young people and wages... or is it wages and young people?
As simple as I can make it, the oped is clearly the perspective of a worker, i.e. labor demand, but says nothing about the labor market. There is this little concept of labor supply that factors into why wages are low and it may be counterintuitive as to why some young people feel they can’t earn as much as they want to in the local labor market.
I also hate to point out that the analysis in the oped is all based on some income statistics pulled from the census bureau. “Income” includes a lot more than just wage and salary earnings such as transfer and retirement benefits, along with other income sources. Due to our odd age demographic, all those income stats are heavily impacted by our elderly population here and say little about what local jobs pay. But no matter in that I don’t dispute the premise that we are paid less here, but it just does not work out to the disparities the oped claims to have discovered. A better source for looking up the “average wage per job” (something very different from median income) across regions is from the BEA. See this link for those who want to look this up themselves: http://www.bea.gov/regional/reis/default.cfm?catable=CA34§ion=2
From which I get these numbers for the regions cited:
Raleigh: $39,174 (note the oped actually says we get paid 34% less than in Raleigh??... it just isn't even close to being true.)
Before I begin, lets say I just skip the fact that the implied premise, that young people are leaving disproportionately, is baseless. I’ve beaten that to death as much as I can, let’s just look at the economic logic here. And lets stipulate entirely that there are people, many people I bet, who would stay in Pittsburgh or move to Pittsburgh if they could earn the same wage they can get on the open market in many other regions. What does that mean and what does it really say about the region? Something good or something bad? Given equal wages, everyone wants to live in Pittsburgh? Wow!
It is also worth mentioning, but I wont get into, that the oped does the common benchmarking of our educational attainment to other regions looking at the easily extracted statistic for the population age 25 and over. Again, that confuses the issue for us because we have older folks who generally have less education. But I have beaten that to death as well.
Lets talk about young, highly educated, recent college graduates who make up one of the most mobile parts of the labor force. What is Pittsburgh all about these days? We ‘produce’ an inordinate number of college graduates across a wide range of fields. I am pretty sure that if computed a ratio of new college graduates annually to the size of the local workforce would peg Pittsburgh at or near the top among large metro regions. Thus what you get is a nearly perpetual supply of workers being fed to local employers. Think that is affecting local wages? You bet.
Thus the problem is not that so many are leaving, wages are low because so many are staying. Seriously, by any measure, the educational attainment of our young workers ranks high, so somebody is staying…. a lot are staying. If somehow we really retained that many more graduates each year, we would soon become a top-heavy and dysfunctional labor force. The place can’t work with only PhD’s running around serving coffee at Starbucks, let alone working on the shop floor. With an overabundance of college graduates local employers looking for those workers are generally able to meet their needs by paying lower wages, that’s how markets work.
Now I know people bring up the issue of job growth in the region and clearly more job growth would both increase labor demand and also potentially push up wages but that is true everywhere and always. Even if we had several percentage points more growth each year in the workforce (which would be enough to shift us from a job laggard to a job leader among regions) we would still be producing a lot of college graduates for the size of the local labor market. That imbalance would still be there and so would be that wage premia (or negative premia) that we all abhor.
The low wage conundrum has a corollary: why Pittsburgh lags at attracting people to Pittsburgh. It’s just another effect of our high educational production. I have long suspected that local employers have gotten out of the habit, actually I doubt they were ever in the habit, of recruiting nationally for positions. If local employers can meet their needs with local workers it makes every sense for them to do so. It costs more to find and screen candidates from elsewhere… and there is a big hidden cost. Workers who move to Pittsburgh for a job are much more likely to move elsewhere if a better offer comes up. So until local employers are forced to find workers elsewhere, something that may not happen anytime soon as long as our local colleges and universities continue to succeed at their intended missions.
So what does it all mean? Are we are all destined to earn a fraction of what our friends in SF are making? Job and wage growth will come or it will not based on a lot of factors, but confusing the role of local wages is just bad economics. There is no button to push that will raise wages and keep people here. It all comes across as just another perspective that there is something wrong in the water inhibiting our future growth.