Unequal wage growth is undermining economic mobility in Washington

May 22, 2014 | Tatsuko Go Hollo

Washington state has seen enormous growth in low-wage industries, such as food service and accommodations. Although leisure and hospitality sectors have followed business cycle trends, they have also been outpacing the growth of nonfarm jobs and at an increasing rate. Between 1990 and 2012, these sectors grew by 45%, compared to total nonfarm job growth of 34%. Washington’s occupations are also growing more quickly at the top and the bottom of the income spectrum than in the middle.

Only Washingtonians in the top three deciles of the hourly earnings scale have seen their wages increase over the last several decades, with those at the top seeing the largest increases. Since 1979, those in the top 10% have experienced a 31% increase in hourly wages, while wages of those at the median or below have remained stagnant for more than three decades. Further, the top 20% are the only workers that have experienced increased wages since the start of the Great Recession.

Mobility graph - wages
Income disparities tend to increase over generations. Inherited wealth puts families in better neighborhoods, increases access to better education, and provides access to contacts and experiences that strengthen opportunities for the next generation.

mobilty graph - by sectorOn the other hand, financial emergencies hit the poor the hardest, as they have fewer resources to overcome a crisis. As a result, income inequality in one generation persists in the next generation. Research indicates the current disparities will take many years to be moderated, and only if economic growth is focused on people with middle and lower incomes. When economic growth is strong, people become more mobile, but only if the benefits are widespread and provide a boost for everyone.

Today, only one-third of Americans experience upward mobility, surpassing both their parents’ income and relative position on the economic ladder. Another third experience downward mobility, earning less income than their parents while also failing to move to a higher income bracket. The notion of pulling oneself up by the bootstraps is a powerful one – but the fact is that just 6% of those born into the bottom quintile make it to the top and only 17% make it above the middle.

While residents of the Evergreen state are equally likely to move up the income ladder as the average American, they are more likely to be downwardly mobile. Recent research indicates about 28% of Americans experience downward mobility, compared to 32% of Washingtonians. The state’s income disparities may be increasing the risk of falling to a lower rung on the ladder for those who are unable to access higher education or secure union representation, two factors that are important in protecting against downward mobility.

Across the country there has been renewed attention on raising the minimum wage. In the Puget Sound region, the 2013 elections have indicated support for a higher wage standard, with passage of a $15 per hour minimum wage for transportation and hospitality workers in the airport city of SeaTac and the election of Kshama Sawant to Seattle City Council, who ran on a $15 per hour minimum wage platform. Nationally in 2013, New Jersey, New York and Connecticut approved increases to their state minimum wages, and California passed a law to increase its minimum wage to $10 per hour by 2016.

This post is adapted from our recent report Chutes and Ladders: How Economic Mobility is Changing in an Inequality Society. Read the full report here.

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Posted in Minimum Wage, State Economy

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