News Column

History of Idaho's Great Wage Divide

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Feb. 05--For the past three decades, Idaho's wages barely exceeded inflation. Getting into that pit took time; so will getting out.

In 1977, Idaho's average wage was 88 percent of the national average.

Then, in the 1980s, the decline started. According to the Idaho Department of Labor, the state's average fell to 76 percent of the national average by 2010.

Today, despite decades of economic development efforts, Idahoans' wages regularly show up near -- or at -- the bottom of 50-state wage rankings.

In part, that's because high paying legacy jobs in forestry and mining have vanished. And Idahoans have shot themselves in their paychecks by not pursuing postsecondary degrees needed for most higher paying jobs.

What happened?

Idaho was riding a housing boom in the 1970s, which meant good jobs at timber mills. But demand for housing slowed. Idaho was caught in a severe recession in the 1980s, and mills began to close.

"There was a slow decline in the number of lumber, logging, mining and agriculture (jobs)," says Steven Peterson, a research economist at the University of Idaho.

While jobs went away, people didn't. Roots kept many people in rural Idaho even though that meant trading higher-paying jobs elsewhere for lower-paying local work, often in service industries. In his own family, Peterson remembers a time when his father was unemployed for a year: "It never even occurred to my parents to move."

Between 1991 and 2011, the number of service jobs grew by more than 200,000 and reached an average annual salary of $33,766, according to the Idaho Department of Labor. The number reflects all people in those jobs, including highly paid executives. The number of production jobs climbed slightly before descending in the Great Recession, ending at about 112,000, not far from where it started. The average production salary in 2011 was $43,784.

Were the job losses only in rural Idaho?

No. Large companies that once provided top jobs in the Treasure Valley consolidated headquarters, were sold or shed employees. In 1999, Ore-Ida Foods Co. headquarters were consolidated from Boise to Pittsburgh with parent company H.J. Heinz, costing 300 jobs. For a decade ending in 2009, Micron Technology Inc. cut its workforce by about 7,000 people. Supervalu, which bought Albertsons Inc. in 2006, cut hundreds of jobs in Boise from headquarters operations in the last six years. Hewlett Packard Co. has also reduced jobs, though the company won't say how many.

What was the effect?

Many of those "were high-paying jobs," says Don Holley, who left Ore-Ida Foods Co. when it moved 14 years ago and is now a Boise State University economics professor. "Those were the $50,000 (jobs) with benefits that make the mayor salivate."

The trade-off: "We have gained cheese factories and milk processing, and they just don't pay as well. We don't have the executives like we had before."

What happened to wages?

Depending on what you measure, the news is either bad or worse.

Today's median annual salary -- the point at which half the people make more and half less -- in Idaho is $23,192 for all full- and part-time workers. That's dead last in the country, according to a U.S. Census report.

The Great Recession hit Idaho harder than most states. Based on median hourly wages, Idaho slipped from 34th to 42nd between 2008 to 2011, the steepest decline of any state, the state Labor Department says. The hourly median wage climbed slightly from $14.32 in 2008 to $14.54 in 2010 before dropping to $14.51 in 2011.

Between 2008 and 2011, median hourly wages climbed 1.3 percent, and inflation increased 4 percent.

Idaho's median household income dropped 9 percent from 2008 to $43,341 in 2011 -- the 10th lowest in the country.

How have Idaho wages grown over the years?

Not much if you adjust for inflation. Wage growth was about 3.4 percent over the past three decades, according to the Idaho Department of Labor.

But that figure isn't universally accepted. It doesn't reflect factors such as the cost of health insurance premiums paid by companies, which are effectively an increase in pay that doesn't show up in wages, says Peter Crabb, professor of finance and economics at Northwest Nazarene University in Nampa.

Inflation also is based on several factors, and not everyone is equally affected. For example, not everyone feels the pinch of the cost of education, Crabb says.

What do Idaho's low wages mean in practical terms?

Finding a living-wage job in Idaho is tough.

Only a third of Idaho jobs paid a living wage in 2012, down from 40 percent in 2006, the Labor Department says. A living wage is defined as $39,000 a year for a couple with two children in urban areas, and $36,400 in rural areas. For a couple, it's $22,977 urban and $22,146 rural. For a single person, it's $14,021 urban and $13,513 rural.

The shortage of living-wage jobs also contributes to Idaho being one of the top 10 states for people holding multiple jobs. Seventy-four of every 1,000 Idaho workers held more than one job in 2011, up from 71 in 2010.

OK, that all seems pretty bleak. But aren't Idaho's low wages a reflection of our low cost of living?

The cost of living is lower in Idaho than in many places, but that's only part of the reason our wages are lower, says Brian Greber, director of Boise State's Center for Business Research and Economic Development. Suppose someone living in Boise makes the state's median annual salary of $23,192. If that person moved to any of several medium-sized cities such as Denver, Little Rock or Cincinnati, where costs of living are higher, the Boise salary would be about 80 percent of the amount needed in the other cities to compensate, Greber says.

