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Wage growth in Maryland among worst in region

Stagnant wages erode consumers' purchasing power

Maryland's wage growth is among the slowest in the region, according to federal data. (The Daily Record / Dan Karlin; source: U.S. Bureau of Labor Statistics)

Maryland’s wage growth is among the slowest in the region, according to federal data. (The Daily Record / Dan Karlin; source: U.S. Bureau of Labor Statistics)

Although Maryland has added nearly 40,000 jobs over the past year, the state’s private workers aren’t necessarily seeing increased wages as a result.

In May 2014, private-sector employees in Maryland earned an average of $27.09 per hour, the seventh-highest rate in the country, but that ranking fell to ninth in May 2015 as average hourly wages increased by just 2 cents in the state, according to federal data.

That stagnation made Maryland a relative anomaly in the region, where only Washington, D.C., had worse year-over-year development. Average hourly earnings in the District fell from $38.54 to $38.44 — still the highest in the country — but Virginia’s wages increased by 3.8 percent, Delaware’s by 2.2 percent and Pennsylvania’s by 1.7 percent.

An economist from the Bureau of Labor Statistics’s Mid-Atlantic Information Office said she couldn’t offer insight into Maryland’s status specifically, but she said that such minor growth generally isn’t too concerning and that only a large negative number would be cause for alarm.

But Daraius Irani, chief economist at the Regional Economic Studies Institute at Towson University, said Maryland’s stagnation is concerning when compared to the growth seen in other states.

“If our neighbors are doing better, the question is why aren’t we doing better,” Irani said.

In addition to its neighbors doing better, states with similar levels of affluence also outperformed Maryland. Besides Maryland and D.C., the other eight states ranked in the top 10 in 2014’s average hourly earnings saw an increase of at least 2 percent over the last year.

Irani pointed to several factors contributing to Maryland’s seeming wage torpor.

First, he said, job creation is gravitating toward lower-pay employment such as retail, hospitality and service sector jobs, which depresses the statewide earnings average. More than 10,000 jobs were added in the leisure and hospitality sector from May 2014 to May 2015, according to data from the Maryland Department of Labor, Licensing and Regulation.

Even with the continued reduction in unemployment, which is at 5.2 percent in Maryland and 5.3 percent nationally, the current marketplace is still skewed toward employers, with more applicants than available jobs. This imbalance allows employers to keep wages down because they don’t have to give raises to entice prospective workers, Irani said.

Both Maryland and D.C. are also still suffering from cuts from the federal government. The data in question concerns only private-sector jobs, but such cuts have an outsize effect on contractors, Irani said: When the government slashes jobs, contractors slow down hiring and limit wage increases.

Irani suggested that the state’s private contractors would do better to transfer more of their business to the commercial sector to hedge against the decline in government spending.

Governmental issues such as budget debates and sequestration “are always going to have an ongoing impact on Maryland, so maybe we need to move away from that a little bit.”

Irani’s concern over the numbers is tied to what they mean for citizens’ purchasing power. Like the other relatively affluent states in the top 10 of the average hourly earnings, Maryland is a high-cost state, he said, with higher real estate, food and electricity costs.

In some areas, such as gas, prices can fluctuate and benefit the consumer: the Regional Economic Studies Institute calculated the recent drop in gas prices to be worth $1,600 in savings for an average commuter over the course of a year.

But in other areas, such as rent, costs increase every year, so absent a corresponding increase in hourly earnings, consumers will have difficulty keeping up, Irani predicted.

“Saying that wages are stagnant, that means people’s purchasing power is that much less than it was a year ago,” he said.