There’s been an ongoing national discussion of the seeming paradox of concurrent wage stagnation and rising employment levels in the past decade since the Great Recession. As the Washington Post recently reported, while unemployment levels have reached a 50-year low, wage growth has been sluggish and has even backslid from estimates in February of this year. As economists, policymakers, and labor advocates continue to discuss the implications and possible solutions to this quandary, we at the Economy League want to offer some local context and data on employment and wage trends in Philadelphia.

This issue’s Leading Indicator is the first part of a story that asks, “Why haven’t wages increased with employment levels in Philadelphia?”

Key Takeaways:

There were roughly 55,000 more jobs in Philadelphia in 2018 than there were in 2008 - during the midst of the Great Recession

Average annual pay in Philadelphia, however, has only increased by $2,428 in the same ten-year period, adjusted for inflation

The average annual growth rate for annual pay in Philadelphia from 2008 to 2018 is 0.3%

The overall wage stagnation may stem from the composition of the growing sectors of the labor market – namely low-skill, low-wage jobs in Retail & Hospitality, Food Service, and Healthcare & Social Assistance

National Context

In 2011, economists and policymakers breathed a sigh of relief as employment estimates began to rise after stark declines during the Great Recession of 2007-2009. For many, this labor market recovery signaled the end of the recession. Eight years later in 2019 the nation’s employment levels continue to climb, but wages have remained relatively stable since 2008. Many experts remain puzzled since there are 11 million more jobs in 2018 than there were in 2008, the national unemployment rate is currently below prerecession levels, and yet the average annual wage has only increased by $4,153 in real dollars between 2008 and 2018. This equates to an average increase of about $415 per year, or 0.8%.

Mainstream economics suggests that wages typically rise as unemployment decreases, following the law of supply and demand: as the supply of available workers decreases, companies compete for this shrinking labor pool by offering higher salaries. Yet it seems that this basic tenet of economics is in doubt, and the supply of available workers is continuing to decrease while wages are barely budging.

The Philadelphia Story

In Philadelphia, the employment trends largely mirror national estimates. Using average annual employment and pay estimates from the Bureau of Labor Statistics' Quarterly Census of Employment and Wages, Table 1 shows the growth in annual employment levels and wages in both Philadelphia and the U.S. indexed to 2008 estimates. It is critical to note that that most employment estimates are in fact proxy measures that count “filled” full- or part-time jobs rather than individual employees; meaning an individual working multiple jobs is counted more than once [1].