What the data show¯¯
This report focuses on five aspects of middle-income employment in the Portland- Metropolitan Statistical Area (called Portlandmetro in this report), including:
- Share of total employment
- Wage group
The report also compares Portland-metro’s employment changes from 1980 to 2013 (annual averages) to changes in the following geographic areas:
- "Peer" regions defined as Cincinnati, Sacramento, Salt Lake City and St. Louis
- "Aspirational" regions defined as Seattle, Denver and Minneapolis
These comparator regions have been used in past Value of Jobs reports to provide national context for the Portland-metro’s economy. In 2014, Salt Lake City was added as a peer region to align with analysis done by Greater Portland Inc.
This report initiates a regional dialogue about an indisputable reality that is affecting Portland-metro families: declining availability of middle-income jobs and wage polarization, along with a region that is becoming increasingly unaffordable for middle-income workers. While many factors contributing to this trend are beyond the region’s control, some can be impacted by the region’s leaders. The goal, therefore, is to identify proactive steps that can be taken to make Portland-metro a national leader where middle-income families thrive.
A global trend
Global market changes and technology have had major impacts on labor markets across the U.S. and in Portland-metro. As the markets have evolved to be global in nature, companies in the U.S. and abroad have moved lower value-added production overseas, which has impacted manufacturing employment in the nation as a whole. At the same time, foreign markets have been identified as growth opportunities for many industries, benefiting workers at home. As a trade-based economy, Portland-metro has benefited from the development of global markets, as earlier Value of Jobs reports have shown.
Technology has affected manufacturing, with robotics and automation replacing humans on production lines. Technology’s impact has also spread into office and service work as software becomes an inexpensive substitute for routine labor. ATMs have replaced bank tellers; tax software has displaced accountants; online shopping has reduced the demand for retail clerks; and even grocery stores, restaurants and transportation providers are replacing human labor with automation. It is very likely that more and more of the remaining routine jobs will be replaced by technology over time.
WHAT ARE MIDDLE INCOME JOBS IN PORTLAND-METRO?
In Portland-metro, middle-income jobs mainly include those in manufacturing/production, sales and administrative support. Middle-income jobs also include those serving local markets and populations, such as teachers and trades workers, which tend to be impacted by business cycles.
Drawing on methods from the Federal Reserve Bank of New York and Oregon’s Office of Economic Analysis, this report looks at middle-income occupations in two subsets: Upper-middle-income occupations with median wages in 2013 of $40,730 to $50,360, and lower-middle-income occupations with median wages of $29,420 to $35,170 in Portland-metro. Today in Portland-metro, some 620,580 workers hold jobs in those categories.
The high-income occupations analyzed had median wages ranging from $61,950 to $92,460, and the low-income occupations had median wages ranging from $19,850 to $24,890 in Portland-metro. The median for all Portland-metro wages is $38,650, a wage that lands between the upper-middle and lower-middle- income ranges. See Figure 1.
The consequence, in Portland-metro and across the U.S., is job polarization. Jobs are growing at the high-skill end including those workers who create, implement and manage the technological advancements. These jobs typically require a four-year college degree or better. At the low end of the wage scale are jobs that require little if any post-secondary training and are not easily automated: facility maintenance workers, food preparers and others. It is the jobs in the middle — the jobs that have traditionally been a path out of poverty for lower-wage workers — that are being automated, moved or replaced with jobs that require new and different skills.
The impact to Portland-metro of these global trends is a mixed bag. Like most of the country, Portland-metro has seen some manufacturing jobs move overseas. On the other hand, Portland-metro has done a better job of holding on to traditional manufacturing than most regions (see the Value of Jobs Manufacturing Report, published in 2012). Technology also has had an impact in Portland-metro, with automation and efficiency resulting in leaner manufacturing processes and fewer jobs. Yet, Portland-metro is a center for technology development, and a large amount of both hardware and software development happens here, leading to job creation. Likewise, Portland-metro’s economy is fundamentally driven by international trade, which benefits from global market development. Indeed, some 490,000 Oregon jobs are tied to trade either directly or indirectly, according to the Value of Jobs 2013 International Trade report, and growth in trade results in more jobs for Oregonians.
The question facing policy makers is how they can leverage the positive impacts of global market evolution and technology to position Portland-metro, and the region’s families, for prosperity in the decades ahead. Leaders should consider what factors are important to make sure Portland-metro is ready to accommodate change, including educational attainment, land availability and transportation infrastructure.
Since the 1980s, Portland-metro, like much of the nation, has seen higher levels of employment growth in both the high- and low-income job groups, as shown in Figure 2. High-wage jobs grew 185 percent between 1980 and 2013, and low-wage jobs grew 161 percent. Upper-middle-wage jobs, on the other hand, grew 103 percent in that same time period, and lower-middle-wage jobs showed just 47 percent growth.
Portland is not alone in that reality. The trend was apparent in virtually all of Portland-metro’s comparator regions, including both peer (Cincinnati, Sacramento, Salt Lake City and St. Louis) and aspirational regions (Seattle, Denver and Minneapolis). See Figure 3. While the size of the actual growth in each category varied, in all but one region, Denver, high-wage jobs grew most, followed by low-wage jobs. Focusing on middle-income jobs, the growth of upper-middle- income jobs outpaced lower-middle-income jobs. Relative to the comparator regions, Portland-metro’s job growth across all income categories was outpaced only by Seattle and Sacramento.
In Denver from 1980 to 2013, high-income and low-income jobs grew at about the same pace (about a 135 percent increase), while that region’s middle-income jobs followed the national trend of growing more at the upper end than at the lower end.
