In a swift reversal, big wage rises imperil growth aspirations

Suddenly, Miami-Dade has become a national beacon of shrinking unemployment and rising wages, seemingly a cushy featherbed for the new CEO of our economic development organization when he enters the job next week.

First looks, however, are deceptive. Beacon Council newcomer Rodrick Miller will still face Miami’s long-standing challenge of growing high-wage jobs while making sure the gains are spread fairly in the community. As he said in an interview with Miami Today last week, economic building here must revolve around competitiveness.

So while we all have hoped for lower unemployment and higher wages, now that they are here how will we compete for new and imported jobs with communities that can offer a larger pool of workers dying for jobs and more affordable pay for those workers?

Remarkable figures unveiled last week by the US Bureau of Labor Statistics show that not only are this region’s wages and costs of employing workers rising far faster than the national average, but they are rising far faster than in any other major metropolitan region.

National compensation costs of employees jumped 5.1% last year, quicker than at any time in memory, as employers battled to hire qualified workers and bid up compensation to do so, the Bureau of Labor Statistics figures show. But in Miami, where the labor market was far tighter than elsewhere, the cost rose 6.3%.

That increase not only exceeds the national average, it is largest by far among metros – Los Angeles at 5.7% was next, followed by 5.5% in Boston and Dallas.

If we narrow compensation costs to just their major component, wages and salaries, the disparity gap grows. Nationally, the average increase for wages and salaries was 5.1%, but in Miami it was 6.8%. Again, that was the nation’s top, followed by 6.2% in Seattle, 5.9% in Los Angeles and 5.8% in Boston.

This was the second straight year that Miami far outpaced the nation. In 2021, the total compensation cost increase here was 5.2% while for the nation it was 4.4%, and the gain in wages and salaries alone was 6% in the Miami area versus 5% nationally.

It’s too early to call two years of fastest compensation rises in Miami a trend, but it’s a far cry from Miami’s historic status as a low-wage area getting farther removed from national pay levels via slow growth rather than rapid rises. It provides Mr. Miller and area executives a puzzle: how do we plan future compensation scenarios?

While wages in our seven-county region have been rising far faster than the nation, we have seen unemployment in just Miami-Dade County shrinking more than anywhere. As we reported last week, while non-farm unemployment is now 3.5% nationally and 2.5% in Florida, in Miami-Dade it has continued to shrink and is now 1.4% – far below the level economists once targeted as a healthy economic base.

In isolation, low unemployment and rising pay are themselves blessings. Give thanks.

But how do we deal with them if this is indeed a trend rather than an anomaly? How do we lure employers here to create more jobs when it becomes relatively more expensive to pay each worker while very few unemployed persons are seeking the new jobs? That will require a whole new strategy.

We noted last week a five-year pattern of more Miamians moving to other metropolitan areas than we got back from those areas – a net negative outflow that became area growth only because newcomers flooded in from abroad. On its face, that’s an outflow of workers being replaced by less-educated newcomers, because census data show that Miami’s workers born abroad are less educated than those born in the US.

Those census figures, however, predated the region’s rapid rise in pay and decrease in joblessness. Could higher pay and lower unemployment now be stronger magnets to retain key parts of our workforce? It’s certainly possible.

Meanwhile, smaller employers are squeezed as they offer far higher wages and still can’t fill jobs in a suddenly tight labor market. That’s another challenge that Mr. Miller will have to take on, to enlarge the pool of qualified workers to meet new demands.

Whatever a far tighter labor market with a rapidly rising pay scale will mean to a community that has been flaunting its high tech and financial hub aspirations, we can guarantee Mr. Miller and the Beacon Council one thing: he is not settling into a cushy featherbed. Welcome to Miami.