Income and Wages in the Stateline Counties
Overall Wage Picture
While employment is an easy measure of economic success, wage and income are of paramount concern. Employment conditions in the five counties have been generally improving or holding steady. Whether this is well-regarded depends in part on the economic forces driving it. Basic economic thinking suggests two drivers. Labor is derived from the demand for the final product, thus we see “derived demand for labor.” If demand for an industry’s output increases, that generates an increase in demand for labor in that industry which should also increase the wage. More employment at a higher income: Who would not like such a thing? However, it’s also possible for supply-side adjustments to increase employment, and these do so typically with the effect of reducing wage rates. Perhaps workers lower their wage expectations, perhaps workers are displaced from higher-paying industries to lower-paying industries. In these instances, more employment but at reduced wages is decidedly a mixed bag. Paying work is better than none, but the reduced standard of living can certainly be a bitter pill. Indeed, stagnant employment with increasing wages may very well sound more appealing than the converse.
Table 3 presents average weekly nominal wage rates aggregated by sector for each county for 2003, 2004 and 2005. To get yearly salaries, the weekly wages are multiplied by 52. While this is stylized (it ignores the concept of layoffs and seasonal effects) it shows the change in nominal wage rates potential over each year and the 2003-2005 period. Nominal wages are also not adjusted for inflation. Consumer-price inflation in the Milwaukee Metropolitan Statistical Area (the closest statistical area available) from 2003-2004 was 1.4%, and 2.77% from 2004-2005. If nominal wages in 2004 did not rise by 1.4%, then the real purchasing power of wages is declining. It should be noted that the rural inflation experience is likely to be different from that of a metropolitan area like Milwaukee or even Madison, so this estimate is considered the closest approximation.
Overall, nominal wage growth from 2003-2004 was above the rate of inflation. Green and Lafayette counties had nominal wage growth of about 4%; Walworth County was just under 3% growth. Average wages in Lafayette County showed small growth in nominal terms, but not enough to keep up with inflation. All four of these counties, however, had average nominal wage levels significantly below that of the state average. Only Rock County had average wages close to the state average, but Rock County was also the only county to experience average nominal wage decline over this period. 2004-2005 was a more difficult period for both nominal and real wages, with the overall average declining in every county except Lafayette, where nominal wages continued to be stagnant. Average nominal wages declined for the state as a whole as well, but the decline was faster in Rock, Green and Walworth counties. Only Rock County saw decreases for the entire 2003-2005 period, and no county’s average nominal wages kept up with inflation though nominal wages in Jefferson County were close to doing so.
Sectoral Nominal Wages
Green County
Workers in Green County experienced some real wage gains in 2003-2004. However, some employment sectors saw a down-turn in 2004-2005. Looking at the overall 2003-2005 period, and keeping in mind overall growth of 4.3% (1.4% plus 2.77% inlation) is necessary to keep up with inflation, several sectors saw real gains. Construction and Natural Resources experienced real wage increases in Green County. Industries experiencing increases in labor due to job growth can be considered demand driven if they also see wage increases. In effect, the construction industry in Green County has experienced demand driven employment increases due to the needs of the customer and a shortage of qualified construction workers. As a result, they are compelled to pay higher wages to those workers available.
Labor supply factors work in an opposing fashion: large numbers of workers are available and employers hire them at lower wages due to an oversupply of labor. This explains some industries which witness higher levels of employment along with lower wages. Manufacturing employment in Green County experienced significant employment increases in 2005. However, due to a large supply of available labor, firms were able to offer lower wages.
A more muddled message comes from Trade, Transport and Utilities and Financial Activities. While both sectors were clear gainers in real wages, only Transport and Utilities (not separated from Trade in the income data) showed employment growth. As a result, the concepts of demand driven and supply driven employment is less clear in the Financial Activities sector.
Jefferson County
In Jefferson County, Manufacturing is the largest and best-paid sector. As in Walworth and Green counties, the large wage gains of 2003-2004 drew back the subsequent year leaving a nominal increase in wages insufficient to keep up with inflation. There was some catching up to the state average however, even if only by a percentage-point difference in growth. Many other sectors in Jefferson County kept up with inflation though: Construction, Information, Education and Health, and Leisure and Hospitality sectors all had wage growth in excess of inflation. Overall, wages in Jefferson held up best among the five counties with only Natural Resources and Public Administration showing nominal decreases.
Lafayette County
The picture in Lafayette County is mixed. Several sectors showed exceptionally large decreases, including Information, Leisure, and Natural Resources all with two-year declines over 10%. On the other hand, the Construction and Manufacturing Sectors saw nominal wage increases exceeding the amount necessary to keep pace with inflation. In the case of Construction, nominal wages rose 16%. The information reported for Professional and Business services looks spectacular, but it represents a small employment base. Financial Activities is clearly in decline in the county, both in terms of employment and wages.
Rock County
Lower wages are driving some of the increases in employment in Rock County. No sector in Rock County kept up with inflation. Most sectors suffered nominal declines. Perhaps it could be argued that Rock County has the highest average wages of the five and is converging toward its neighbors. However, that is likely little consolation to the residents and nominal wages there are still lower than the Wisconsin average. Manufacturing had the largest decline of 8.4%, though it is still the most highly paid sector for any county and the averages for the state as well, perhaps due to the General Motors plant. Other Services showed large decreases as well even as the second-lowest paid sector in the county. Financial Activities also experienced a significant decrease of 5.7%. The sector showing the largest increase in nominal wages was Professional and Business services. Rock County is also distinguished as having the most anemic increase in wages in the Construction industry.
Walworth County
All private sector industries showed at least some growth in wages in Walworth County from 2003-2004, but several submitted to lower wages in the following year. Information jobs saw wage declines of 4% over the two-year period, roughly in line with the 5% decrease in Public Administration salaries. Manufacturing and Construction are the highest-wage sectors. While both saw nominal increases in Walworth, it was only half the growth necessary to keep up with inflation. Only the Financial and Natural Resource sectors saw real growth, but neither is an overly large employer in the county.