Wage slowpoke Miami suddenly leads the national pack
The labor market puzzle just got more perplexing. Job demand is growing, unemployment is falling, yet wages seem stuck in place.
Or are they?
“Jobs Rebound, Wages Stand Still” was the Wall Street Journal’s banner weekend headline as it reported a 17-year jobless low yet a national annual wage increase of only 2.4%.
What’s really happening?
In the Miami region, what’s happening is that we have in just one year gone from trailing the national average in wage growth, at just 1.9% a year here, to an annual growth of 3.9% as of September according to figures released Thursday, not only well above average but above every other US urban area.
Slowpoke Miami is now number one.
What does it mean? And is it an aberration or a trend?
Tony Villamil, an economist from the first Bush administration whose Washington Economics Group is a Miami fixture, is suspicious of the federal report that sees a Miami that was running behind the pack leading it in just one year.
“You don’t suddenly go in one year from being below national average in total labor cost to being above the national average,” he said Friday. “I would be highly skeptical that suddenly we have turned the corner here” in Miami-Dade, Broward and Palm Beach counties.
Viewed from Orlando, however, the jump in Miami area wages over other regions in Bureau of Labor Statistics figures is perfectly natural to Seth Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida’s College of Business Administration.
“You can’t provide Gainesville wages in Miami” and expect to attract workers, he said.
Dr. Snaith sees a number of factors leading to faster wage rises in Miami than in any other metropolitan area.
Our housing bind is a key factor, he said, because it’s a vital element of the cost of living.
Miami housing costs have risen so fast that they have outpaced the ability of workers to keep up via wages. While wealthy outsiders have driven the rise at the top of the housing market since the recession, that market bears little relationship to housing for workers. Yet that rise has skewed the housing supply toward high-end buyers to the detriment of workforce housing – and Miami’s workforce is growing as more find jobs.
We’ve outpaced the national labor market in job creation and labor force growth for five years, Dr. Snaith points out, yet “wage and salary growth here has been pretty tepid.”
As employers compete to fill more jobs, wages are rising, Dr. Snaith said, which he sees as a trend. With a federal tax cut in the works, he foresees another boost in growth, feeding the process of demand for workers driving up wages.
A factor that’s not so apparent is Miami’s degrading commuting and traffic. “All of these go into the calculus for workers when they decide where to live and work,” Dr. Snaith says.
Metropolitan areas across the nation have just finished trying to convince Amazon that each most deserves the Seattle corporation’s new 50,000-job headquarters site. One of Amazon’s key concerns in requesting site proposals was labor cost and availability. The company is well aware that its 40,000-plus jobs have skewed the Seattle market.
That outsize influence shows up in the figures for metropolitan area labor cost growth. In wages and salaries, Seattle’s 3.8% annual increase trails only Miami’s 3.9%. Moreover, in total cost of compensation – which includes both wages and benefits – Seattle registered a stratospheric one-year jump of 7.6%, far ahead of Miami’s second-ranked 3.7%.
Clearly, the pressures of Amazon’s vast growth are driving its own employment costs through the roof – a significant factor in why the company is seeking a headquarters elsewhere with lower labor costs. The question is whether those costs would remain low for long if Amazon did move in and raised demand for skilled workers by the tens of thousands.
If it lasts, Miami’s sudden jump in wage growth is good news for workers, but it certainly won’t help in the race to lure Amazon here.
Any company looking for less wage escalation could start with the 1% annual gain in Minneapolis, where total compensation costs also had the lowest rise in the nation at 1.1%. Philadelphia was second lowest in wage gains at 1.8%, while Dallas was second lowest in annual compensation cost rise at 1.4%.
One thing certain in Tony Villamil’s mind is that Miami’s rapid growth in labor costs is well ahead of its annual growth in productivity, which Dr. Snaith says is about 3%. While Miami is becoming more competitive in ability to attract workers and meet employer demands to fill jobs, it is at the same time becoming more expensive for employers to do business here.
To Dr. Snaith, the wage level increases have been a long time coming – “I’m surprised it took so long.”
That said, he doesn’t anticipate South Florida wages rising as rapidly next year. He’s forecasting 2% to 3%. Even that slower increase, however, would surpass past gains of less than 2% a year.
Whatever the future number, the Miami area’s wage and compensation rates clearly have broken out of their below-average levels. The unanswered question is whether this will make the area more or less successful in luring added high-wage employers.