June 5, 2008

Utah is commonly referred to as a low-wage state, a status which can influence state welfare policies, affect labor market decisions, and deter talented persons from seeking employment within the state. This status is somewhat misleading, however, because it is based on numbers which do not take into account the unique structure of Utah’s labor force. Understanding the socioeconomic factors which influence Utah’s labor force and correcting for this bias reveals that Utah employees receive wages which are closer to the national average than commonly believed.

Utah’s Low-Wage Problem

The Bureau of Labor Statistics (BLS) consistently reports Utah’s weekly wage as one of the lowest in the nation. A table from the November 2007 BLS news release ranks Utah’s weekly wage of $696 as 38th in the nation. The average weekly wage for the United States was $885, meaning Utah’s wage only represents 78.6% of the national average. Historically, Utah has ranked about 40th in regard to weekly wage and BLS reports from the last decade show Utah’s wages remaining around 82% of the national average. The BLS reports also show this disparity has been growing over time. This information leads researchers, elected officials, pundits, and others to report Utah as a low-wage state, which can be misleading when it comes to making economic policy decisions.

While BLS data are widely used and accepted, it is important to acknowledge they do not take into account the unique structure of Utah’s labor force. One concern with using BLS data to rank Utah’s wages against other states is that BLS includes the wages of part-time workers in its calculation of average weekly wage. This can lower average pay, especially when a state, like Utah, employs a large number of part-time workers. Another concern is that aggregate BLS data is influenced by Utah’s young working-age population.

A High Percentage of Part-Time Workers

Data from both the 2006 Current Population Survey (CPS) and the 2006 American Community Survey (ACS) show Utah has one of the highest percentages of part-time workers in the United States. Data from CPS (which reports the number of full-time and part-time workers) rank Utah second in regard to the highest percent of part-time workers. Minnesota, which ranks first, exceeds Utah’s percentage by only 0.04 percentage points. When disaggregating the data by gender, Utah ranks seventh in terms of the highest percent of men working part-time, and first in terms of the percent of women working part-time. The percentage of Utah women working part-time is more than 3.3 percentage points higher than Maine, which is ranked second, and more than 11.3 percentage points higher than the national average.

The 2006 American Community Survey also provides the number of workers with no disability who worked in the past 12 months. Workers are divided into three categories: those who usually worked 35 or more hours per week, those who usually worked 15-34 hours per week, and those who usually worked 1-14 hours per week. Data from the ACS show Utah has the highest percent of workers who worked both 15-34 hours per week and 1-14 hours per week. While the percentage of total Utah workers who worked 15-34 hours per week is only 0.19 percentage points higher than Rhode Island (ranked second), the percentage of workers who worked 1-14 hours per week is one percentage point higher than Vermont (ranked second) and almost two percentage points higher than the national average.

Disaggregating by gender shows this ranking is heavily influenced by the number of women who work part-time. The percentage of men and women who worked 15-35 hours per week in Utah are both the highest in the nation, but the percentage of men who worked 1-14 hours per week is 2.95% and ranks 11th. The percentage of women who worked 1-14 hours per week is 9.10% and ranks first; this is 2.3 percentage points higher than Idaho (ranked second) and almost 4 percentage points above the national average.

Utah’s Socioeconomic Characteristics

Data from the 2006 CPS and ACS illustrate the unique structure of Utah’s labor force, which in turn helps explain why the BLS calculation of Utah’s wage is so low. While these findings are useful in clarifying the misconception that Utah is a low-wage state, the data do not give details as to why Utah has so many part-time workers. To accurately understand the impact of Utah’s part-time labor force on the economy, one must first understand the socioeconomic characteristics which determine the state’s high percentage of part-time workers.

One common theory used to explain Utah’s large part-time labor force is that the state’s thriving tourism industry creates demand for part-time labor to work as ski instructors in the Wasatch Mountains or as trail guides in Utah’s National Parks. While Utah does rank high in terms of seasonal employment, the percentage of workers who are employed part-time because of the seasonal nature of their position is only 2.47%.[1] This places Utah just outside the top ten states according to the percentage of seasonal part-time workers, and 2.4 percentage points behind Alaska, which ranks first.

A better explanation for Utah’s large part-time labor force is the state’s young population. The age group 15 to 24 makes up 17% of Utah’s population, but only 14% of the national average. Not only does Utah have more teens than the national average, but Utah’s teens are also more likely to work. Utah ranks sixth highest in the nation according to the percent of males ages 16 to 19 who are both enrolled in school and employed. While fewer teenage females work than males, Utah still ranks ninth in the nation according to the percent of females ages 16 to 19 who are both enrolled in school and employed.[2]

A third explanation for Utah’s large part-time labor force is tied to the number of Utah workers who are enrolled in college or post-secondary training. Over 39% of Utah’s part-time workers listed enrollment in “school or training” as the reason they did not work full-time. This included 67.61% of men and 27.69% of women.[3] This was the second most common reason given in Utah for being employed part-time. Utah also ranks tenth highest in the nation according to the percent of part-time workers who listed that they usually work full-time, but currently work part-time because of school or training.[4]

A Key Factor: Utah’s Unique Commitment to Family

While these three factors heavily influence Utah’s large, part-time labor force, data from the Community Population Survey suggests the socioeconomic characteristic that best explains Utah’s high percentage of part-time workers is Utah’s unique commitment to family responsibilities. The most common reason Utah workers gave as to why they worked part-time is because of “other family/personal obligations.” Over 55% of Utah’s female part-time work force listed this as their reason for working part-time, ranking Utah first in the nation according to the percent of women listing this reason. The national average was 39%.

