenbyalmosthalfto14.5%in2011.Allofthelossesinunionmembershiphaveoccurredintheprivatesectorwheretodayjustbelowonein10Pennsylvanianworkersaremembersofunions.

AsillustratedinFigure2.11,unionworkersearn27%morethantheirnon‐unioncounterpartsinPennsylvania.Whenyouconsiderthatunionizedworkersaremorelikelytohavecharacteristicsassociatedwithhigherwages,includinghigherlevelsofeducationandagreaterconcentrationinhigh‐wageindustries,theunionearningsadvantageshrinkssomewhatbutisstillsubstantial.Usingstandardstatisticaltechniquestoseparateouttheadvantagesofunionmembershipfromotherproductivity‐relatedcharacteristics,laboreconomistJohnSchmittfindsaunionwagepremiumin

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Pennsylvaniaof15.3%.17Forafull‐timeworkerin2011,theunionwagepremiumyieldsanadditional$5,100inannualincome.

Havingreviewedtrendsinhourlyearningsforworkersatdifferentwagelevelsandacrossandbetweendemographicgroups,inthenextchapterwenarrowourfocustothelowest‐payingjobsinthePennsylvaniaeconomy.

Chapter 3: Poverty‐Wage Jobs

Inthischapter,weturnourattentiontothelowestpayingjobsinthestate’seconomy.Specifically,welookatjobspayingpovertywages—inotherwords,wagesthatwouldearnanannualincome(forafull‐time,full‐yearworker)belowthefederalpovertylineforafamilyoffour.Asasociety,wehavefailedtohonorthecommitmenttoworkmadebyworkersinpoverty‐wagejobsbecausetheyarestillunabletoaffordadecentstandardoflivingfortheirfamilies.

Weconductouranalysisbyestablishingathresholdforapovertywageof$10.97anhour.In2011,justunderoneinfourjobsinPennsylvaniapaidwagesbelowthisamount.

Inthesectionsthatfollow,weanalyzethechangeovertimeintheshareofpoverty‐wagejobsinthePennsylvaniaeconomyaswellasthecharacteristicsoftheworkersinthesejobs.

17JohnSchmitt,TheUnionsoftheStates,CenterforEconomicandPolicyResearch,February2010,availableonlineathttp://www.cepr.net/documents/publications/unions‐states‐2010‐02.pdf

Definition:Poverty‐WageJobs

Wedefinepoverty‐wagejobsasthosepayinghourlywagesthatwouldnotbesufficientforafull‐time(40hoursaweek),year‐round(52weeks)workertoearnanincomegreaterthanthepovertylineforafamilyoffourwithtwochildren.In2011dollars,thepovertywagewas$10.97anhourorless.Atthiswage,aworkeremployedfull‐timeyear‐roundwouldearn$22,811.

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Trends in Poverty‐Wage Jobs

Table3.1ShareofPennsylvaniaWorkersEarningPovertyWages,1979‐2011

Demographic 1979 1989 2000 2011PercentChange1979‐2011

1989‐2011

All 24.0% 29.3% 24.4% 23.9% ‐0.6% ‐18.7%ByRaceandGender WhiteMen 11.3% 18.6% 16.6% 17.1% 51.2% ‐8.2%BlackMen 19.9% 31.0% 27.3% 34.8% 75.0% 12.3%WhiteWomen 40.6% 40.6% 30.9% 27.0% ‐33.5% ‐33.6%BlackWomen 41.1% 40.2% 36.5% 29.5% ‐28.2% ‐26.5%

ByEducation NoHighSchoolDegree 28.9% 44.9% 54.5% 57.9% 100.4% 28.8%HighSchoolDegree 26.0% 33.9% 29.1% 27.9% 7.2% ‐17.9%SomeCollege 25.7% 28.7% 26.1% 31.2% 21.7% 8.9%NoDegree n.a n.a 31.3% 38.9% n.a n.aAADegree n.a n.a 16.1% 20.2% n.a n.a

Bachelor'sorHigher 10.6% 11.2% 8.1% 7.9% ‐25.2% ‐29.6%Note.Povertywagesaredefinedhereaswageslessthan$10.97perhour,2011dollarsSource.KeystoneResearchCenteranalysisofCPSORGdata

PercapitaincomesinPennsylvaniagrewby61%between1979and2011.Despitethiseconomicgrowth,theshareofworkersinthecommonwealthearningpovertywagesremainedessentiallyunchangedoverthesameperiod(Table3.1).Overthecourseofthe1980s,theshareofpoverty‐wagejobsrose,reflectingthedeeprecessionearlythatdecade.Startinginthelate1980sandespeciallyinthelate1990s,theshareofpoverty‐wagejobsfellsharply.Theweakereconomyofthe2000shasonceagaindriventheshareofpoverty‐wagejobshigher.

