Why the state’s rise in wages is bad news
California wages were rising at a 12% annual clip last year, according to one measurement — and that spike was essentially bad news.
One of my favorite economic indicators is employment data derived from a quarterly analysis of bosses’ unemployment insurance filings. This analysis, which is different from the less reliable monthly surveys, takes time, so we just got last summer’s results.
What my trusty spreadsheet found in 2020’s third quarter, as the economy was first rebounding from pandemic lockdowns, was stunning.
California had the nation’s largest jump in average weekly wage, up $157 to $1,466, while suffering the sixth-largest drop in jobs (9%). Yet the state is no outlier: Nationally, average wages rose 6.8% in the year ended in September while jobs fell 7.4%.
Cruel twist
No, employers were not extra generous to those still on the job — though some workers did make more than usual. Nor was Econ 101 suspended as flocks of unemployed workers should depress pay, right?
Rather, this statistically noteworthy big pay twist is actually another symbol of how cruel the pandemic economy has been. Low-salary jobs were decimated by pandemic restrictions and consumer reluctance to travel or spend in person.
Remember, economic metrics can be skewed by the mix of participants. In this case, far fewer small paychecks were restored by the economic rebound. That huge gap gave a boost to the overall wage average — not individual pay — for those lucky to be employed.
Ponder this employment report’s portrait of working in the leisure and hospitality industries as many of California’s “fun” places slowly get back in gear. This world was rocked by the coronavirus.
Do not forget that businesses from tourism to entertainment to restaurants are a significant slice of the economy. California had 1.35 million of these workers last summer — 8.4% of its workforce. In the rest of the nation, 11.28 million “fun” workers represented 9.2% of all jobs. But this niche also had a jumbo slice of last summer’s employment declines.
No fun
California was down 689,538 “fun” jobs in the year ended in September versus 940,336 jobs gone at all other businesses. So these “fun” jobs represented 42% of all California cuts. The rest of the nation lost 3.27 million “fun” jobs or 38% of all U.S. cuts.
Now if you like percentages, these drops translate to 34% of California’s fun jobs lost — a far steeper drop than 6% employment losses elsewhere in the state economy. Nationally, 22.5% of fun jobs vanished versus 4.5% for other businesses.
Paychecks from “fun” work are often modest. Those fortunate to be at work in California’s leisure and hospitality industries last summer were paid an average $619 weekly wage — 60% below $1,544 paid by other employers statewide. Elsewhere in U.S., the $466 weekly fun wage was 72% below the $1,202 paid in other workplaces.
The odd wage quirk tied to the huge declines in lower-paid workers can be seen here, too. California “fun” industries’ weekly wages rose 4.6% despite losing roughly one-third of its jobs. Note: That’s less than half of the 12% statewide average gain. In the rest of the nation, wages rose only 0.6% for “fun” workers.
You can see how much pain was everywhere for those who create “fun” for a living.
You also see that the odd shape of the economic destruction of the coronavirus — primarily clobbering lesser-paid, consumer-facing work that couldn’t be done remotely — created business patterns that aren’t easily summed up by one number.
Trust me, this isn’t the only piece of financial data loaded with pandemic subplots.