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For the first time in a decade, average wages in Minnesota appear to be increasing

Average weekly wages in Minnesota showed no significant growth, hovering between annual averages of $990 and $1,010 between 2004 and 2013. After a gradual increase in the last three years, they hit $1,081 in the second quarter of 2017.

Workers in Minnesota have been waiting a long time for a raise. After more than a decade, it finally looks like they’re getting it.

Data from the Minnesota Department of Employment and Economic Development show that after years of stagnant pay (median wages actually declined by 1 percent between 2003 and 2014), Minnesotans’ median wages started to climb the following years, growing 4 percent between 2014 and 2016 (all numbers in this story are inflation-adjusted).

“They were pretty flat, and then all of a sudden, in 2015, ’16 and ’17, they’ve started taking off a little bit,” said David Senf, a DEED labor market analyst.

On its face, that’s good news for Minnesotans. More money should mean less poverty and additional cash available for spending, which boosts the economy.

But while characteristics of the state’s workforce suggest the trend should continue, the U.S.’s economy moves in cycles, and it's currently in the midst of a very long expansion — if and when a recession comes along, things could change.

Growth at the bottom

Average weekly wages in Minnesota showed no significant growth, hovering between annual averages of $990 and $1,010 between 2004 and 2013. After a gradual increase in the last few years, they hit $1,081 in the second quarter of 2017, according to the most recently available data.

Average weekly wages in Minnesota by year, 2004-2017
Wages in Minnesota were stagnant between 2004 and 2013, and began climbing in 2014. Note: Figures are averages of weekly wages during the four quarters of each year, with the exception of 2017, which averages first and second quarter data, the most recent available.
Source: Minnesota Department of Employment and Economic Development

Data show the increase in average weekly wages is due both to higher hourly pay and longer work weeks, Senf said.

That wage growth appears even as a growing wave of baby boomers leaves the workforce. Since those older, more experienced workers are being replaced by younger, less-experienced workers who command lower salaries, overall wages may be driven down to some degree. While that phenomenon could be occurring, it doesn't seem to have been enough to counter the upward trend in wages overall.

Another encouraging sign: Whereas high-wage workers had been seeing greater gains in pay, in the last few years, workers making below median wages are finally starting to see gains.

“(In) the 90th percentile wages, there’s been steady gains over the last 16 years, whereas the other groups were pretty stagnant until just recently,” Senf said.

Minnesotans' annual wages by salary percentile, 2001-2016
For more than a decade, top income earners were the only bracket seeing meaningful gains in wages. Around 2014, Minnesotans at the lower end of the income spectrum began seeing gains, though wages for the lowest earners are still below 2001 levels.
Source: BLS Occupational Employment Statistics, compiled by DEED.

Gains at the bottom could be partly responsible for lower poverty rates in recent years: between 2014 and 2016, poverty rates dropped from 11.5 percent in 2014 to 10.8 percent in 2016.

Nationally, some researchers have attributed gains at the lower end of the income spectrum to an increasing minimum wage, Senf said. It’s worth noting, though, that below-median wage earners in Minnesota are still making less than they were in 2001 when you consider inflation.

Thanks to gains for lower income earners, Minnesota is now ahead of the U.S. average in wages for all income groups except the top.

Demand for workers

To what do we owe fatter paychecks? Low unemployment, Senf said.

Less than a decade ago, at the height of the Great Recession, statewide unemployment was as high as 8 percent. Now, unemployment is less than half that: under 4 percent for the last three years, putting 2015, 2016 and 2017 among the top 10 years for low annual unemployment the state has seen since 1976, the earliest year for which consistent data are available (the all-time low was 2.7 percent, in 1988).

Low unemployment can be tough on employers, but it can be good for workers. When lots of people are looking for jobs and employers can take their pick of workers, employers don’t have an incentive to raise wages to attract or retain workers. But when they can’t find enough workers, they’re forced to raise wages in order to steer them into jobs. When some employers raise wages in order to attract workers, other employers have to raise wages, too, or they could lose theirs.

There’s ample evidence of tight labor markets are tight across the state. Minnesota employers are clamoring for childcare, an amenity in short supply, that could help them free up parents to join the workforce or put in more hours. In Central Minnesota, the region with the fastest job growth in the state, Perham, Minnesota has more jobs than it does population — and has to compete with bigger towns in the area for workers.

If low unemployment is driving wage growth, there’s good reason to suspect the wage growth could continue.

The State Demographic Center projects growth in the state’s workforce to be hampered in the coming years due to demographics.

As Baby Boomers, who make up a considerable share of the state’s population, age out of the workforce, the state needs workers to replace them. Meanwhile, the state’s birth rate has been declining for decades. Minnesota may not be able to attract enough people from other states or other countries to fill jobs. And the state already has one of the highest labor participation rates in the U.S. (69.1 percent of adults over age 16 were employed in 2016, compared to 62.8 percent for the country, according to DEED).

Senf said he hopes to see the wage growth continue.

“You would think so, given the trends,” he said, but there’s one big “if” when it comes to the question of whether wage growth will continue.

“If there’s no recession,” he said.

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Comments (16)

Please stop talking about "cycles"

The biggest misconception about economics in the history of economics is this belief in "cycles". Economies don't "cycle". Cycles are predictable trends, if we had predictable trends economist would have predicted the Great Recession and all the bubbles and bursts that preceded it.

There's no "cycle" of any kind revealed by this wage data... a flat line is not a "cycle". And that flat line goes all the back to the 80s.