Figure3.1abovepresentsthetrendsinpoverty‐wagejobsbygenderandracebetween1979and2011.Asmorewomenenteredintonewfieldsandexperiencedanincreaseinwagesoverthisperiod,therewasasharpdeclineintheshareofbothwhiteandblackwomeninPennsylvaniaemployedinpoverty‐wagejobs.Theshareofwhitewomeninpoverty‐wagejobsdeclinedfromnearly41%in1979to27%by2011.In1979,41%ofblackwomeninPennsylvaniawereemployedinpoverty‐wagejobs,andby2011justunder30%were.

Whitewomenarestillmorelikelytoholdpoverty‐wagejobsthanwhitemeninPennsylvania,althoughthegaphasnarrowed.In1979Pennsylvaniawhitewomenweremorethan3.5timesmorelikelytoholdsuchjobsthanwhitemen,butin2011theywerealittlemorethan1.5timesaslikely.Still,in2011morethanoneinfourwhitewomeninPennsylvaniawereemployedinpoverty‐wagejobs.

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Whiletheshareofwhitemenemployedinpoverty‐wagejobsinPennsylvaniaremainslowerthanforallothergroups,itrosefrom11%in1979to17%in2011.

JustunderoneinfourAfrican‐AmericanmeninPennsylvaniawereemployedinpoverty‐wagejobsin1979,butby2011overoneinthreewereemployedinsuchjobs.Todayblackmenaremorelikelythanblackwomeninthecommonwealthtobeemployedinpoverty‐wagejobs.

Finally,table3.1showsthatworkerswithmorecredentialsarelesslikelytobeemployedinpoverty‐wagejobs.In1979,29%ofPennsylvaniaworkerswithoutahighschooldiplomaheldpoverty‐wagejobs,butby2011thatfigurehadclimbedto58%.Highschoolgraduatesfaredsomewhatbetter,with26%holdingpoverty‐wagejobsin1979and28%by2011.OneinfivePennsylvaniaworkerswithanAssociatedegreeand8%ofcollegegraduatesheldpoverty‐wagejobsin2011.

Where Are All Those Bad Jobs?

Thecharacteristicsofpoverty‐wage,or“bad,”jobsboildowntothreefactors:lowwagesintheservicesector,theabsenceofaunion,andpart‐timework.In2011,almosthalfofPennsylvaniaworkerswithpoverty‐wagejobshadpart‐timejobs,andfewerthan5%weremembersofunions.Pennsylvaniaworkersin“serviceandsalesoccupations”accountfor57%ofallpoverty‐wagejobs.Whenexaminingthesamedatabyindustry,wefindsevenin10poverty‐wagejobsinthecommonwealthareinjustthreeindustries:leisureandhospitality;wholesaleandretailtrade,andeducationandhealthservices.

Theindustrycategory“educationandhealthservices”isacombinationof“educationservices”and“healthcareandsocialassistance.”AswediscussedinChapter1,healthcareandsocialassistanceisahighlypolarizedsectorcontainingbothhigh‐wagejobsforphysiciansandnursesaswellasmanylow‐wagebutfast‐growingjobs,suchashomehealthaidesandchildcareworkers.

Poverty‐WageJobsAreSticky

TheKeystoneResearchCenter’sbriefingpaperStuckontheBottomRungoftheWageLadderfoundthatroughly40%ofPennsylvaniaworkersearningpovertywagesin1998werestillearningpovertywagesin2004

http://keystoneresearch.org/publications/research/stuck‐bottom‐rung‐wage‐ladder

TheUnionAdvantageForLowWageWorkers

InUnionsandUpwardMobilityforLow‐WageWorkersbyJohnSchmitt,MargyWaller,ShawnFremstad,andBenZipperertheauthorsanalyzedwagesfor15lowwageoccupationsincludingChildCareworkersandHomeHealthaidesandfindthatunionizationraisedworkers'wagesbyjustover16percent‐‐about$1.75perhour‐‐comparedtothoseofnon‐unionworkers.

http://www.cepr.net/documents/publications/UnionsandUpwardMobility.pdf

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Despiterisingproductivityandeconomicgrowthvirtuallynoprogresshasbeenmadeinmorethan30yearsinreducingtheshareofjobsinPennsylvaniathatleaveworkerslivinginpoverty.Withthisinmind,inthenextchapterweexploretrendsinincomeandpovertyinPennsylvania.

Table3.2DistributionofPennsylvaniaWorkersbySelectedCharacteristicsandWageLevel,2011

CharacteristicsWorkerswithPoverty‐

WageJobs(wage<$10.97/hr.)

WorkerswithHigher‐WageJobs

(wage>$10.97/hr.)

