Home to the state's second-largest metro, the Northeast Region has a strong industrial sector, tied largely to the area's abundant natural resources.
Most of the manufacturing base centers on mining and forest products industries. More than half of the sector's employment is in paper and machinery manufacturing.
Want the freshest data delivered by email? Subscribe to our regional newsletters.
2/14/2022 9:00:00 AM
Carson Gorecki
During the past year and a half of this pandemic economy and labor market, we have been focused on the number of jobs. While the change in employment is likely the most important indicator of the health and respective recoveries of different regions and industries, it is certainly not the only measure available. Wages are among the other measures DEED's Labor Market Information Office is keeping an eye on.
Included in DEED's Quarterly Census of Employment and Wages(QCEW), are - you guessed it - average wages by detailed industry. As inflation increasingly became a matter of concern across the U.S. economy, the question whether wages have kept pace is of greater relevance as well. Are workers going to be able to afford rapidly rising costs of everyday necessities such as food and gas? Or are prices outpacing wage gains making everything relatively more expensive?
The Bureau of Labor Statistics tracks prices of common consumer goods and services via the Consumer Price Index (CPI). The CPI is often considered the best estimate of average costs for American consumers and it rose rapidly starting in early 2021. In the Midwest region, over-the-year changes ranged from 5.7% to 5.9% in the 3rd quarter (see Figure 1). This growth in prices exceeded the peak of a 5.6% increase experienced during the depths of the Great Recession in 2008. From the 3rd quarter of 2019, the Midwest CPI for all items rose an even greater 6.4%.
How did wages in Northeast Minnesota stack up against our best estimate of prices from the CPI? The 3rd quarter QCEW data provide us the perhaps best means of comparison. Since the 3rd quarter of 2019, the average annual wage for covered employment in all industries grew 13.4%. The largest wage growth was seen in the industries that either paid the lowest or the highest wages.
Wages at Management of Companies expanded an astounding 73.6% over two years, followed by Mining (+27%), Accommodation & Food Services (+17.5%), Arts, Entertainment, & Recreation (+17.3%), and Retail Trade (+17.1%) (see Table 1). Management of Companies and Mining were already the two highest paying industries in the region, while Accommodation & Food Services, Arts, Entertainment, & Recreation, and Retail Trade were three of the four lowest paying industries, despite the aforementioned above-average increases.
This diametric pattern of wage growth indicates motivating factors may differ by industry. While all industries were, and are, impacted by the pandemic, Accommodation & Food Services has seen above-average increases in what was already a relatively high vacancy rate before the pandemic. On the other hand, Mining and Management of Companies have maintained two of the lowest vacancy rates since second quarter 2020. These opposing trends indicate that whereas wage growth in Accommodation & Food Services was likely a direct attempt to attract workers to meet demand that bounced back quickly, Management of Companies and Mining may have raised wages for other reasons such as retention or consolidation of workforces that saw smaller relative employment loss.
| Industry | Annual Average Wage Q3 2021 | Change in Average Wage Q3 2019 - Q3 2021 | Change in Employment Q3 2019 - Q3 2021 |
|---|---|---|---|
| Total, All Industries | $52,416 | +13.4% | -5.9% |
| Agriculture, Forestry, Fishing and Hunting | $41,288 | +5.3% | -5.7% |
| Mining | $118,716 | +27.0% | -1.2% |
| Construction | $72,072 | +10.1% | +0.8% |
| Manufacturing | $65,104 | +8.9% | -5.0% |
| Utilities | $107,952 | +16.7% | -1.7% |
| Wholesale Trade | $63,128 | +4.7% | -8.6% |
| Retail Trade | $32,032 | +17.1% | -3.3% |
| Transportation and Warehousing | $57,668 | +8.2% | -13.5% |
| Information | $54,444 | +14.4% | -14.9% |
| Finance and Insurance | $62,088 | +15.5% | -11.3% |
| Real Estate and Rental and Leasing | $35,048 | +14.2% | -9.6% |
| Professional, Scientific, and Technical Services | $67,392 | +9.7% | +7.9% |
| Management of Companies and Enterprises | $138,892 | +73.6% | -9.0% |
| Admin. Support and Waste Management Services | $35,672 | +15.1% | -14.6% |
| Educational Services | $53,300 | +3.1% | -2.4% |
| Health Care and Social Assistance | $56,836 | +11.3% | -5.8% |
| Arts, Entertainment, and Recreation | $27,872 | +17.3% | -12.2% |
| Accommodation and Food Services | $21,944 | +17.5% | -9.3% |
| Other Services (except Public Administration) | $31,200 | +6.6% | -14.6% |
| Public Administration | $58,188 | +9.1% | -4.5% |
| Source: DEED Quarterly Census of Employment & Wages | |||
The slowest wage growth occurred in Educational Services (+3.1%), Wholesale Trade (+4.7%), and Agriculture, Forestry, Fishing, & Hunting (+5.3%). Each of these three industries has average wages closer to the all-industry average. Looking at the previous quarter, wage growth in Management was only 3%, the smallest increase across all industries from 2nd quarter 2019 to 2nd quarter 2021, indicating that the bulk of wage growth in Management occurred from the 2nd into the 3rd quarter of last year. Mining also saw a sizeable jump in average wages from the 2nd to the 3rd quarter, indicative of either one-time or seasonal wage growth, as opposed to the more gradual increases seen elsewhere.
Unlike averages, median wages are less sensitive to outliers such as large bonuses at a few companies. Median wages are published as part of the Quarterly Employment Demographics program for which the most recent data available was Q2 2021 as of time of writing. From 2nd quarter 2019 to 2nd quarter 2021 the median wage for all industries in Northeast Minnesota grew 10.8%, only slightly below the 11% growth of average wages over the same period. Median wages also grew the most in Management of Companies, an indication that wage growth in the two-year period ending in the 2nd quarter 2021 was much more evenly distributed than in the period ending 3rd quarter and further evidence of large increases in focused segments of the industry. The next fastest growth in median wages occurred in Finance & Insurance (+20%), Accommodation & Food Services (+14.3%), and Real Estate & Rental Leasing (+13.6%).
Despite some differences between median and average measures, it appears that at the most general level, wage increases in Northeast Minnesota have kept pace with one measure of inflation, the CPI. However, industries are not monolithic, and wages in several have not kept pace with CPI, indicating that there is great variability that is not captured by the average wage vs. CPI comparison. Additionally, the CPI is a measure of urban consumer prices and as such may not do a great job of capturing the price changes unique to the more rural areas that characterize much of Northeast Minnesota. Finally, each individual household is going to be impacted differently, depending on the jobs held and typical costs incurred. It is at the household and family level that the impacts of these large market forces are ultimately felt, which is why we here at DEED will continue to track wages and their relative spending power for Minnesotans.
Contact Northeast Minnesota Labor Market Analyst Carson Gorecki at 218-302-8413.
