When you come down to it, having a job isn’t enough to make it in modern America. With a low-paying job, you are likely to be on food stamps, your kids in the federal school lunch program and your parents on Medicaid.
While it is wonderful for governors and mayors to announce new jobs, the level and growth in the average compensation of those jobs is of equal importance as the jobs themselves.
First, three explanations: In the following paragraphs, jobs refer to both full-time and part-time jobs. Metropolitan statistical areas (MSAs) cross state lines; the Chicago MSA includes northwest Indiana; Louisville and Cincinnati MSAs both extend into parts of southeastern Indiana. Compensation includes wages, salaries, bonuses, as well as company-paid benefits such as health insurance.
In 2011, average compensation per job in 366 metropolitan areas equaled $52,581. Six of the 16 MSAs containing Indiana counties exceeded this level: Chicago (19th in the nation) at $67,867 was far ahead of Cincinnati (70th) at $58,062. These were followed by Columbus (79th), Indianapolis (80th), Kokomo (120th) and Louisville (137th).
These six metro areas suggest that the best-paying jobs are in or near the biggest cities and perhaps in those smaller towns dominated by a single company where labor and management work together well.
The next five MSAs tell different stories: Evansville, Fort Wayne, Lafayette, Elkhart-Goshen and South Bend-Mishawaka fall into a narrow range between $48,300 and $50,800. The final five include Michigan City-La Porte, Terre Haute, Bloomington, Anderson and Muncie. The last two are ranked 351st and 353rd of the 366 metro areas of the nation. These last five are towns that once had thriving manufacturing establishments but have seen off-shoring plus productivity enhancements diminish their employment status.
The average annual growth rate of per-job compensation was 3.4 percent for the 366 metro areas. The rate of increase in consumer prices for 2001 to 2011 averaged 2.2 percent per year. Only seven of the 366 statistical areas fell below 2.2 percent and showed no real growth in compensation per job. In that group of seven were Anderson (ranked 364th) and Kokomo (last at 366th).
A high level of compensation may be a legacy of growth in the distant past. For example, Boulder, Colo., ($66,800) ranked 22nd in average compensation per job but only 341st in growth of such earnings from 2001 to 2011. Detroit ($63,200), a better known example, ranked 38th in compensation per job but 358th in its growth rate.
The fastest-growing metropolitan statistical areas were places where there are significant military installations. For example, Jacksonville, N.C., is home to Camp Lejeune; while Lawton, Okla., serves nearby Fort Sill.
Columbus’ growth rate was Indiana’s only representative in the top half of all statistical areas in the country.
Economic development agreements should include the level and growth rate of compensation per job a company offers before tax breaks are considered.
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business.