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Federal Reserve Bank of Cleveland
09/03/2024 | Press release | Distributed by Public on 09/03/2024 09:27
Lower-Wage Workers in Ohio Have Seen Strong Wage Gains Since 2019
Cleveland Fed District Data Brief
Lower-Wage Workers in Ohio Have Seen Strong Wage Gains Since 2019
In Ohio, the trend of relatively weak wage growth for lower-wage workers has reversed recently. This has resulted in the lowest wage inequality in more than two decades, with lower-wage workers seeing notably stronger real wage gains during 2019 to 2023 than for others throughout the wage distribution.
The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.
Introduction1
Labor income accounts for most of the income of households outside the top 1 percent of income earners.2As such, changes in labor income are likely to have important implications for living standards. In recent years, there has been growing concern about wage stagnation, notably for lower-wage workers, and the associated implications for income inequality. Indeed, a 2017 report by the Brookings Institution notes that "[w]age inequality has been on the rise over the past several decades."3A 2020 Congressional Research Service report further notes that the stagnation of real hourly wages at the lower end of the income distribution has "contributed to an increase in overall income inequality." The report goes on to say that "Over the 1979-2018 period, real wages at the 10th percentile of the wage distribution grew by only 1.6%, whereas wages at the 50th percentile grew by 6.1% and wages at the 90th percentile grew by 37.6%."4
Interestingly, relatively weak wage growth for lower-wage workers seems to have reversed recently, a development documented by researchers primarily focused on trends at the national level.5In Ohio, these trends are also evident, with real wages growing more rapidly at the 10th percentile of the wage distribution than at other parts of the distribution in recent years.6,7Moreover, real wage gains between 2019 and 2023 at the 10th percentile were more than twice as rapid as they were during the final four years of the previous economic expansion (2015-2019). These developments have reduced wage inequality in Ohio to its lowest levels in more than two decades based on a comparison of wages at the 10th and 90th percentiles.Analysis
In contrast to the patterns that have generally prevailed through the past several decades, recent real wage growth in Ohio has been strongest for those at the bottom of the wage distribution. Figure 1 presents Ohio's inflation-adjusted wages at the 10th, 30th, 50th, 70th, and 90th percentiles of the wage distribution for 2000, 2019, and 2023. (For comparison, the same information is also shown for the United States.)