This post is written by a favorite Memphis economist of ours, David Ciscel, former Chair of the Economics Department, Associate Dean of Fogelman School of Business, Dean of the Graduate School; Dean of the School of Business at Christian Brothers University; and Senior Consultant for the Federal Reserve Bank of St. Louis. He has published more than 200 academic articles and monographs ranging from executive compensation level, value of household labor, regional economic development, and urban sprawl. His perceptive, scholarly analyses – and his generous blog posts here – about the Memphis economy are required reading for anyone looking to understand the Memphis economy and gain insight into its current sluggishness when compared to cities it previously outperformed.
By David Ciscel
The recent post on Professor Elena Delavega’s The Poverty Report: Memphis Since MLK was excellent. Everyone should get a copy.
But the Report did have a giant mystery in it. The educational levels of African Americans had jumped dramatically, but the poverty levels remained stubbornly high and income levels remained abysmally low.
I could not find any local data to explain the mystery.
But the Economic Policy Institute just released a reported called The State of American Wages, 2017 by Elise Gould. It sheds a light on the national disparity that should help explain things in Memphis.
First, income inequality in general is getting worse and that affects black workers in a larger proportion than white workers. In 2017, if your wage was at the 20th percentile of all wages, white workers earned (on average) $12.25 per hour while black workers earned $10.06 – 82.1% of white workers.
From 2000 to 2017, white workers had seen their wages grow at 0.3% per year while black workers saw their wages grow at 0.0% per year (that is, not at all).
Now for workers with wages at the 90th percentile, white workers earned $48.06 per hour while black workers earned $33.81 per hour – 70.4% of white workers. From 2000-2017, white workers at the 90th percentile saw their wages grow at 0.9% per year while black workers grew by 0.5% per year.
Two things are happening:
(1) The growth rate of black workers is far lower than white workers so that even at high wages, the wage disparity between black and white workers is growing, and
(2) Everyone on the low end of the income scale is seeing their wages grow more slowly than those at the high end (so black workers with a higher proportion of low wage workers in their cohort have been losing ground since 2000).
The same story occurs with education levels. For white workers with a high school (HS) diploma, 2017 earnings averaged $19.12 per hour while black workers earned $14.93 – 78.1% of white workers. From 2000 to 2017, white HS workers saw their wages grow at 0.3% per year while black HS workers saw their wages grow at -0.2% per year (that is, their wages fell every year on average).
For four-year college graduates, white workers earned $33.70 per hour in 2017 while black workers earned $26.53 per hour – 78.7% of white workers. From 2000 to 2017, white college workers saw their wages grow by 0.4% per year while black college workers saw their wages grow by 0.1% per year. The conclusions are the same as those above. Because of the initial disparity in 2000 and the disparity in grow rates since 2000, black workers at every educational level are in weaker income positions today than they were in 2000.
Memphis is not unique.
We are part of the larger economy.
But the bundle of jobs available in the region tends to be weaker than the typical job in the United States. Consequently, because Memphians have lower incomes and more job instability, the trends noted above are exacerbated in the Memphis job picture.
Professor Delavega was correct to emphasize income – the education picture has improved as the income picture has declined.
Postscript: The numbers above are all in 2017 dollars, so the impact of inflation has been taken out. That is, the wages represent real incomes from 2000 to 2017.
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