by Luke Greiner
June 2016
Wage growth typically follows classic supply and demand curves, an increasing labor supply with a decreased demand for labor will decrease wages. Or, a more applicable example for our current and future reality is a constant labor supply with increasing demand, creating a situation that applies upward pressure on wages. Longitudinal Employer-Household Dynamics data from the U.S. Census Bureau uncover trends in average wages across different industries in Minnesota for all employees, and new hires provides an in-depth look at a changing labor market.
Year-to-year wage data are most reliably produced by industry average wages. A limitation of using industry wage data instead of occupational wage data is how the occupational density within an industry can change over time, possibly leading to higher or lower paying occupations, potentially shifting average wages.
Example: if the manufacturing industry increasingly automates welding and instead of hiring a large number of welders who have a typical wage of $19.71, they increase the number of programmers in their ranks with a typical wage of $26.04, average wages will increase, even though occupational wages within the industry might not have changed.
Twenty years ago the average annual wage of a newly hired worker in Minnesota was $17,934 or 58.8% of the average wage for earned by all employees. By 2014 that ratio increased to 60.3% from an average annual wage of $31,791. Over the course of that year the average wages earned by new hires is $20,889 less than the average wage for all workers. New hires in Agriculture, Fishing, and Forestry, Finance and Insurance, Management of Companies, Mining, Retail Trade, and Utilities earn a lower ratio of average annual wages in 2014 compared to 1996.
The largest difference in wages for new hires is found in the Management of Companies sector where new hires earn, on average, $44,232 less annually than the average wage for the industry. High average wages play a key role in the large gap in Management of Companies. The largest difference by percent is found rather in Educational Services, where new hires make 58.3% of the average wage. Workers can look to the Real Estate, Rental, and Leasing sector for the fastest growth in new hire wages, increasing 170% from 1996-2014.
The smallest percentage wage gap for new hires is in Construction where they earn $46,083, 78% of the average Construction wage. Lower average wages in the Accommodation and Food Services industry provide the smallest annual difference of just $5,016 less earned by new hires compared to the average for the industry. The slowest wage growth for new hires is found in the Retail Trade industry, increasing just 49.9% from 1996-2014, exactly one point less than inflation.
Check out the interactive graphic below to see average wages for all the major industry sectors in Minnesota. Use the dropdown to select different industries and hover over the line for more details.
