Despite pandemic pay boost, low-wage workers still can’t afford basic needs

by Tim Henderson, Kentucky Lantern

Employers grappling with a nationwide labor shortage gave the largest pay increases to low-wage workers between 2019 and last year.

But even so, many of those workers — more than 40% of all U.S. households, by one estimate — are struggling to cover the inflated costs of basic expenses.

In the past several years, businesses such as bars and restaurants have engaged in bidding wars for scarce workers. In 28 states, people working in food preparation and service jobs had the biggest pay bumps: Waiters and waitresses made at least 50% more in New Jersey, Wisconsin and Utah, according to a Stateline analysis of new federal wage data. There were similar spikes for bartenders in Utah, Arizona and Kentucky.

Many states have raised minimum wages in recent years, with more increases coming this year. But low-wage workers got significant raises even in states that use the federal minimum wage of $7.25 an hour.

Median pay for food workers such as cooks and waiters increased 33% in Kansas and 31% in Idaho, faster than any other job category in those states. In Kentucky and Mississippi, transportation workers got an increase of 22%, outpacing all other categories of workers. The minimum wage is $7.25 in all of those states.

Farmworkers in California got bigger raises, by percentage, than computer professionals. The hourly pay for computer and math jobs rose 20% to $61.87, enough to beat the 14.1% inflation rate for that time frame.

But pay for California farmworkers jumped 30% to a median of $16.12.

The federal data from the U.S. Bureau of Labor Statistics, called the Occupational Employment and Wage Statistics, measures hourly wages by state and job for May of the previous year. The 2022 data was released in April.

Nationwide, gains in pay for low-wage jobs have reached historic proportions, according to an Economic Policy Institute report in March. Compensation for the lowest-paid jobs rose 9% between 2019 and 2022, adjusted for inflation. That’s much higher than the 4.9% for high-wage jobs and 2.4% for middle-wage jobs. And it was the biggest bounce for low-wage workers since at least 1979, according to the report.

“The labor market is stronger now, particularly for workers who are historically disadvantaged because of their relative scarcity,” said Elise Gould, a senior economist at the Economic Policy Institute and lead author of the March report.

“Employers are scrambling to get them hired back,” she said. “They can look across the street and see better wages and bonuses.”

However, research from the Economic Policy Institute and other groups shows a continuation of the decades long trend of low-wage workers falling behind as rising costs outpace their incomes.

Despite the recent gains, low-wage workers have faced stagnant wages for decades. Their costs for basics such as housing and health care have risen even faster than inflation, according to a report from United for ALICE, a project led by the United Way of Northern New Jersey. 

The effects are significant: The typical retail sales worker, the most common job in the country, lost $26,000 in buying power between 2007 and 2022, according to the report.

“You see people getting paid a decent wage and then you realize it’s really expensive to live there. It’s a big factor even with the higher pay recently for people in low-wage jobs,” said Stephanie Hoopes, director of the ALICE team that compiled the statistics as a more realistic yardstick of families’ economic well-being.

Nationally, 41% of households were either in poverty or unable to afford basic needs in 2021, according to the United for ALICE report. The share of households in that situation ranges from 32% in Alaska to 52% in Mississippi.

Cost of living

Cost of living plays a big part in hourly pay. Statewide median pay ranged from $17.36 in Mississippi, which also has the lowest cost of living, to $28.10 in Massachusetts, which is one of the most expensive states. Cost of living is measured as of 2021 by the federal Bureau of Economic Analysis, which shows the highest cost of living is in Hawaii, where median pay was $23.35 last year.

Some Midwestern states saw big pay increases for their most common jobs. For example, manual laborers in Indiana and Illinois had median pay increases of 24% and 25%, though those workers still make less than $18 per hour. In Pennsylvania, where there are more manual laborers than any other category except home health aides, median pay increased 22% but the median is still less than $18 per hour.

Pay like that is a step up from fast food and retail jobs for a high school graduate, but not enough to pay for housing for a family in Indiana, said Rachel Blakeman, director of Purdue University’s Community Research Institute in Fort Wayne. And, she said, such jobs are always subject to layoffs and replacement by new technology.

“In Indiana, we’re kind of stuck at $17 an hour. There’s an idea that we need workers to fill the factories and we’re going to do that with the kids,” Blakeman said, adding that there should be more support for Midwestern high school students who want to go to college or learn professional trades.

“Most of our students have to pay for college. It’s not a free endeavor. But we forget there’s also a cost to not going to college,” Blakeman said.

In Alabama, personal care workers had the biggest hourly pay increase, up 19% to a median $12.38 an hour. The personal care category includes hairdressers, whose pay was up 39% to a median $13.98, and recreation workers, up 25% to $12.63.

One state where higher-wage workers fared better than low-wage ones was Massachusetts, where a biotech boom gave the biggest wage bump to science professionals, whose pay rose 24% to $47.14 an hour.

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Stateline is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott Greenberger for questions: info@stateline.org. Follow Stateline on Facebook and Twitter.

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