Wage Change Insights (5)
Although wages have increased in all three states between 2000 and 2019, the rates of wage growth in Illinois and Indiana have been lower than the national average while Iowa has seen fairly high wage growth. Illinois has had among the worst wage growth in the U.S. due to a declining population and income tax increases, and Indiana has had similarly slow wage growth due to relatively low levels of education among its workers and recently lost many high-paying jobs in manufacturing. However, Iowa has had relatively high wage growth because of low unemployment and increased skill levels of its workforce.
Factors Affecting Wage Growth in Illinois, Indiana, and Iowa
- Although the state's average wages increased overall between 2000 and 2019, Illinois' wages have increased at slower rates compared to the national average following the Great Recession. When adjusted for inflation, Illinois has had the second-lowest income growth among U.S. states. From 2007 to 2019, the U.S. overall average 2.1% inflation-adjusted income growth compared to Illinois's 1.1% inflation-adjusted income growth.
- According to the Illinois Policy Institute, Illinois's population has been consistently decreasing since 2014, which has slowed economic development and caused the state's relatively low rate of wage growth. Illinois residents are moving to other states at high rates looking for lower housing costs, more competitive pay, and more job opportunities, especially for manufacturing jobs, which have declined in Illinois in the last decade.
- Additionally, since 2000, the state's pension debt has grown rapidly, with an increase of over 500%. To allow the state to cover the cost of paying off this debt, Illinois lawmakers have increased the state's income taxes twice, in 2011 and 2017. These tax hikes have had lasting negative impacts on the rate of job creation, thereby limiting wage growth as well.
- Average wages have grown in Indiana between 2000 and 2019, but that growth has been well below the national average since 2004 because Indiana's workforce has relatively poor educational attainment levels. A poorly educated workforce means that a relatively high proportion of Indiana's job market is composed of low-wage jobs, which are more likely to be lost during short-term economic downturns and slow the state's long-term wage growth.
- Additionally, between 2015 and 2019, Indiana's northwest region lost in 1,614 lucrative manufacturing jobs, with an average annual income of $100,268, as well as hundreds of jobs in merchant wholesale and publishing. In place of these above-average paying jobs, the region had increases in low-wage service jobs.
- Compared to the rest of the U.S., Iowa has seen relatively high wage growth between 2000 and 2019, with the 7th highest rate of weekly wage increases from 2007 to 2017.
- Iowa's unemployment rate has been steadily dropping and, as of 2019, was the fourth-lowest in the country, at 2.6%. Recent employers in Iowa are having to compete for workers, which has increased wages in the state. This increasing hiring competition has also resulted in employers having to seek out and train unskilled workers, which has resulted in wage increases across multiple industries.
- As a result of the increasing demand for workers in Iowa's job market, wage growth between 2007 and 2017 was particularly high in the following job sectors: 40% wage growth in natural resources and mining jobs and 30% wage growth in professional/financial services, leisure, hospitality, IT, and construction jobs.