Part‐Time 46% 9.9%UnionMember 4.9% 17.9%PercentinOccupation

Management,business,andfinancialoccupations 3% 17%Professionalandrelatedoccupations 10% 26%Serviceoccupations 38% 10%Salesandrelatedoccupations 19% 7%Officeandadministrativesupportoccupations 11% 15%Farming,fishing,andforestryoccupations 1% 0%Constructionandextractionoccupations 2% 5%Installation,maintenance,andrepairoccupations 1% 4%Productionoccupations 6% 7%Transportationandmaterialmovingoccupations 8% 7%

PercentinIndustry Agriculture,forestry,fishing,andhunting 1% 0%Mining 0% 1%Construction 2% 6%Manufacturing 7% 15%Wholesaleandretailtrade 24% 12%Transportationandutilities 3% 6%Information 1% 2%Financialactivities 3% 8%Professionalandbusinessservices 6% 9%Educationalandhealthservices 21% 28%Leisureandhospitality 24% 4%Otherservices 5% 4%Publicadministration 2% 6%

Source.KeystoneResearchCenteranalysisofCPSdata

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Chapter 4: Income and Poverty

Asthepreviouschaptershavemadeclear,widespreadjoblessnessandslowgrowthoverthelastdecadehaveledtofallingor,atbest,stagnatingwagesforabroadgroupofworkers.Withunemploymentexpectedtoremainhighforsometime,thewagegainsaccruedbyPennsylvaniaworkersinthelate1990sareatriskofcompletelydisappearing.

Againstthisgrimbackdrop,thischapterexaminestheproductofwagesandhoursworkedtoevaluatehowwelleconomicgrowthistranslatingintoprosperityforthetypicalfour‐personfamily.Wefind,byexaminingfamilyincomeandpovertyratesovertime,thatmiddle‐andlow‐incomePennsylvanianshaveexperiencedfallingincomes.

Median Family Income Below Its 2000 Level

Table4.1andFigure4.1presentdataonmedianincomesforfour‐personfamiliesfrom1980to2010.ThegrowthinmedianfamilyincomesovertimeinPennsylvaniacloselytracksnationaltrends.Afterfallingslightlybelowthenationalmedianinthe1980s,medianincomesin

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PennsylvaniagrewslightlymoreinPennsylvaniathannationally.In2010,thefour‐personmedianincomeinPennsylvaniawas$76,682comparedto$72,767nationally.

Adjustingforinflation,medianincomeforfour‐personfamiliesislowertodaythanadecadeago,withincomesfallingby$6,100from$82,800in2000.

Inthelastdecade,thegrowthinfour‐personmedianincomesinPennsylvaniahaslaggedallofourneighboringstatesexceptOhioandDelaware.

Table4.1

MedianIncomeforFour‐PersonFamilies,Pennsylvania,U.S.,andNeighboringStates,1980‐2010

State 1980 1990 2000 2010Change

1980‐1990

1990‐2000

2000‐2010

Pennsylvania $62,513 $66,129 $82,818 $76,682 $3,616 $16,688 ($6,136)UnitedStates $61,299 $67,033 $78,788 $72,767 $5,734 $11,754 ($6,021)Delaware $64,189 $75,237 $87,818 $79,829 $11,049 $12,580 ($7,989)Maryland $69,013 $86,333 $98,202 $100,928 $17,320 $11,870 $2,726NewJersey $69,965 $91,267 $99,466 $101,957 $21,301 $8,199 $2,491NewYork $61,634 $71,479 $81,690 $81,212 $9,845 $10,211 ($478)Ohio $62,725 $69,249 $78,817 $70,599 $6,524 $9,568 ($8,218)WestVirginia $53,520 $54,444 $58,583 $61,691 $924 $4,139 $3,108Source.U.S.CensusBureau,CPSandACS;dataserieschangesfromCPStoACSin2004‐2005

Where the Money Goes

Howisfamilyincomespent?PresentedinFigure4.2aredataonfamilyexpendituresfortheNortheasternUnitedStates(Pennsylvaniadataarenotavailable).Thesinglelargestspendingcategoryforhouseholdsishousing,consuming29%ofexpenditures.Thenextlargestcategoryistransportation,whichaccountsfor15%ofspending.Together,housing,transportation,andutilities,fuels,andpublicservicesaccountfor51%of

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expenditures;addinfood(13%),personalinsuranceandpensions(11%),andhealthcare(6%),andwehaveaccountedfor80centsofeverydollarofhouseholdexpenditures.

Poverty in Pennsylvania

In2010,afamilyoffourwasdefinedaslivinginpovertyiftheirannualincomefellbelow$22,811.Formostofthelastseveraldecades,exceptforaverybriefperiodintheearly1980s,thepovertyratehasbeenlowerinPennsylvaniathaninthenation.In2010,12.2%ofPennsylvaniaresidentslivedbelowthepovertylinecomparedto15%nationally.

Figure4.4showsthepovertyrateforchildreninPennsylvaniafrom1980to2010.Similartotheoverallpovertyrate,thechildpovertyrateinPennsylvaniahasgenerallybeenlowerthanthenationalchildpovertyrateoverthelastseveraldecades.In2010,17.3%ofchildreninthecommonwealthwerepoor,comparedto22%ofchildrennationally.

