Job Vacancy Wages Don’t Meet Basic Needs

The wages offered for most job vacancies in Minnesota are not sufficient to meet the basic needs of a typical family, according to the 2017 Minnesota Cost of Living Study prepared by the Minnesota Department of Employment and Economic Development (DEED). The preceding article in this series noted that the median wage for all occupations in Minnesota is only modestly above what is necessary to meet these basic needs. The same report shows that in nearly every Minnesota region, the median wage offered for job vacancies is below the typical family’s basic needs wage. Meanwhile, the state’s minimum wage is well below the basic needs wage in every region.

The published version of the DEED report compares the 2017 typical family’s basic needs wage (for a definition, see the preceding article) to the estimated median job vacancy wage offer from the second quarter of 2016. The analysis below is based on more current median job vacancy wage offer estimates from the fourth quarter of 2016, which were not available when the 2017 Cost of Living Study was published earlier this year. DEED defines a job vacancy as “a position that is currently open-for-hire at the time of the survey.” DEED gathers job vacancy wage data through a survey of a stratified sample of about 10,000 Minnesota firms. During the fourth quarter of 2016, these employers reported a total of 97,400 vacancies statewide.

On a statewide basis, the 2017 wage needed to support the basic needs for a typical family is $17.69 per hour. The estimated median wage offer for job vacancies in the fourth quarter of 2016 was $13.97 per hour—21 percent less than what is needed to meet basic needs. The state’s large employer minimum wage is currently $9.50 per hour, while the small employer minimum wage is $7.75,* which are respectively 46 percent and 56 less than what is needed to meet basic needs. The chart below shows the extent to which the estimated median job vacancy wage offer, the large employer minimum wage, and the small employer minimum wage are above or below the typical family’s basic need wage statewide and in each of Minnesota’s thirteen economic development regions (EDRs).†

The estimated median job vacancy wage offer is below what is needed to meet the basic needs of a typical family in twelve of Minnesota’s thirteen EDRs. Among these twelve regions, the gap is largest in the Twin Cities Metro region (EDR 11), home to over half of the state’s population and 62 percent of its jobs. In that region, the estimated median job vacancy wage offer is 31 percent below the wage needed to meet the typical family’s basic needs. In three other regions (EDRs 1, 4, and 8), the median job vacancy wage offer is within ten percent of the basic needs wage. Over half of the job vacancy wage offers are below the basic needs wage in every Minnesota region—with one exception: the Upper Minnesota Valley region (EDR 6W) has an estimated median wage offer ($18.85 per hour) that exceeds the typical family’s basic needs wage ($13.67 per hour) by a whopping 38 percent.

A deeper dive into the data, however, indicates that this particular finding may be somewhat anomalous. The sample of job vacancies from which the EDR 6W median job vacancy wage offer was calculated was 552—only 0.6 percent of the statewide total sample and less than half the sample size of the next lowest region. Relative to previous surveys, fourth quarter 2016 job vacancies in EDR 6W were heavily concentrated in the high wage categories of “management occupations” and “healthcare practitioners and technical occupations,” which had the effect of dramatically increasing the estimated median job vacancy wage offer in EDR 6W.‡ Whether this change in the nature of job vacancies in 6W is a long-term trend, a one-time phenomenon, or a sampling error is not yet clear, but excessive exuberance regarding the level of job vacancy wage offers relative to the basic needs wage in this region may be premature.

Because the large and small employer minimum wages are constant throughout the state, the ratio of these wages to the typical family’s basic needs wage varies in direct proportion to the basic needs wage. For example, the large employer minimum wage ranges from 30 percent below the typical family’s basic needs wage in the Southwest region (where the basic needs wage is the lowest) to 52 percent below in the Twin Cities Metro region (where the basic needs wage is the highest). While there is significant variation among regions, the small and large employer minimum wage is significantly below the basic needs wage of the typical family in every EDR.

It is interesting to examine recent efforts to increase the minimum wage to $15 per hour in the context of the basic needs wage. For example, in Minneapolis, the $15 per hour minimum wage—while substantially higher than the state minimum wage—is still 24 percent below the typical family basic needs wage in the Twin Cities metro region ($19.63 per hour) and Hennepin County ($19.80 per hour). Opponents of increasing the minimum wage often argue that workers earning minimum wages are young and do not need to support a family—and thus do not need a wage increase. A 2016 report from the Economic Policy Institute and Oxfam America has cast doubt upon this assertion; that report found that over half of all workers making $15 per hour or less are between 25 to 54 years of age.

A prosperous economy depends on the ability of working families to purchase the goods and services that that economy produces. The DEED Cost of Living Study provides useful information as to how successful the state has been in achieving this goal. The study shows that median wages in Minnesota are only modestly above the basic needs wage of a typical family, while median job vacancy wage offers are generally well below it. Additional analysis provided here shows that the state’s minimum wages are even further below the basic needs wage. In short, many Minnesota jobs do not pay enough to meet the typical family’s rather Spartan basic needs as defined by DEED, let alone a more comfortable middle-class lifestyle to which Minnesota families aspire.

 

*The state’s large employer hourly minimum wage was increased to $9.50 and the small employer minimum wage was increased to $7.75 on August 1, 2016. These wages, which are indexed to inflation, will be adjusted on January 1, 2018. The small employer minimum wage is equal to the training rate and the youth rate.

 A map and chart that accompanied the preceding article in this series illustrate the counties that comprise each EDR.

 In the fourth quarter 2016 Minnesota job vacancy survey, “management occupations” and “healthcare practitioners and technical occupations” comprised 39 percent of all job vacancies in EDR 6W, up from nine percent in the second quarter 2016 survey (and an even smaller percentage in the two preceding surveys). The large increase in the concentration of job vacancies in these two relatively high-wage occupations is a major contributor to the estimated median job vacancy wage offer increase in 6W from $10.33 in the second quarter 2016 survey to $18.85 in the fourth quarter 2016 survey.