Still struggling: State of Working Ohio 2016
September 4, 2016
Ohio is emerging from recession, but tepid job growth, low wages and disparities hamper working families.
Contact: Amy Hanauer, 216.361.9801 or 216.375.9274
By Amy Hanauer and Diana Granados
Ohio is finally emerging from the deep recession into a slow and halting recovery. This State of Working Ohio uses the best and most recent data available to understand the Ohio labor market and propose ways to make sure that Ohio workers can find quality jobs and Ohio employers can find skilled workers. Key findings include:
- Inflation-adjusted compensation has grown slowly in the nation and has actually fallen in Ohio, despite long-term solid growth in productivity and education. Workers are more educated and productive than ever but they are not getting their share of economic growth. Nationally, hourly productivity grew by 142 percent between 1973 and 2014, but compensation only edged up by less than 18 percent. In Ohio, between 1979 and 2013, productivity rose by 61.5 percent but hourly average compensation actually fell by 1.1 percent. Despite the long-term growth, we’ve had three consecutive quarters of productivity decline nationally, raising concerns that compensation will fall further.
- Labor force participation is at an all-time low in Ohio over the time period examined, with just 62.3 percent of Ohio adults in the labor market. The trend is particularly troubling for working-age men, only 81.7 percent of whom are in the labor force.
- Ohio still has fewer jobs – 5.5 million – than it had prior to the early 2000s recession, when there were 5.625 million jobs in Ohio. Our growth trails that of the nation over almost any recent time period analyzed – since 2000, since 2005 when we slashed taxes, since 2007 when the recession started, or over the last year. We do especially poorly in public jobs: we’ve shed more than 17,000 state and local government jobs since the recession started in December 2007, leaving our communities with fewer teachers, safety workers and social workers.
- Wages climbed to $16.61 in 2015 for the median Ohio worker, a nice boost after several years of decline. But our Ohio wages remain far behind what they were a full three dozen years ago in 1979 at the median, when adjusted for inflation.
- Wages are behind in large part because our fastest growing sectors and our most common jobs are low wage. Of our thirteen most common occupations, only two pay more than 200 percent of the official poverty line for a family of three. Nine of these most common jobs pay less than $30,000 a year with full-time, year-round work. It’s no wonder families are struggling – the available jobs ensure that.
- Official unemployment is quite good in Ohio, 5 percent in June and 4.8 percent in the not-yet-adjusted July numbers. But some counties and communities have much worse unemployment – at the end of 2015, unemployment was 10 percent in Monroe County and 11 percent for black workers.
- Income is extremely unequal in Ohio with the top 1 percent earning more than $752,000 a year while the bottom 99 percent combined early less than 43,000 a year on average. Incomes are also extremely unequal within and between Ohio counties – three counties have top one percenters who earn more than $1.25 million a year, while many counties have average incomes for the bottom 99 percent combined that are below $30,000.
- Disparities endure in Ohio. African American and female workers still earn much less than their white male counterparts. Black workers earn just 76 cents for every dollar a white worker earns at the median, a gap that has worsened substantially. Over a full year, the gap equates to more than an $8,700 disparity with full-time work. Women earn just 81 cents for each dollar a man earns, a nearly $7,000 difference with a full year of full-time work.
We know how to improve Ohio’s labor market so that it works better for Ohio’s working families. These include creating jobs by keeping interest rates low and investing in infrastructure and people; improving job quality by encouraging unions and enacting labor standards; ensuring the best possible workforce by investing in education and improving anti-discrimination efforts; protecting struggling families by improving our state and federal Earned Income Tax Credit, providing childcare, and defending our unemployment compensation system; and paying for it all by restoring top tax brackets.
The United States and Ohio are finally emerging from a deep recession followed by a slow, halting recovery. Official unemployment is quite low and we are even seeing slight median wage growth in Ohio for the first time in years. We’ve finally recovered the jobs lost during the official recession, although we remain far behind the jobs we had at our peak in Ohio, prior to the early 2000s recession. When compared to the grim-only news we’ve had to report in the last several years, there’s much to applaud.
That said, deep and unrelenting problems remain. Many Ohioans have left the labor force, putting our end-of-year labor force participation in 2015 at an all-time low. These departures are particularly troubling for working-age men, making clear that the trend is not driven by retirements or higher education. Productivity growth nationally has slowed, raising serious concerns for observers across the political spectrum. Ohio lags far behind the nation in job growth and remains behind previous peaks, with a particularly troubling persistence in public job loss. While wages have finally edged upward, sustained and meaningful wage growth is elusive. And our most common occupations are dominated by jobs that leave a family low-income or even officially in poverty. With that backdrop, families hardly stand a chance.
Further, disparities endure and even grow in Ohio. Women still earn less than men and black workers trail far behind white workers (further, even, than in the past) with much higher unemployment. This is despite the fact that women and African-Americans have increased their education levels – in fact, sometimes female and black workers with more education remain slightly behind median male and white workers with lower educational attainment. Finally, many counties are left behind – incomes are much lower and unemployment levels much higher in Appalachia than in our prosperous suburbs. Inequality is staggering, both within and between counties in Ohio.
The good news is that there are clear solutions. States that invest more in their people – in education from pre-K through college, in relieving poverty and assisting with the basics, in ensuring good jobs and deep energy investments – are seeing the returns. Their students achieve more, their incomes are higher, their energy bills (and contributions to climate change are lower). In the Ohio data we can easily see that letting workers join unions and helping young people increase their education levels both pay dividends, for individuals, families and communities.