Interestingly, only 3.72% Utah’s female part-time work force listed “child care problems” as the reason they worked part-time. This is below the national average and ranks Utah in the lowest twenty states for women listing this reason. This may suggest that some female part-time workers in Utah who choose to stay home with their children believe it is a family or personal obligation, rather than a child care problem.[5]

The Impact of Part-Time Workers of Utah’s Wage

So how strong of an influence does Utah’s large, part-time labor force have on BLS’ rank of average weekly wage? If one only looks at the median earnings of full-time workers, Utah’s ranking significantly improves. Median earnings for all full-time, year-round workers in Utah were $36,500 in 2006, ranking 27th and equaling 95% of the national average. This is significantly better than the BLS data showing Utah at 82% of the national average.

Median earnings for full-time working men rank 26th and are over 98% of the national average. Median earnings for full-time working women rank 35th and are over 90% of the national average.[6] Data from CPS also show that while Utah has the highest percentage of workers who worked 0-20 hours per week, the number of men who worked over 40 hours per week is above the national average.

A High Proportion of Young Workers

While Utah’s incomes are closer to the national average when part-time workers are excluded, wages for both men and women still fall below the national average. Another major factor contributing to Utah’s lower wages is the state’s young working-age population. Research done by Mark Knold, Chief Economist for Utah’s Department of Workforce Services, shows the largest portion of Utah’s labor force consists of workers aged 20-34. This is significantly younger than the dominant age group of workers in the United States, which includes workers aged 40 to 60. Because incomes and wages tend to increase with age, Utah’s young working-age population is a primary factor contributing to Utah’s lower earnings.

Utah’s income ranking also depends on the type of data used. For example, even though Utah has somewhat lower than average wages and salaries, Utah household incomes are above average. The 2006 median household income in Utah was $50,309. This is almost $2,000 above the U.S. average of $48,451 and ranks Utah 19th highest in the nation. Another, well-respected estimate of household income places Utah among the top 10 states for household income.[7] However, the 2006 median family income was $58,141; this was just below the U.S. average of $58,526 and ranks Utah 22nd highest in the nation.[8]

The difference between household and family income is that family income is based on the incomes of the householder and any other people living in the same household who are related to the householder by birth, marriage, or adoption. Family income does not count single-person households. Household income is based on the incomes of the householder and any other people living in the same household, regardless of whether they are related to the householder. Because many households consist of one person, household income is typically less than family income.

One factor that could contribute to this disparity is the fact that Utah has a high number of workers per household. Utah is ranked second in the nation in terms of workers per household, but only 23rd in terms of workers per family. Utah has a higher than average population ages 0 to 14, which explains why the number of workers per family is so low.[9] Having more workers per household may contribute to higher household incomes.

Utah also has fewer single-person households compared to most other states. Only 19% of households in Utah are single-person households, whereas the national average is 28%. This gives Utah the lowest percent of single-person households in the nation. Single-person households in Utah make an average of $27,331, which only represents 53% of the state’s median household income.[10] Having very few single-person households contributes to Utah’s higher than average household income because there are fewer lower-income households to include in the statewide average.

Making a Living in Utah

While this information indicates that Utah workers have higher wages and incomes than the BLS data indicate, the question remains as to whether full-time and part-time workers are able to support themselves on Utah’s incomes.

Cost of Living

In terms of overall cost of living, Utah is below the national index (93.6 vs. 100) and ranks 16th lowest in the nation with respect to cost (based on first quarter 2008 figures). The state is below the national index in terms of every category: housing, utilities, transportation, healthcare, miscellaneous goods, and groceries. However, the index for transportation and miscellaneous goods both increased from 2007 fourth quarter estimates.[11]

Home Value

The median home-value in Utah is slightly higher than the national average; however, most homeowners in Utah own homes valued $150,000 to $199,999, while most homeowners in the United States own homes valued $300,000 to $499,999. The majority of Utah homeowners also pay lower monthly homeowner costs as a percentage of household income than those in the rest of the United States.[12]

Home Ownership

Over 70% of Utah residents own—rather than rent—their home, compared to 67% in the United States.[13] This contradicts the theory that more part-time workers lead to more rental properties. This also supports the idea that Utah’s high percentage of part-time workers is influenced by the number of teenagers who work part-time and still live at home, as well as the number of women who choose to work part-time because of family obligations but can rely on their partner’s income to finance expenses. The second part of this statement is confirmed by the drastic difference between the number of male and female part-time workers presented above.

Conclusion

While the state’s high percentage of part-time workers and younger workforce lower the BLS calculation of Utah’s average weekly wage, it is important to recognize that the median Utah family earns a wage which is competitive with the rest of the nation. In addition, the median earnings for both full-time working men and women in Utah are over 90% of the national average. Although Utah ranks below the national average in several measures of income, this brief shows that this ranking is better than initially assumed—especially for full-time working men. Acknowledging BLS average weekly wage data do not take into account the unique structure of Utah’s labor force and understanding the socioeconomic characteristics which influence Utah’s high percentage of part-time workers provides a more realistic picture of Utah’s economy.

Endnotes

This research brief was written by Utah Foundation Research Analyst Laura Summers. Ms. Summers may be reached at (801) 355-1400 or by email at: laura@utahfoundation.org. For more information about Utah Foundation, please visit our website: www.utahfoundation.org.