The State of Working Massachusetts 2013

Wages

Wages account for the majority of income received by most workers, especially for middle- and lower-wage earners who do not receive income from capital gains or other investments.1 Looking at wages is one way to measure the well-being of workers in a state. Massachusetts ranks high on this measure—in 2012, the median hourly wage in Massachusetts was $19.27, the third highest of all states and 18 percent higher than the U.S. median wage of $16.28 per hour.

Although median wage earners may be better off in Massachusetts compared to other parts of the country, the experience among workers within Massachusetts has varied widely in recent years. Comparing wage growth during similar points in the business cycle, we can see that in the 1980s real hourly wages grew at roughly the same rate—about 1.8 percent a year—for workers across the earning spectrum. That began to change in the 1990s. Wages for the middle group grew at less than half the rate of higher wage earners, and the bottom 20 percent of workers saw a decline in real wages. This divergence only became more pronounced during the first decade of the 2000s.

Of course, inequality in wages and income has increased across the U.S., but the gap between high and low earners has widened more here in Massachusetts. Comparing growth in hourly wages for the 20th and 80th percentiles of earners in Massachusetts and across the U.S. shows that the two groups have pulled further apart in Massachusetts than in the country as a whole. The Massachusetts gap narrowed somewhat during the recession, but remains wider than the U.S. average. The increase in wage inequality is largely the result of a lack of growth in wages at the bottom, which suggests that many Massachusetts workers have not shared in the benefits of the state's economic growth in recent decades.

While the economy has begun to grow again, low-wage workers continue to struggle. Between 1985 and 2012 (in each case three years after the official end of a recession), the gap in hourly pay between high and low wage earners grew by about $9.00, from more than $15 an hour to more than $24 an hour (adjusted for inflation).

Moreover, while all groups saw declines in hourly wages over the last few years, the drop for lower-wage earners has been steeper and the gap remains wide.

Since 1979, productivity in Massachusetts—measured as the output of goods and services per hour worked— has more than doubled, growing by 112 percent over this period. For the U.S. as a whole, productivity has grown by 69 percent over this same period (both figures adjusted for inflation.)

In the four decades following the end of WW II, wage growth in the U.S. generally kept pace with productivity growth (see this report from the Economic Policy Institute and the chart from that report, immediately below), meaning that workers' incomes and standards of living rose along with productivity. This pattern continued into the later 1970s, when the two measures began to diverge.

In Massachusetts, the trend continued through much of the 1980s, but by the end of that decade the two measures began to diverge here as well. Since 1979, the median wage for Massachusetts workers has grown by just 18 percent and the minimum wage has actually lost nearly 13 percent of its value.


1For a breakdown of sources of income for different income groups, see Mishel, Lawrence et al, The State of Working America, 12th Edition (Cornell University, 2012), p. 61ff.