Oregon’s Wage Growth Stuck in Neutral

Oregon’s economy has shown strong employment growth in recent years. That strong growth has caused the state’s labor market to tighten up, as record low unemployment rates have Oregon employers increasingly finding it difficult to fill job openings. Oregon’s average hourly wage, after more than five years of decline and stagnation following The Great Recession, finally started to show fast wage growth in both 2015 and 2016. However, as Oregon’s employment growth showed signs of slowing in 2017, Oregon’s average hourly wage followed suit, with wage growth slowing to a grinding halt beginning in the second quarter of 2017 and continuing through the first quarter of 2018. Nationally, it has been a similar story with recent wage growth. Real average hourly earnings nationally increased only 0.4 percent from March 2017 to March 2018.

Economists have a number of theories as to what has caused wage growth to slow recently, but there isn’t a “silver bullet” answer to the slowing growth.

The aging of our workforce is at least partly responsible for the slowing. Many Baby Boomers continue to reach retirement age; retiring out of what are typically close to peak earnings years for most workers. At the other end of the age spectrum are young Oregonians new to the labor force. When inexperienced workers enter the labor force, they typically earn lower wages than workers with more experience. Labor force participation for Oregon’s youth has been on a fairly sharp decline since 2000, and that decline in participation accelerated during The Great Recession. The labor force participation rate for Oregonians youth (ages 16 to 24) jumped from 54.9 percent in 2016 to 60.6 percent in 2017. Looking at older Oregonians; the participation rate for Oregonians ages 55 and over declined from 40.3 percent in 2016 to 38.9 percent in 2017. The increasing labor force participation among youth is certainly welcome news, but it also a factor tempering Oregon’s average hourly wage growth.

Whatever are the causes of the slowing growth in Oregon’s average hourly wage, we have certainly seen real wage growth slow in Oregon and nationally over the past year.

This article was written by Pat O'Connor, regional economist for Benton, Linn, Marion, Polk, and Yamhill counties and was originally published on QualityInfo.org.