Thefederalpovertylineiscalculatedbymultiplyingthecostofasubsistencefoodbudgetbythree.Itiswidelyunderstoodthatthecurrentpovertythresholdisaconservativebenchmarkthatunderstatesthenumberofpeoplestrugglingtogetbyinoureconomy.Acommon

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ruleofthumbforasomewhatmorerealisticpovertymeasureistwicethepovertyline.Figure4.5showsthechangeintheshareofPennsylvanianswithincomesbelowtwicethepovertyline.In2010,29.5%ofthepopulationinPennsylvanialivesbelowthisthresholdcomparedto34%ofpeoplenationally.

In1980onein10Pennsylvanian’shadincomesthatputthembelowthepovertyline;33yearslateroneineightPennsylvanian’slivedinpoverty.Giventhecontinuedhighlevelofunemploymentmanyeconomistsarebracingforafurtherriseinpovertyrateswhennewdatafor2011arereleasedinearlySeptember.18Theriseofpovertyandstagnatingincomesforabroadgroupofworkersdocumentedinthisandpreviouschaptershasalsobeenaccompaniedbyanunprecedentedriseinincomeinequalityasubjectwefocusuponinthenextchapter.

18HopeYen,AssociatedPress,USpovertyontracktorisetohighestsince1960s,July22nd2012,availableonlineathttp://bigstory.ap.org/article/us‐poverty‐track‐rise‐highest‐1960s

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Chapter 5: Three Decades of Income Inequality

Aswehavedetailedinpreviouschapters,theGreatRecession’simpactonPennsylvania’seconomyandpeoplelingersbothintermsofhighunemploymentandfallingwagesforthosefortunateenoughtoholdontotheirjobs.TherewasastartlingriseinincomeinequalityinboththeUnitedStatesandPennsylvaniaevenbeforetheworstrecessionsincetheGreatDepressionhitusinlate2007—aswehavedocumentedinpasteditionsofTheStateofWorkingPennsylvania.Inthischapter,weexaminetrendsininequalityoverthelastdecadeinPennsylvaniabutfocusespeciallyondatafor2010,thefirstyearoftheeconomicrecovery.Alldatasummarizedinthischapterareadjustedforinflationandexpressedin2010dollars.

Taxdata,whichallowustoexaminetrendsinincomeamongthewealthiesthouseholds,areavailablefromtheInternalRevenueService(IRS)onlywithalonglag.19Atthetimeofpublication,wehaveonlypreliminary2010data(fromtheIRS)forPennsylvania,whichweareabletousetomakepreliminaryprojectionsoftopincomesfor2010inPennsylvania.20(Moredetailed2010Pennsylvaniadataontopincomes—permittedmorepreciseestimates—shouldbeavailablewithinthenextyearfromthePennsylvaniaDepartmentofRevenue.)

19ForexampletheCurrentPopulationSurvey(CPS)whichwerelyupontotracktrendsinwagesforthetypicalworkerwasnotdesignedtosampleeffectivelyhighincomehouseholds.20IRSdataon2010incomesareavailableonlineathttp://www.irs.gov/uac/SOI‐Tax‐Stats‐‐‐Historic‐Table‐2.FollowingthemethodologyoutlinedbyEstelleSommeiller,RegionalIncomeInequalityintheUnitedStates,1913‐2003,PhDdissertation,UniversityofDelaware(2006),weusetheseIRSdatatoestimateincomelevelsbytopfractiles.Wenormalizethe2010figuresfromtheIRSdatabaseduponanaverageoftheratiooftopfractileincomelevelsestimatedfromIRSdatatotopfractileincomelevelsasreportedbythePennsylvaniaDepartmentofRevenue(DOR)foreachyearbetween1997and2009.Forexample,wecalculatefollowingSommeiller(2006)thattheaverageincomeforthetop1%oftaxpayerswas,between1997and2009,85%oftheaverageincomeofthetop1%oftaxpayersasreportedbythePennsylvaniaDepartmentofRevenue.Tocalculatetheaverageincomein2010,wedivide$861,068by85.3%toarriveatapreliminaryestimateoftopincomesinPennsylvaniaof$1,009,688.

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Unequal Income Growth: It’s Lonely on the Top

Roughly62,000Pennsylvaniataxpayers,thetop1%,experiencedrapidgrowthinincomesastheeconomygrewfrom2002to2007(Table5.1).Duringthattimeperiod,whileaverageincomesgrewby15.4%,theincomesofthetop1%grewby50%.Asaresult,thetop1%inPennsylvaniacaptured54%ofallincomegrowthduringthisperiod.

AsthefinancialsectorcrashedduringtheGreatRecession,thetop1%inPennsylvaniaexperienceda27%declineintheirincomesfrom2007to2009—areflectionoftheconcentrationofwealthamongthe1%infinancialmarkets.Asallincomesdeclined,thetop1%absorbed44%ofalltheincomelossesduringtheGreatRecession.

