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December 2005
Vol. 6, No. 9
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Average Annual Pay Comparison
While the rate of average annual pay growth in the past
has fluctuated among regions, more recently the rate of growth has aligned
for the United States, Midwest and Indiana, according to the Bureau of
Labor Statistics. Indiana experienced a 1.2 percent increase in pay from
2003 to 2004, less than the United States but greater than the Midwest
(see Figure 1). The 11.3 percent increase in average annual pay for the
Midwest in 1997 was mainly due to Michigan’s 47 percent increase
in wages that dropped back down the following year. Indiana’s largest
increase was in 1992, when average annual pay grew 4.6 percent. Even
though Indiana’s growth rates are not far from the rest of the
nation and the Midwest, at $34,694, Hoosiers are paid $4,660 dollars
less than others across the nation and $3,769 dollars less than other
workers across the Midwest (see Figure 2). This stubborn pay gap has
widened over the last decade (see Table 1).
Figure 1: Over-the-Year Percent Change in Average Annual
Pay, 1991 to 2004
Figure 2: Adjusted Average Wage, 1990 to 2004
Table 1: Difference in Average Annual Pay
 Click for larger image
Five-Year Change in Average Annual Pay
Examining our position from 1999 in relation to 2004, our pay level
eroded relative to the Midwest and the rest of the nation. Which
sectors contributed the most to this loss of ground? Table
2 shows
the change in average annual pay, while Table
3 shows the differences
between Indiana and other regions. Indiana saw pay decreases in three
industries: accommodation and food services, educational services,
and mining. Both the United States and the Midwest saw a decline
in average annual pay for the information sector, while Indiana experienced
a 7 percent increase ($2,598). An increase of this magnitude is certainly
welcomed but should not overshadow the fact that the state’s average annual pay in this sector is $19,391
less than the United States and $8,299 less than what other Midwestern
workers earn in this sector. Indiana’s five-year change in pay
was only greater than the United States in the information sector and
the professional, scientific and technical services sector. However,
Indiana had larger average annual pay increases than the Midwest in 11
out of 20 sectors. The five-year change in pay for all industries combined
was $758 less than the United States and $138 less than the Midwest.
Table 2: Five-Year Change in Average Annual Pay, 1999
to 2004
Click for larger image
Table 3: Difference in Five-Year Average Annual Pay,
1999 to 2004
Click for larger image
Overall, only 25 counties saw dollar declines in their average annual
pay over the five-year period. As shown in Figure
3, Vermillion County
had the largest average annual pay decline ($4,863, -11.6 percent). Gibson
County workers saw the largest increase in their inflation-adjusted average
annual pay ($11,579, 37.9 percent).
Figure 3: Five-Year Change in Average Annual Pay
In 2004, the average annual pay levels in Indiana were lower than the
nation and the Midwest in all sectors except agriculture, forestry, fishing
and hunting and in the arts, entertainment and recreation (Midwest only).
Of course, average annual pay is not what you actually get to bring home,
and cost of living cannot be ignored when comparing pay levels between
areas.
The Bureau of Economic Analysis provides per capita disposable personal
income for states for this time period. Although this calculation is
based off of personal income, which includes all sources of income and
not just work-related income, this can give us an idea of the cost of
living for Indiana residents. Note that per capita disposable personal
income is personal income from all sources minus taxes which includes
income, property tax and motor vehicle licensing. In 2004, Indiana’s
disposable per capita personal income was $27,070, an increase of 7.5
percent since 1999. Indiana’s disposable per capita personal income
growth rate was 0.9 percentage points less than the nation, 1.6 percentage
points greater than Illinois and 1.9 percentage points greater than Ohio
and Michigan. Per capita disposable personal income in Wisconsin and
Kentucky grew faster than in Indiana over this five-year period (0.7
and 0.9 percentage points, respectively). So the fact that Indiana’s
disposable per capita personal income has grown faster than some of its
Midwestern neighbors between 1999 and 2004 helps to offset the $138 difference
in the change in average annual pay. The October issue of InContext found
that housing is very affordable for Hoosiers, both homeowners and renters,
relative to the rest of the nation (owners’ costs in the article
included the cost of utilities). Housing and utilities are two variables
often looked at when examining the cost of living.
Notes
- The Bureau of Labor Statistics admits this may be an anomaly in the
reconstructed data series.
Amber Kostelac, Data Manager
Indiana Business Research Center,
Kelley School of Business, Indiana University
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