BHI Weekly Dispatch on RMG: Government workers see increase in purchasing power

The following analysis is from the forthcoming issue of the Beacon Hill Institute's Economic Indicators a quarterly briefing on the state's economy.

Across the United States, real average earnings rose 1.9 percent, seasonally adjusted, from December 2009 to December 2010. In Massachusetts, across all sectors, real salaries wages rose 3.9 percent roughly double the national figure.

Real salary and wages are important because they identify a worker’s purchasing power after accounting for inflation. That is to say, the measure of real wages identifies how many goods and services workers can purchase.

The above chart indicates that workers from the employment sectors most reliant upon government spending saw their purchasing power increase, a product of the fiscal stimulus from Washington. Meanwhile a large portion of private sector workers in wholesale, retail manufacturing and finance sectors struggled. The positive side for the private sector came in the professional, scientific and technical job category at 5.3 percent.

Comparing fourth quarter 2009 over 2010, state and local government real wages grew by 7.6 percent outpacing the growth in the education sector which realized a 7.5 percent rise. That was on top of the 9.0 percent growth in the third quarter measure. Real wages in health care continued to show strength at 6.3 percent. Health care remains the most vibrant sector in Massachusetts. Ironically, the growth in state and local government real wages takes place despite public sector layoffs over the past year.

Real wages for private sector workers are lagging. And that’s particularly pronounced for lower wage earners that dominate manufacturing and wholesale and retail.

Long before Fidelity’s decision to relocate 1,100 jobs out of Massachusetts, the financial industry in 2010 languished in negative territory. At the end of the fourth quarter 2010, real wage growth in finance and insurance declined 1.6 percent.

Source: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce. For CPI see Bureau of Labor Statistics

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