Basic economic supply and demand theory suggests this: When supply of something (potatoes, say) is large, prices per item tend to fall, and when supply is low, demand for the scarcer goods will tend to drive up prices.
That economic theory ought to have the effect, in recent times, of driving wages high in Idaho.
Unemployment is low. A normal level of “full employment” where just about everyone who wants a job can get one, allowing for people in between jobs or who need to reduce their hours for some reason, is at about four percent “unemployment.” (I use the quotes because the word is something of a term of art.) Idaho’s unemployment, or jobless, rate, has crashed through the floor and is down in the cellar. For 14 consecutive months, it has been at or below three percent. Ostensibly this is a good thing. However…
I’m not sure we even understand exactly what that means. We know that Idaho’s work force has not been increasing much (the reasons for that might be interesting to explore further, since so many jobs are available in the state), and there’s some stress among a number of employers in finding enough employees.
Theoretically, that should put workers in a terrific bargaining position, much better than normal. Economic theory says pay should be going up considerably, and since Idaho is one of the leading states for low jobless rates, that ought to be happening a lot in the Gem State.
It isn’t. Here’s a summary from a new report by the Idaho Center for Fiscal Policy: “While the average American has seen their inflation-adjusted wages increase by more than 21 percent over the last four decades, Idaho wages have gone up only 1.6 percent – representing a potential inflation-adjusted earnings difference of nearly $408,000 over the course of a career. In 1977 the difference between the average American wage and the average wage in Idaho was $4,950 annually and in 2017 the difference was $14,018 – an increase of 283 percent.”
Overall, Idaho does have a lower cost of living than many other states. But it’s unevenly distributed. If you live in a small town well away from any of the urban areas, your cost of, for example, housing may be relatively low. But the often high cost of living in Boise is not so different, in many ways, than the cost of living in many other metro areas around the country.
Why is the Idaho wage lower than those in most states? The ICFP report suggests this: “Idaho’s trailing wages are likely driven by the increasing difference between Idaho’s postsecondary degree attainment and the nation’s. In 1940, the share of Idahoans over 25 years old with a bachelor’s degree was 4.5 percent, compared to 4.6 percent nationally. Last year, the share of Idahoans over 25 with a bachelor’s degree was 26.8 percent, compared to 32 percent nationally.”
Idaho state government has for years had a goal of 60 percent of Idaho young adults (age 25 to 34) holding a college degree, but recent reports have pegged the actual number, for three years in a row, at 42 percent – unchanging.
This does sound like one reasonable suspect, though maybe explaining more the kind of jobs that grow in Idaho than their overall number or wage rate. Probably the reasons behind the slower wage rate increase in Idaho are numerous and complex.
But as Idaho’s next crop of elected officials prepare to take office, they probably should spend a little time considering them.