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Minnesota’s wage growth ranks 45th in the United States

Above average wages, below average productivity

Minnesotans often point to the state’s high wages as one of its attractions. Indeed, as we wrote in our report The State of Minnesota’s Economy: 2017, the average annual wage in Minnesota is above the national average.

But how long can this continue? Minnesota’s workers are less productive than the national average, whether on a per worker or per hour worked basis. How long can we enjoy above average wages with below average productivity?

Minnesota’s wage growth lags the national average

This shift might be happening. New data from the Bureau of Labor Statistics shows that, in the year to February 2018, Minnesota’s wage growth lagged the national average, as Figure 1 shows. The national rate of increase for average hourly earnings was 2.5%. In Minnesota, it was 0.5%. Overall, Minnesota’s growth rate ranks 45th.

Figure 1 – Growth in average hourly earnings, February 2017 to February 2018, %

Source: Bureau of Labor Statistics 

Above average wages, but for how long?

The good news is that our state’s average hourly earnings of $28.40 are still above the national average of $25.98. Indeed, we still rank a healthy 10th. But, as our growth rate lags the average, so our level will continue to fall relative to it.

I’ve written recently about how Minnesota’s ‘tight’ labor market – the shortage of workers relative to the demand for them – is driving wages up. But what Minnesota really needs to get wage growth back up at the head of the pack is increased worker productivity.

John Phelan is an economist at Center of the American Experiment. 

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