Thebeginningoftherecoverymarkedastartlingreturntothepre‐recessionpatternofunevenincomegrowththathasfavoredthe1%attheexpenseofthe99%.Whileallincomesgrewonaverageby2.7%inPennsylvaniain2010,theincomeofthetop1%grewby11%.Asaresult,thetop1%captured76%ofallincomegrowthinthefirstfullyearoftheeconomicrecovery.IntheU.S.,thetop1%captured93%ofallincomegrowthin2010.21

Table5.1Inflation‐AdjustedIncomeGrowthinPennsylvania,2000‐2010

AverageIncomeGrowth

Top1%IncomeGrowth

Bottom99%IncomeGrowth

Fractionoftotalgrowth(orloss)capturedbytop

1%

2001Recession2000‐2002 ‐9.4% ‐23.9% ‐5.8% 50%Expansion2002‐2007 15.4% 50.4% 8.5% 54%GreatRecession2007‐2009 ‐13.1% ‐26.5% ‐9.4% 44%

Recovery2009‐2010 2.7% 11.2% 1.0% 76%Notes.Seetextformethodologicaldetails

Source.KeystoneResearchCenterbasedonPennsylvaniaDepartmentofRevenue,InternalRevenueServiceandPiketty&Saez(2003)data

21EmmanuelSaez,StrikingitRicher:TheEvolutionofTopIncomesintheUnitedStates,UnpublishedWorkingPaper,March2012availableonlineathttp://elsa.berkeley.edu/~saez/saez‐UStopincomes‐2010.pdf.

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The Race Resumes to Surpass the 1920s Age Inequality

IncomeinequalityintheUnitedStatesreachedapeakin2007notseensince1928,astheshareofincomeearnedbythetop1%reached23.5%(Figure5.1).22HereinPennsylvania,theshareofincomeearnedbythetop1%peakedatjustshyof22%in2006beforefollowingthenationalpatternanddecliningto18%in2009.23In2010,thefirstfullyearoftherecovery,preliminarydatafromtheIRSindicatethattopincomeswereonceagainsurginginPennsylvania,drivingthe1%’sshareofallincometo19.7%.

In2010,theaverageincomeofthebottom99%ofPennsylvaniataxpayersgrewby1%,whiletheaverageincome

22ThomasPikettyandEmmanuelSaez,“IncomeInequalityintheUnitedStates,1913‐1998,”QuarterlyJournalofEconomics,118(1),2003.Updatedestimatesavailableonlineathttp://elsa.berkeley.edu/~saez/TabFig2010.xls.23Previously,whencalculatingincomeshares,wefollowedEstelleSommeiller,RegionalIncomeInequalityintheUnitedStates,1913‐2003,PhDdissertation,UniversityofDelaware(2006),andusedpersonalincomedatafromtheBureauofEconomicAnalysis(BEA).Becausepersonalincomedataalsocontainthedollarvalueoftransfersandhealthbenefits,itisgenerallygreaterthantotaltaxableincome.Asaresult,dividingthetotaltaxableincomeheldbythe1%bypersonalincomeunderstatestheirshareofallincome.Withthisyear’sreport,wecalculatetopfractileincomesharesinthefollowingway:FirstwecalculatePennsylvania'sshareofU.S.AdjustedGrossIncomeforeachyearbetween1997and2008(onlineathttp://www.irs.gov/taxstats/article/0,,id=171535,00.html).ThisfigureisthenusedtoderiveincomeforPennsylvaniafromU.S.income,includingcapitalgainsfoundincolumn6ofTableA0inhttp://elsa.berkeley.edu/~saez/TabFig2008.xls.WethencombinethisfigurewithestimatesoftheaverageincomeforeachtopincomefractileprovidedbythePennsylvaniaDepartmentofRevenuetoestimatetheshareofincomeearnedbyeachtopincomefractileforeachyearfrom1997to2009.

Table5.2PercentChangeinIncomebyIncomeGroup2009to2010(2010dollars)

PennsylvaniaIncomeGroup 2009 2010* PercentChangeBottom99% $41,281 $41,676 1.0%The1% $907,932 $1,009,688 11.2%Bottom90% $28,803 $29,162 1.2%90‐95% $128,536 $129,547 0.8%95‐99% $212,971 $213,407 0.2%99.99.5% $426,184 $452,527 6.2%99.5‐99.9% $770,245 $847,832 10.1%99.9‐99.99% $2,439,322 $2,750,248 12.7%99.99‐100% $16,731,881 $18,480,207 10.4%

UnitedStatesIncomeGroup 2009 2010 PercentChangeBottom99% $41,696 $41,777 0.2%The1% $913,451 $1,019,089 11.6%Bottom90% $29,967 $29,840 ‐0.4%90‐95% $124,916 $125,627 0.6%95‐99% $201,580 $205,529 2.0%99‐99.5% $399,985 $418,378 4.6%99.5‐99.9% $738,187 $798,120 8.1%99.9‐99.99% $2,465,244 $2,802,020 13.7%99.99‐100% $19,631,207 $23,846,950 21.5%

*The2010figuresforPennsylvaniaareprojectionsbasedondatafromtheInternalRevenueService.Finaldatafor2010onincomesbyincomelevelwerenotavailablefromthePennsylvaniaDepartmentofRevenueasthisreportwascompleted.Seetextforadditionalnotesonmethodology.

