City struggles to find solution to problem of wage inequality

PORTLAND TRIBUNE: JOHN M. VINCENT - Manufacturers like Vigor Industrial on Swan Island pay more than regional median wages for traditional middle class work.Middle-income wage earners are being squeezed in the metropolitan area. The share of middle-wage jobs has dropped from 69 percent in 1980 to 57 percent in 2013. Middle-income wages also have stagnated during the same period. And now housing costs are increasing so fast that most middle-wage earners cannot afford to buy houses in Portland, even if they work there.

Those are among the findings of a new report by the Value of Jobs Coalition, a public-private research partnership that includes the Portland Business Alliance and the Port of Portland. It blames the decline in middle-wage jobs on globalization and technology changes, twin forces affecting workers across the country.

“While Portland has recovered all of the jobs lost in the Great Recession, the middle-income jobs are coming back most slowly. That should be a concern for all of us because middle-income jobs are the backbone of the economy,” says Roger Hinshaw, a commercial market executive and chairman emeritus of the PBA.

The report, titled “2015 Middle Income Jobs in the Portland-Metro Economy,” calls for policymakers to prioritize education, trade, infrastructure, work-force housing, and the protection of job corridors where middle-income jobs are concentrated, including along the Columbia and Willamette rivers.

“The question facing policymakers is how they can leverage the positive impacts of global market evolution and technology to position Portland-metro, and the region’s families, for prosperity in the decades ahead,” says the report, which was written by the ECONorthwest consulting firm.

The report can be read here.

According to the report, although the Portland area benefits from international trade, lower-value jobs have been created overseas. And many routine domestic jobs have been replaced by robotics, automation and online service providers. Job sectors affected by the changes include manufacturing, transportation, financial services and food service.

“It is very likely that more and more of the remaining routine jobs will be replaced by technology over time,” the report says.

A total of 620,580 workers held middle-income jobs in the metro area in 2013, the most recent year the information was available. They include administrative, production, health support, sales, repair and commercial services jobs. The median wages ranged from $29,420 to $50,360 a year.

The study found that many middle-income jobs are concentrated in a few corridors. They include along the Columbia and Willamette rivers, where traditional industrial jobs are concentrated, and along U.S. 26 and Highway 217 in Washington County, where high-tech jobs are concentrated.

But the report also found that most middle-income earners cannot afford to live near where they work. It defined an unaffordable house as costing more than 30 percent of household income to buy. According to that standard, even households earning the median income of $69,400 — cannot afford to buy a median-priced home in the metropolitan area. That required at least $70,000 a year in 2013. As a result, many middle-income workers now live east of Interstate 205, in outer Washington County and in Clark County.

“If purchasing a home in the city of Portland is an opportunity only for families earning $70,000 or more, who are we pricing out? Teachers? Firefighters? Welders? Construction workers?” asks the report, listing some of the other traditional middle-wage jobs.

According to the report, the problem will only get worse if interest rates go up, as they are eventually expected to do.

The report calls for the construction of more “workforce housing” that middle-income earners can afford to buy near their jobs. It praises policymakers for creating housing for low-income residents in the past, but says middle-income earners need help, too.

“Policymakers must look closely at all laws and regulations that impact home prices, including land availability, zoning, fees and taxes. If the goal is to enable people to live closer to their work, schools and transit, then housing affordability must be a focus,” the report says.

According to the report, although the percentage of middle-income jobs has declined in the metropolitan area, the percentage of both low- and upper-income jobs has increased. This has resulted in greater economic inequality, and it reflects what is happening in many other cities in the country, including Cincinnati, Denver, Sacramento, Salt Lake City, Seattle and St. Louis.

Income inequity has increased nationally even more because high-income wages have grown while middle- and low-income wages have stagnated, the report says. This is also true in Portland, where the median high-income wage increased approximately $20,000 a year since 1980 (adjusted for inflation), but hardly at all for everyone else.

This is changing now that the Great Recession is over and the economy is finally beginning to recover. According to the report, the Oregon Department of Employment predicts high-, low-, and upper-middle income wages will grow 10 to 15 percent between 2012 and 2022, while lower-middle-income wages will grow 13 percent.

“If that prediction proves true, the disparity that occurred in the three decades since 1980 will not continue. But policymakers need to act affirmatively to ensure a reversal of the trend,” the report says.

Defining wage groups

Portland-metro wages

The report divides jobs into four categories, based on federal and state measurements in 2013:

• Low-income jobs paid median wages ranging from $19,850 to $24,890 a year.

• Lower-middle-income jobs paid median incomes of $29,420 to $35,170.

• Upper-middle-income jobs paid median incomes of $40,730 to $50,360.

• High-income jobs paid median incomes for $61,950 to $92,460

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