For the big money, head to this West Texas city
Which metro area has the highest paid workers? Hint: It’s not on the East Coast, where Wall Street tycoons sleep at night. Nor is it San Jose or San Francisco, hometo the well-paid techies.
It’s probably a surprise to most folks — it certainly was to me— that the metro area with the richest paychecks and employee benefit packages is Midland.
Workers in the West Texas city in 2012 earned an average of $91,200, including wages and benefits, new data from the U.S. Bureau of Economic Analysis show.
The U.S. average was $56,900 and the Houston average was $71,600, said Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston, who recently crunched the bureau’s data to come up with the comparisons.
Gilmer noted that the high wages in Midland reflect its relatively small population of at least 114,000, andits remote location.
“It’s very difficult to attract labor there,” Gilmer said. “When incomes rise in the oil sector, they just pull the entire wage pool up with them.”
Gilmer recalled going out to eat
at a restaurant ona trip to Midland. Therewas a line out the door, he said, but half the restaurant was dark because there weren’t enough employees to serve the food.
It turns out that managers of energy companies would come in for lunch and give their business cards to their servers. The next day, the server would report to the oil field instead of the restaurant.
Quickly hired away
Gilmer recalled the story of a real estate developer from El Paso who got the idea of taking a crew to Midland to build houses. The crew members were immediately offered jobs by oil companies scouting workers with construction and other skills.
“Henever put up a house,” Gilmer said.
When wages rise, other companies have to boost what they pay just to keep their staff from leaving to drive a truck or work on a rig, he said.
That isn’t as likely to happen in Houston because the city doesn’t revolve around just one industry, he said. While people move to Houston to take advantage of the low unemployment rate and the availability of jobs, high wages paid by one industry donot have the same displacement effect as in cities like Midland.
People are concerned with the lack of diversification in Houston, said Patrick Jankowski, vice president of research for the Greater Houston Partnership. But all they have to do is look westward to see a one-industry community where the school bus drivers are now driving oil trucks.
When the energy industry is doing well, Midland
“It’s very difficult to attract labor there. When incomes rise in the oil sector, they just pull the entire wage pool up with them.” Bill Gilmer of the Institute for Regional Forecasting at UH, referring to Midland
does well. It wasn’t that way a fewyears back, Jankowski said, pointing to the data that showthat Houstonians earned more — sometimes substantially more— than workers in Midland between 2001 and 2007. But since 2010, workers in Midland have been taking home bigger paychecks.
It’s a-boom-and-bust economy, said Jankowski, who predicts that Midland will again one day see its wage levels shrink.
When Gilmer separated out the wages and benefits paid to oil and gas explo- ration and production workers, the data illustrated another interesting phenomenon.
Employees in the Houston area who worki n the drilling and exploration end of the energy industry earned an average of $302,900 in 2012. (Local wages and benefits still haven’t recovered from the 2008 high of $328,500.)
Effect of outsourcing
The high wage and benefit package reflects the intensive amount of outsourcing that goes on in the oil andgas industry, Gilmer said.
Many companies outsource their janitorial services. But the energy industry has been at the forefront of outsourcing, he said, contracting for many support functions suchas accounting, humanresources, secretarial services and office management.
That takes a lot of lower-paid employees off the payroll reports that government researchers use to gather data, Gilmer said.
He recalled one instance in which a large energy company told its accounting staff to walk across the street to the outside accounting firm that would now be handling the company’s books.
“Inthe morning they were classified as mining employees. Inthe afternoon, theywere classified in the service industry,” Gilmer said, referring to the category that includes professional services.
What’s left behind are the highly skilled, highly paid employees suchas geologists, geophysicists, reservoir engineers and chemical engineers, as well as executives, Gilmer said.
The wage data do not include the big bonuses or stock options of top-tier executives; if that were added, the averages would surely increase, he said.
Fewer executives
In Midland, the comparable oil andgas average wage was $207,400 in 2012. Gilmer speculated that one of the reasons it isn’t as high as it is in Houston is because Midland doesn’t have as many energy executives.
Ina ny case, the big paychecks are jaw-dropping, Jankowski said.
“There is no better advertisement to pursue a STEM education than a $300,000salary,” he said, referring to the acronym for science, technology, engineering and mathematics. “Then youcan afford two Porsches and an apartment in the Heights.”