Source.KeystoneResearchCenterbasedonPennsylvaniaDepartmentofRevenue,U.S.InternalRevenueServiceandPiketty&Saez(2003)data

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ofthetop1%grewby11%.Thetop1%inthestatecaptured76%ofallincomegrowththatyear(Table5.1).OurpreliminaryestimateslikelyunderstatetopincomesinPennsylvania,sotheshareofincomecapturedbythetop1%willlikelymovehigheroncethePennsylvaniaDepartmentofRevenue(DOR)releasesitsfinaldataforthe2010taxyear.

Table5.2presentstopfractileincomelevelsfor2009and2010inPennsylvaniaandtheUnitedStates.In2010,theaverageincomeofPennsylvania’stop1%grewbyover$100,000to$1,009,688.Overthesameperiod,theaverageincomeofPennsylvania’sbottom99%grewbylessthan$400to$41,676.Thehighlyunevengrowthinincomesisevenmoreapparentwhenyouexaminethechangeinaverageincomesfortheroughly621Pennsylvaniataxpayerswhomakeupthe.01%(99.99‐100%inTable5.2).Ourpreliminaryestimateisthattheiraverageincomegrewby$1.7millionto$18,480,207in2010.Nationally,thisgroupoftaxpayersexperiencedanincreaseintheirincomesin2010of21.5%ormorethan$4.2million.BecauseourPennsylvaniaprojectionsunderstatethehighestincomesthemost,weexpectthegapbetweenthe.01%inPennsylvaniaandnationallytoclosesubstantiallyoncewehavethefinaldatafromtheDOR.

Chapter 6: Conclusion

ThisreporthasestablishedthatthePennsylvaniaeconomyisperformingpoorlyfromtheperspectiveofmiddle‐classandlow‐incomefamilies.Thisisparticularlyevidentsince2000,theendofthelong1990seconomicexpansion.Itisalsolargelytrueforthefullthirdofacenturythatbeganin1979.Theexplanationfortheeconomy’sfailuretoimprovethelivingstandardsandlivesoftypicalfamiliesisnotuncontrollableoutsideforcessuchasthethreehorsemenofthemiddle‐classapocalypse—globalization,technologicalchange,andthemarket.Theexplanationismisguidedpolicies.Currently,federalandstatepoliciesaremisguidedbecausetheyareputtingthebrakesonaneconomythatisalreadythreateningtogobackintoreverse.Weneedtopresstheaccelerator.Longer‐term,policiesaremisguidedbecausetheyhavefailedtodeliveronacoredemocraticpremise—andpromise.Bythisdemocraticpromisewemeanthatthecentralpointofpolicyinacapitalistdemocracyshouldbetoensurethatamarketeconomyimprovesthelivesofmostpeopleandbenefitsthecountry(orstate)asawhole.ThisitispossibletodefinepoliciesthatwoulddeliverbroadlysharedprosperityisillustratedbythedetailedpolicyagendainTheStateofWorkingPennsylvania2011(seetheboxattheendofthischapter).IfPennsylvaniaandtheUnitedStateshadadoptedayearagotheshort‐termpolicyrecipesweoutlinedlastyear,manymorePennsylvaniafamilieswouldbebenefitingfromgrowthtoday.Toclosethisyear’sStateofWorkingPennsylvania,wefirstsoundawarningandthenoutlineasimplethree‐partpolicyprescription.ThewarningisthatthereisaclearandpresentdangerofanotherlostdecadeforworkingfamiliesandariseofeconomicinequalityaboveeventhelevelsbeforetheGreatDepression.Usingconsensuseconomicforecastsforeconomicgrowth,whichprojectcontinuedhighunemploymentuntiltheendofthecurrentdecade,theEconomicPolicy

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Instituteprojectsthattheincomesofthemiddlefifthoffamilieswillbelowerin2018thantheywerein2007and2000.24Thisisa“statusquopolicy”forecast—theoutcomeintheabsenceofadditionalfederalpoliciestoincreasejobcreationandlowerunemploymentrates.Aby‐productofwagesnotrisingformostworkersduringanotherlostdecadewillbethatanoutsizedshareofthebenefitsofeconomicgrowthwillcontinuetogotothetop1%,asin2002to2007andonceagainin2010.Thiscouldproducelevelsofinequalitythatexceedthoseofthelate1920s.ForthreereasonscoretotheidentityofAmerica,evenhigherlevelsofinequalitywouldbebadnewsnotjustforthemiddleclassbutforthenationasawhole.

