The tight job market isn’t packing much of a punch when payday comes around.
While the economy keeps humming along in the 10th year of a record-setting growth streak, the personal incomes of people across the Buffalo Niagara region have been growing at a disappointingly slow pace.
Our incomes – not just wages and salaries, but also dividends, rental income and social services payments – grew by a tepid 1.2% last year, after adjusting for inflation, according to the latest personal income data from the U.S. Bureau of Economic Analysis. That’s just a third of the 3.3% growth in per capita personal incomes during 2017.
The sluggish growth in incomes was disappointing because the 2017 data seemed like a sign that the tight job market finally was starting to translate into higher pay for workers. But it hasn’t. Since 2008, our incomes have grown by only 14%, after inflation. That works out to a little more than 1% a year.
What makes the income data so important is that spending by consumers makes up about 70% of all domestic economic activity. The more consumers have to spend, the more robust the economy will be. And how much they have to spend depends, in large part, on how fast their incomes are growing.
And incomes in the Buffalo Niagara region – and across upstate New York – aren’t keeping pace with the rest of the country, said E.J. McMahon, research director for the Empire Center for Public Policy, an Albany think tank. Personal income growth in both Erie and Niagara counties ranked in the bottom 20% of all U.S. counties.
While businesses complain that good workers are hard to find, they’re still holding the line on pay. Wages and salaries here grew by an inflation-adjusted 1.7% last year – and that was the biggest annual increase since 2015. Real wage and salary growth has topped 2% during only two of the last 10 years.
Not everyone is sharing equally in the region’s modest income growth. Wages grew by 2.6% in the fast-growing health care and social assistance sector and by 2.1% in the sizzling real estate sector. But wages fell in key sectors, like transportation and warehousing, along with accommodation and food service.
Worker turnover also can have a big impact on wage trends. A sector with an older workforce can see downward pressure on overall wages as workers retire at the top of their pay scale and are replaced by younger employees who earn lower starting wages.
Personal incomes in the Buffalo Niagara region grew less than half as fast as they did nationally, where per capita incomes rose by 2.9% during 2018 after adjusting for inflation. It was the first time in four years that local per capita incomes grew slower than the national average.
Our incomes come from a variety of sources. Wages and salaries are the biggest part, but things like dividends, pensions and social services payments also help determine how much money we have. In each instance, the local change was less than the national gains, and our transfer payments actually dropped.
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