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State of work 2018 Wage mismatch worsens

September 2, 2018

In its annual “State of Working Connecticut” report released on the eve of Labor Day, the nonprofit Connecticut Voices for Children found that many families statewide are still struggling to make ends meet — with the state General Assembly possibly to explore an emerging model in a few states nationally that would vary minimum wages according to business profits or higher-cost areas.

Connecticut has finally regained all the private-sector jobs lost in the recession, but businesses have yet to hire sufficiently to close the gap created state government layoffs and municipalities. Connecticut’s 4.4 percent unemployment remains 0.4 percentage points above the national average.

With some economists blaming a “jobs swap” in Connecticut, in which the best-paying corporate jobs are leaving the state and most new hiring occurring in low-wage service jobs, Connecticut Voices for Children researchers Jamie Mills and Rachel Silbermann stated their own analysis debunks that theory.

In industries that say they cannot find skilled workers to fill available jobs, the researchers indicated it found no evidence of the logical result of rising wages. And it is not a “Northeast thing” — the average weekly wage jumped 12 percent in the first quarter of the year in Boston and Suffolk County, Mass., according to a Bureau of Labor Statistics report last week, the second highest spike in the country, with the Nashua, N.H., region also placing in the top 10.

Since 2014, Connecticut has added more jobs in higher-wage sectors, though Connecticut has a smaller share today of job openings offering $100,000 or more than most neighboring states.

‘Americans don’t believe’

At the opposite end of the pay scale, Mills and Silbermann theorized that the state’s minimum wage of $10.10 an hour is the result of eroding union influence and increasing “monopsony power” of a few employers to dominate industry wage expectations, contributing to the income malaise in Connecticut.

“Because more middle and high-wage jobs are currently being added to the economy than before, we would actually expect this to put upward pressure on wages, not cause average wages to stagnate,” Mills and Silbermann wrote in the Connecticut Voices for Children report. “The composition effect can no longer explain slow average wage growth.”

This past week, the U.S. Bureau of Economic Analysis determined that corporate profits have surged in the past year, with a Hearst Connecticut Media analysis finding an even more pronounced increase for publicly traded companies in southwestern Connecticut.

In mid-August using data from Oxford Economics and Haver Analytics, a Wall Street Journal study suggested corporations are paying far less today for the cost of labor than they did during previous periods of peak economic activity, comparing the value of the S&P 500 stock index to average wages. To University of Connecticut economist Fred Carstensen, it is robbing corporations of one important symbiotic benefit — increased spending on their products by lower-income workers.

“Historically wages would go up much faster (than) the stock market … which was truly important as that meant aggregate demand was growing rapidly, creating a much larger market for businesses, who then (saw) increasing sales and profits,” Carstensen told Hearst Connecticut Media. “But not now, (the) pattern has inverted. Stock market values have surged — but wages have been flat or declining. This reveals how weak American economic growth has actually been and why so many Americans don’t believe they have benefited. They haven’t.”

The 142-hour workweek?

For those making the state’s minimum wage of $10.10 an hour or just above it, the state’s high costs of living create a daunting reality: Connecticut Voices for Children cites data showing that a single mother in Bridgeport would need to work 142 hours a week to earn the $6,000 a month needed to cover rent, food, health and child care, taxes and other needs.

Noting that nearly a third of Connecticut workers make less than $15 an hour, the threshold that has been the subject of a national movement for pay equality, Connecticut Voices for Children advocates the state raising the minimum wage to $15 over three years..

In response to a legislator’s query, the Connecticut General Assembly’s Office of Legislative Research published a study this past week that examined tiered minimum wage scales in New York, California, Ohio and other states that create differentiated wage floors depending on industry, location and size of an employer. As the case elsewhere in the nation, Connecticut allows a few exceptions, including for restaurants paying below minimum wage for restaurant servers who receive tips, informal jobs like babysitting or formal apprenticeships.

“Most commonly, these minimum wage ‘tiers’ allow smaller businesses to pay a lower minimum wage, based on either their sales or business volume,” wrote OLR analyst Lee Hansen. “Others vary according to an employer’s location to better account for the varying costs of living in different regions of the state.”

Alex.Soule@scni.com; 203-842-2545; @casoulman

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