First,evengreaterinequalityisincompatiblewiththeAmericanDreamofwidespreadopportunity.Indeed,evenbeforethenationfeelsthefullimpactofincreasesininequalitysince2000,Americansaremorelockedintotheeconomicstatusoftheirbirththanpeopleinmostotheradvancednations.25

Second,countrieswithhighinequalityalsoexperienceloweconomicgrowth.26Amongotherpossiblereasonsforthiscorrelation,polarizedsocieties(a)struggletopersuadetheeconomicelitetoinvestintheeducationofthepopulationasawholeorinotherpublicgoodsthatboostlong‐runproductivity(e.g.,traditionalandtelecommunicationsinfrastructureandscientificresearch.),(b)lackarobustmiddle‐classthatsustainseconomicdemandovertime,(c)tendtohavehighcriminaljusticeandprivatesecuritycosts,and(d)havelargersharesofbusinesses(thanmoreequitablecountries)that“takethelow‐road”—competebyexploitingworkersordespoilingtheenvironment,businessstrategiesthatdonotincreaseproductivityorcontributetoinnovation.

Third,highlevelsofeconomicinequalityreinforcethepoliticalproblemsthatcontributedtopoorpolicychoicesinthefirstplace:theexcessiveresponsivenessofourdemocracytotheverywealthy,andourpoliticalsystem’slackofresponsivenesstoordinaryfamiliesandthepublicgood.

Insum,anotherlostdecadethreatensthreetreasuredAmericanandPennsylvaniavalues—widespreadmobility,ourrobusteconomy,andourdemocracy.ANewDirection:Thepastisnotprologuewhenitcomestoeconomicpolicy.Wethereforerecommendthreesimplestepstochartapositivenewdirection,allofthemaimedatrestoringthethreecoreAmericanvaluesthreatenedbypolarizinggrowth.

24SeetheEconomicPolicyInstitute’s(EPI’s)12thEditionofTheStateofWorkingAmerica,tobereleasedonTuesday,September11,2012.Onlineatwww.stateofworkingamerica.org25Inonestudyof17OrganizationforEconomicCo‐operationandDevelopmentcountries,theUnitedStatesranked13thonameasureofmobility.Americanslargelyendupwheretheystartontheeconomicladder,andthesameistrueoftheirchildren.SeeEPI’s12thEditionofTheStateofWorkingAmerica.26Foradditionalcitationsontheimpactofinequalityonmobilityandeconomicgrowth,seeAlanKrueger,“TheRiseandConsequencesofInequalityintheUnitedStates,”onlineathttp://www.whitehouse.gov/sites/default/files/krueger_cap_speech_final_remarks.pdf;andhttp://keystoneresearch.org/media‐center/op‐eds/democracy‐and‐inequality‐america‐response‐eric‐cantor

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1. Thefirstandmostessentialstepisthatourstateandournationcommitthemselvestobroadly

sharedprosperity.Candidatesforofficeshouldbeaskedtoendorsethreebasicvalues:theAmericanDreamofupwardmobility;theideathatpeoplewhoworkhardandplaybytherulesshouldbeabletoshareinournation’sexpandingeconomicpie;and,third,acommitmenttoademocracythatisresponsivetopeopleratherthanwealthandmoney.InPennsylvania,wecouldcallthistheContractwiththeKeystoneState.

2. ThesecondstepwouldbeanInvestmentintheFutureplanthatbolstersourinfrastructure,manufacturingsector,education,skills,andscientificresearchinawaythatgrowsjobsintheshortrunandlaysthefoundationforlong‐rungrowth.ThiswouldbemosteffectivelyimplementedbyanextPresidentandCongressin2013.ButversionsofthebasicapproachcouldalsobeimplementedinPennsylvania.WealsothinkthattheCorbettadministrationwouldbewelladvisedtorefocusinthisdirectioninitsnextbudgetifitwantstobolsterthestate’sjobandunemploymentperformanceoverthenext26months.

3. ThethirdstepshouldbewageandincomespoliciesthatrestorealevelofequityinAmerica

thatiscompatiblewithwidespreadmobilityandastrongeconomy.For33years,aseconomicinequalityhasgrownandthemiddleclasshasbeenundersiege,neithertheUnitedStatesnorPennsylvaniahashadapolicydiscussionthataddressesthebasicquestionofhowcanwerestoretheAmericanDream?27Giventheimportanceofthatdreamtoournation’sidentity,workethic,andinnovativespirit,wethinkthisisagapingholeinourpoliticaldiscourse.

Intheend,thebasicquestionis“WhatKindofPennsylvaniaDoYouWant?”Wewant:

aPennsylvaniainwhichhard‐workingandtalentedchildrenfromlow‐andmiddle‐incomecommunitieshaveafairshotatsuccess,notonlymoreprivilegedchildren;

aPennsylvaniawithopportunityforallwillingtoworkhard,and aPennsylvaniainwhicharesponsivedemocracyhelpscreateaneconomythatworksforall

Pennsylvaniansandthatcanholditsownagainstanyeconomicregionintheworld.Austerityeconomicsandpolicieswrittenforandbythecompaniesandindividualsthatmakethelargestpoliticalcontributionswon’tgetustothiskindofPennsylvania.It’stimeforanewdirection.