Kendall Automotive Group, based in Boise with dealerships in Montana, Oregon, Idaho and Alaska, says it pays its Idaho staff on par with employees in Oregon. Its Alaska stores pay more, because the cost of living in Alaska is higher than in the lower 48 states.

Lot attendants, who keep the cars clean, don't start at Idaho's minimum wage of $7.25. They begin at $8.50 in hour. In a matter of weeks, the good employees are bumped to $9, says Dave Blewett, Kendall's president.

"One of the reasons we do that (is) our people are somewhat mobile," Blewett says. If he wants to move an employee from Oregon to Idaho, he doesn't face opposition from workers resisting pay cuts.

The Statesman, however, has heard from several workers who say they lost money by taking jobs in Idaho at lower wages than comparable jobs in other states and who say the cost of living isn't really less.

A Treasure Valley physical therapist, who asked that her name not be used, says she took a one-third cut in pay to come to Idaho from another state several years ago and has received only one raise in several years, which amounted to about $50 a month. "If anything, rent is higher," she says . "Certain other things are about the same."

What else affects how people are paid?

Competition, Greber says. In Idaho, he says, a lot of industries lack competition for workers, so wages aren't bid up to attract people.

The technology sector is one area that proves the point in reverse.

At White Cloud Analytics, a Boise company that specializes in health care software, CEO Bob Lokken is usually on the lookout for new software engineers. Idaho schools can't meet his demand for new employees. He's just hired several and may start looking again soon. Boise State University turns out about 25 software engineers a year. The industry in Idaho needs 200, he says.

With engineers in such short supply, companies often end up raiding from each other. Lokken says he must look beyond the state's borders and set salaries attractive not just to Idahoans but to professionals in Portland or Seattle. He offers $90,000 to $140,000 a year to engineers with five or more years of experience.

Aren't Idaho's low wages attractive to industries seeking to move or expand?

Yes.

"Right now, it's a selling point," says Jeffery Sayer, Idaho Department of Commerce director. "Our hope is that changes as our economy grows."

Clark Krause, executive director of the Boise Valley Economic Partnership, the Boise Metro Chamber of Commerce's economic development arm, says he doesn't tout low wages. "We don't go after jobs that are low-paying and don't have benefits," he says. But when the partnership announced in April that California lawn-and-pet-supply wholesalers Central Garden & Pet Co. would establish backshop operations in a former Hewlett Packard Co. call center site near Boise Towne Square, the company cited low wages as one reason it came to Idaho.

What about education?

Lack of educated Idahoans plays a big role.

Business leaders, lawmakers, the State Board of Education and the J.A. and Kathryn Albertson Foundation have preached for years the importance of going on to postsecondary education.

The board points to national studies showing the wages for those with certificates and degrees after high school are much higher than those of high school graduates or dropouts.

The board is pushing to get 60 percent of Idahoans ages 25 to 34 to obtain some post-high school training by 2020. In 2010, 31 percent of that age group reached the goal. That rose to 35 percent in 2011. The national average is 40 percent.

Idaho's lackluster college attendance has multiple causes. Among them:

-- College costs. Some people just can't afford to go.

-- A culture that did not value a college education as long as jobs were available at a nearby mine, timber mill or farm after high school.

-- Students who go into college only to be frustrated by the number of remedial classes they must take -- and pay for out of their own pocket -- for skills they did not learn in high school.

Idahoans who receive short-term training on the job average less than $12 per hour, while those with postsecondary vocational training earn nearly $20, and those with bachelor's degrees earn more than $26, according to a 2010 Idaho Department of Labor study.

At the College of Western Idaho, students completing a surgical-technologist curriculum can expect to start work in a hospital for $38,400 a year. Surgical technologists keep surgical areas sanitized, take care of surgical machinery and hand physicians surgical instruments.

Sixteen students are enrolled for the one-year program, which requires previous classes in physiology and anatomy.

Half the students have jobs before they leave the program. The others are employed within six months, says Cathleen Currie, assistant dean of health professions. The program has a 90-student waiting list.

Will things get better?

Wages will rise as the economy improves, says Peterson, the U of I economist. He points to Micron, which has added jobs. After shrinking its Boise workforce to about 5,000 employees in 2009, Micron has added about 600 jobs in the past couple of years.

Parts of the state are beginning to have "attractive, high-paying, high-tech manufacturing jobs," he says.

Crabb believes education is the path to sustainably higher wages for Idahoans. "Very few of our citizens go onto higher education," Crabb says. "We don't have the skills that are going to get higher wages." That's partly why states like Massachusetts have experienced double-digit salary growth when adjusted for inflation and Idaho hasn't, he says.

But change is coming. Crabb points to the growth of College of Western Idaho, which has 9,000 students after four years.

"I see people waking up to this (and seeing) that we need a different kind of workforce," he says.

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Distributed by MCT Information Services

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