Wages, stock markets, employment and unemployment, booms and busts, etc. etc. etc. are NOT cycles, they are simply metrics that change and fluctuate for a variety of reasons. To the extent that wages are increasing it's not because some imaginary "cycle" is dictating a rise... fluctuations are CAUSED by a variety of concrete factors, they don't just fluctuate on their own because of a "cycle".

In economics it's critically important to understand the fact that there are cause and effect relationships that account for fluctuations, collapse, and booms and busts. Cycles are magical thinking assume that an invisible hand will restore prosperity regardless of policy or behavior.

And by the way, are we really celebrating a $71 increase over the last 4 years... $17 dollars a year? You do realize that Corporations and the top 1% (those making $350+k a year) increased by 20% just in 2012 alone. That's 2,000 times the increase we're looking at here. AND bare in mind this is an AVERAGE, so it may well be over estimating the actual increases being seen by a majority of workers.

Sure, to the extent that this is real, it's a small- very small- step in the right direction, but it doesn't undo decades of inequity.

This is a shameful story

This is a shameful story. Corporations for the last several years have been seeing record profits as they stash their profits outside the country and underpay their workers.
How are they rewarded by todays repubs...a big big tax cut with no insistence that they use some of that to create jobs and to pay livable wages.
Todays business model is deplorable.


How does inflation affect these numbers?

Nearly Always

Government agencies use inflation adjusted data. But good reporting always makes note of that.

Still looks to me

like the biggest gain is for the top 10% (assuming that the numbers are in fact median hourly wages adjusted for inflation).
It would be interesting to see how the top 1% and 0.1% were doing.


The author notes that all the figures used are adjusted for inflation.

Workers wages increasing is a good

thing. Unbelievable the party of the working person (DFL) finds fault with this. Obama had 8 years to fix this and it took Trump 1 year.

Unbelievable Memories

Conservatives have such short memories. Flat wages go back to the early 80's, at least. Conservatives only became concerned about it when Obama got into office.

But this shouldn't surprise any of us. When a D is in the White House, conservative Chicken Littles run around yammering about "the debt, the debt the debt!" When an R comes in, it's "Deficit??? What deficit???" That's how we get a corporate tax cut that will blow a hole in the budget for years to come. Later on, adults will take over the White House and clean up the mess.

Neither the centrist, corporate Dems nor the Republican Presidents have been concerned about working class wages for decades.

Frank, Obama had veto proof majorities

In both houses and chose to push ACA. If he cared about workers he would have done something to help them. Trump cares about workers and did something to help them. No one an deny that consumer confidence is up, construction/blue collar work is up and wages are moving up.... All good thing for the non elite working class.

Tell Me

How many days did Obama have a veto-proof majority? Remember, Kennedy died, and the GOP pushed Norm Coleman to drag out the election for months.

So, how many days did this veto-proof majority exist?

Our Hero!

According to the article, wages started an upward trend in 2014 when St. Donald of Jamaica Estates was still just another crooked real estate magnate.

Please, enlighten us. Was it his magic aura of inevitability that made wages start to grow before he was President?

Oh, so NOW rising wages are "good"?

After decades of arguing that minimum wage laws drive businesses to close and move out of the country and that higher wages in general are an unreasonable burden on business... NOW rising wages are good? After decades of arguing that flat wages and decreased benefits were spurring "growth".... NOW rising wages are good? OK. Well.... I agree... rising wages are good, and they need to rise a lot more.

top 5%

Looking at the Tax Incidence studies from 2013 and 2017 the minimum threshold income for the top 5% (the minimum household income required to be in the top 5%) went from $202k to $242k (rounded). That's an increase of 19%. Bare in mind, those are minimum requirements, we know that many individuals made far more, we know that at least 29,000 households in the top 1% made more than $600k.

So, as I pointed out earlier, the top 10% and above have seen income rises around 20 time higher (and higher) than the increases being described for the average worker here.

Tax Incidence Studies

I forgot to include the link to the TIS that I was referring to in my previous comment: You can look this stuff up and calculate the percentages for yourself.

Kind of a weird data set actually

This data set assumes that no one in Minnesota makes more than $95k; that's a bizarre assumption. I'm not going to run the numbers but just eyeballing it I'd say that 90th percentile is an outlier within the data set, if you threw it out, the entire "gain" being described here as a calculated average would probably disappear or fall into negative territory.

Actually, the DEED document this is based on is funky

If you go look at the actual article on the DEED website:

It's kind of weird. The data and graph clearly show much higher gains in the 90th percentile at the top, yet the text claims that the biggest gains were in the lower percentiles... this contradictory. Furthermore, I can't for the life of me figure out how these percentiles are arrived at because there's no range given and the actual range of wages and salaries in MN come nowhere near aligning with these percentiles. The wage floor for the top 10% is around $300k a year, so I don't know how you can get an mean, median, or mode of $95k for the 90th percentile?

Many of the graphs are funky as well. Chart 3 no only combines unlike data (i.e. hours AND dollars) but also compresses the horizontal axis to the point where a $75 increase looks a 100% increase, it's exaggerated.

Chart 1 is even worse, it's confusing because it combines two different data sets in the same graph (average weekly and median hourly), AND exaggerates the trend to the point where a 2% annual increase looks like a giant increase. And you need to compare apples with apples, you don't you can't compare an hourly mean with a weekly average or vice versa.

I could go on but frankly this article is riddled with bizarre features. It's not even clear what kind of "average" we're looking at, is it an average of ALL wages earners or just a select demographic? This could actually be a garbage analysis.