27PresidentObama’s“MiddleClassTaskForce,”chairedbyVicePresidentBiden,wasastepinthisdirectionbutdidnothaveafullenoughdiscussionabouttheeconomicforcesdrivingtheincreaseininequalityorthepoliciesnecessarytorestorelevelsofpre‐taxwageandincomeinequalitysimilartothoseofthe1970s.OntheTaskForce,seehttp://www.whitehouse.gov/strongmiddleclass

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aPennsylvaniainwhichtalentedchildrenfromlow‐andmiddle‐incomecommunitiescan

succeedaswellasmoreprivilegedchildren; aPennsylvaniawithopportunityforallwillingtoworkhard,and aPennsylvaniainwhicharesponsivedemocracyhelpscreateaneconomythatworksforall

Pennsylvaniansandthatcanholditsownagainstanyeconomicregionintheworld.Austerityeconomicsandpolicieswrittenforandbythecompaniesandindividualsthatmakethelargestpoliticalcontributionswon’tgetustothiskindofPennsylvania.It’stimeforanewdirection.

StateofWorkingPennsylvania2011: PolicyRecommendations

Maintainfederalsupportforextendedunemploymentbenefits(thatallowworkerstoreceivebenefits—andmaintaintheirconsumerbuyingpower—forupto99weeks).

Provideadditionalfederalaidforstateandlocalgovernments,sothatpublic‐sectorlayoffsdon’tundercutareboundinprivateemployment;

Investininfrastructureandschoolconstruction:aswehavepointedoutsince2008(inadvocatinga“buylow”Pennsylvaniaschoolconstructioninitiative),constructionprojectsthattakeplacewhenthemarketissoftsaveasmuchas20%becausebidpricescomeinlower.Additionalinfrastructureandschoolconstructionthusdeliveratriplebenefit:theycreatejobs,theyprovideafoundationforlong‐termcompetitiveness,andtheywouldbegoodvalueformoney.

Modernizeoursocialsafetynetforjoblessworkersinawaythatalsostrengthensourskillsandtheeconomy:thecurrentU.S.systemofunemploymentbenefitsstilllooksbasicallylikeitdidinthe1930s,payingpeopleaportionoftheirlostwageswiththe(implicit)expectationthattheydon’tneedre‐skillingbecausetheyaregoingtotheiroldjob.Infact,theyarenotgoingbacktotheiroldjobinmostcases.Weneedanadjustmentsystemthatcombinesincomemaintenancewithexpandedopportunitiesforworkerstogainnewskillsindecentpayingcareersprojectedtoexpandoverthenextfewyears.Thisshiftpartlyrequiresmakingtraininggenerallyavailabletojoblessworkersnotjustavailabletoafewtrade‐displacedworkers.Butitalsorequiressomeothercomponents:

o Strongerandmorewidespreadindustrytrainingconsortia(“IndustryPartnerships”)thatprovidereal‐timeintelligenceonskillneedsfrombusinesses—knowledgethatcanbeusedforjobless,incumbent(currentlyemployed),andlow‐incomeworkersalike;

o Incentivesforexpandingworksharing,whichDeanBakerhasshownhasbeencriticaltokeepingunemploymentlowinGermany;

o Whenunemploymentgetsabovecertainthresholds,theflexibilitytocombinetrainingwithjob‐creationincentivesforbusinesses;and

o Whenunemploymentgetshigherstill,theabilitytoinvestindirectpublicjobcreation.

o Thefederalgovernmentshouldfundinnovativeeffortsbystatestomodernizeintheseways,notprescribingsolutionsbutestablishingcriteriaandthenallowingstatestobelaboratoriesofdemocracy.Forourmoney,thisflexibleapproachwouldbeamoreeffectiveuseoffundsnowbeingconsideredforanextensionofpayrolltaxholidays.

Raisetheminimumwageasjustonestepinthelong‐overdueefforttoimprovewagesforthemiddle‐classandtorepairthebrokenlinkbetweenwagesandproductivitygrowth.Althoughoftenforgotten,thefirstfederalminimumwagewasestablishedin1938.Ourexperienceinthefollowingthreedecadesdemonstratedthatarisingminimumwagecouldactuallyhelptheeconomybycreatingpurchasingpoweranddiscouragingcompaniesfromcompetingusing“low‐wage”strategiesthatdon’traiseproductivity.Theminimumwagerosesteadilyininflation‐adjustedtermsfrom1938to1968,aperioddistinguishedbyverylowunemploymentratesandveryhighproductivitygrowth.

Catalyzelarger‐scaleenergy‐efficiencyretrofits,usingsmallamountsoffederalfundstomobilizeprivatecapitalthatcouldbeattractedtoanewmarketwithpredictablereturns(becauseoftherelativelypaybackperiodsofmanyenergyefficiencyupgrades).

Documents

The State of Working Pennsylvania · The State of Working Pennsylvania 2012 is The Keystone Research Center’s deepest and most comprehensive recent look at the Pennsylvania economy