In Portland-metro and among the comparator regions, middle-income jobs as a share of the region’s overall employment have declined. In 1980, middle-wage jobs accounted for 69 percent of Portland-metro’s overall employment. By 2013, that share had dropped to 57 percent, as shown in Figures 4 and 5.
All of Portland-metro’s comparator regions experienced similar drops in the share of overall employment attributed to middle-income jobs. Seattle had the largest drop, with a 14-percentage-point decline, and Salt Lake City had the lowest, with a 9-point drop.
Looking ahead, the Oregon Department of Employment predicts more balanced job growth over the next decade. The department predicts that high-, low- and upper-middle-income jobs will all grow 15-20 percent in Portland-metro between 2012 and 2022, while lower-middle-income jobs are expected to grow 13 percent. As Portland-metro’s population grows, there will be greater demand for middle-income workers in the construction trades, educators, health care workers and other local service providers.
If that prediction proves true, the disparity that occurred in the three decades since 1980 will not continue. But policy makers need to act affirmatively to ensure a reversal of the trend. With continued uncertainty surrounding the impact of technological evolution on the distribution of jobs, investments still need to be made to position Portland competitively in the future.
Wages stagnate at the middle and bottom
In addition to holding a declining share of the region’s overall employment, middleincome jobs, as well as low-income jobs, have experienced wage stagnation. In Portland-metro, median wage in high-income occupations grew by approximately $20,000 since 1980 (adjusted for inflation), from about $50,000 in 1980 to just over $70,000 in 2013. Conversely, median wage for low-income workers stayed the same, at just over $20,000. The same was true for lower-middle-income occupations, with a median wage staying stagnant at about $35,000, and upper-middleincome occupations, with a median wage staying at about $45,000, see Figure 6.
Portland-metro has outperformed its peers in terms of growth in median wages among high-wage occupations, see Figure 7. Between 1980 and 2013, the median income for high-wage occupations increased by 41 percent, outpacing every other region except Seattle, where median income among high-wage occupations grew about 46 percent.
Conversely, median wage among Portland-metro’s low-wage occupations was among the slowest growing in the comparator groups, at just 4 percent. This is likely because Oregon starts with a higher minimum wage relative to the nation as a whole. The only region that saw the median wage for low-wage jobs grow more slowly from 1980 to 2013 was Cincinnati, with 1 percent growth.
Wage growth for middle-income jobs between 1980 and 2013 among peer regions was mixed. Looking at peer regions (Cincinnati, Sacramento, Salt Lake City and St. Louis) Portland-metro’s 1 percent loss in median wage for upper-middle-income occupations ranked third, trailing Cincinnati and St. Louis, (with gains of 7 percent and 5 percent respectively). Similarly, Portland-metro ranked third in median wage growth for lower-middle-income occupations (3 percent growth for Portland), falling behind Sacramento (11 percent gain) and Salt Lake City (8 percent gain), as shown in Figure 7.
Portland-metro performed worse than all of its aspirational regions in median wage growth for middle-income jobs. While Portland lost 1 percent in median wage for upper-middle-income occupations, Denver, Seattle and Minneapolis all showed gains, see Figure 8. For lower-middle-income occupations, Portland’s 3 percent gain in median wage fell well behind Denver (11 percent gain), Seattle (9 percent gain), and Minneapolis (12 percent). On the whole, Portland-metro’s disparities among high- and low-wage groups, and lower- and upper-middle-wage groups, appear greater than any of the comparator regions, both peer and aspirational.
Like Portland-metro, all of the comparator regions undoubtedly have been impacted by global trends and technology advancements that have affected wage growth. As markets have become global, wages are driven as much by worldwide realities as local trends. Wage growth and wage levels say more about the nature of the industries in a region than characteristics of the region itself, although educational achievement has a significant impact on wages. Since 1980, the impact of education attainment on wages has grown. Those with a high school diploma or less have seen wages decrease in real dollars, while those with some college has remained constant. Only workers with a college degree or higher have seen real wage growth, as shown in Figure 9.
One contributing factor unique to Portland-metro may be the decline of the timber industry in the 1980s, which resulted in a loss of middle-wage jobs and a shift to a technology-based economy, which has brought better paying jobs.
It is also important to consider the “Gini coefficient,” which measures income inequality in a region, see Figure 10. A coefficient of 0 means perfect equality – with everybody earning the same income. A coefficient of 1 is maximum inequality – with one person making all the money and everyone else making nothing. Portland-metro’s coefficient is .45, which falls on the low end of the ranking for comparator regions. Given that Portland-metro has seen the widest gap in wage increases across job categories compared to peer and aspirational regions, its relatively low income inequality ranking may relate to the region’s relatively low median wage for high-income jobs and relatively high median wage for low-income jobs, as shown in the 2014 Economic Check-Up report for the Value of Jobs.
Finally, wages need to be compared to cost of living, and in this area Portland-metro’s middle-income families have cause for concern. Looking at all of the comparator regions and adjusting wages for cost of living, Portland-metro underperforms all comparator regions but Salt Lake City and Denver for lower- and upper-middle-income jobs. Put differently, compared to Portland-metro, wages have more buying power for middle-income families in every region but Salt Lake City and Denver, as shown in Figures 11 and 12.
Regional Price Parity (RPP) is a new form of measurement developed by the U.S. Department of Commerce in 2014. Much like currency exchange, it compares real buying power in different regions at a given point in time.
For example, the New York metropolitan area has an RPP of about 122, meaning prices are about 22 percent higher than the national average. When factored against median household incomes, this provides a measure to account for cost of living differences for a given region.
The stagnation of incomes in middle- and low-wage occupations, along with a higher cost of living, are trends that policy makers should watch. The focus should be on whether Portland-metro is achieving the right mix of jobs to achieve real growing wages for the region’s families and addressing factors that contribute to the higher cost of living.