Some partners we work with recently started a twitter hashtag called #ReasonsForHope. At Policy Matters, our examination of the most recent data on jobs and the economy give us reasons for hope – if we push for and secure the policy changes that can make Ohio’s economy work for all. Please, join us in this hopeful struggle.
Situation: Productivity growth slower, compensation stagnant. Analysts often say that compensation only grows when productivity grows. But rapid productivity growth of the last forty years has not been well shared with the average American worker. Between 1948 and 1973, productivity grew 96.7 percent while average hourly compensation grew at almost the same pace, by 91.3 percent. Since then (through 2014), hourly productivity skyrocketed by 142 percent, while hourly compensation only inched up less than 18 percent. Many now worry that productivity growth has slowed substantially, making it even more challenging to ensure that working people benefit from our economy. This chart goes through 2014. Growth has slowed since then with three consecutive quarters of decline, the longest such slide since 1979.
Solution: Stimulate growth, raise compensation. The decline in productivity growth makes it imperative that the Federal Reserve bank keep interest rates low – raising interest rates can put a brake on growth. The long-standing failure to share growth in our economy necessitates action to increase worker skills and bargaining power. Investing in education, raising labor market standards (like minimum wages) and making it easier to join a union are three ways to better share growth.
Situation: Ohio grows less. Ohio’s long-term and short-term productivity growth is weaker than the nation’s and hourly compensation has actually declined since 1979. Over the shorter time frame of the chart below (compared to the one above), U.S. productivity grew 76 percent between 1979 and 2013 while U.S. compensation rose only 11 percent. Ohio productivity growth was slower over the period – 61.5 percent – while Ohio hourly compensation actually fell by 1.1 percent.
Situation: Many not working. Labor force participation, after climbing throughout the twentieth century, dropped steadily between 2007 and 2015. There’s been a slight improvement during 2016, but we remain far below the 2007 peak when 67.8 percent of Ohio civilians over 16 participated in the labor force. By last year, it had dropped to 62.3 percent, lower than at any point since 1979 when our dataset begins (and lower than most years prior to that). This means that nearly four in ten adults were neither working nor looking for work.
The employment to population ratio (E-POP) tells us what share of adult civilians over 16 is actually employed. During recessions, E-POP goes down more quickly than labor force participation, because initially laid-off workers stay in the labor force as they seek jobs. Ohio’s E-POP plunged between 2007 and 2009 and has stayed roughly similar since then, inching up one year and down the next. By last year 59.2 percent of Ohio’s adult population was actually employed, the same as in 2009 and lower than in all years between 1986 and 2008. There are legitimate reasons for both indicators to go down, like when people are in school, raising children or retired. However, the general plunge is a sign of more problematic forces. The low E-POP and staggeringly low labor force participation together make clear that Ohio is not generating enough jobs to pull all adults into the economy.
Solution: Generate jobs. Low labor force participation and employment levels mean we need to do several things to generate jobs. One is that the Federal Reserve bank should keep interest rates low. The second is that both federal and state policy should explicitly try to generate more employment by restoring public jobs that have been eliminated and by investing in people and infrastructure in ways that employ people now while reducing long-term costs and increasing long-term prosperity. Today’s very low-interest rates make it a great time to invest.
Situation: Prime-age workers exiting. Some have argued that Ohio’s aging population explains the decline in labor force participation. But in fact prime age men have left the labor market at alarming rates. While more than 90 percent of men between the ages of 25 and 65 were working in 1979, by last year only 81.7 percent of men in this age bracket were working.
Solution: Grow jobs. That prime-age men are reducing their labor force participation is a sign that we have insufficient job growth. Investing in transit, weatherization, alternative energy, and infrastructure are ways to employ people now (in occupations where men have often been concentrated) while reducing Ohio’s long-term costs and increasing its long-term quality of life. A June 2016 report by the White House Council of Economic Advisors found that reduction in demand for labor is the main reason for the decline in men’s labor force participation. That paper also suggested doing more to support training and job search activities, and expanding the Earned Income Tax Credit for people who are not custodial parents, as ways to help displaced men in particular.
Situation: Lack of work worse in some communities. The employment-to-population ratio was low in 2015 in Ohio, but even lower for certain sub-groups. Only 54 percent of black adults over 16 were employed, while employment levels were higher for white (60 percent), Latino (64 percent) and Asian/Pacific Islanders (66 percent) in Ohio. Employment levels climb with each additional level of education: fewer than one in three adults with less than a high school degree were employed last year, while more than 76 percent of those with a college degree or more were working.
Solution: More inclusive hiring, education and training.
Low African American employment levels show the need to enable cities to have local hiring requirements for contracts that they award. In Ohio, the state recently denied cities the right to these standards. Staggeringly low employment levels for those without a high school degree demonstrate the need to enable people to get this basic credential. Ohio took a step in this direction by agreeing to expand the number of providers offering high school equivalency testing, moving the state beyond the problematic GED-only system. The change should improve rates which plunged by 85 percent after PearsonVUE, the world’s largest for-profit education corporation, took over the GED testing product from a nonprofit association. Pearson’s changes included quadrupling prices and erecting other barriers to passage. Ohio policymakers can also do much more to raise education levels, like making more need-based financial aid available to help working-class students attend college.
Situation: Jobs still not fully recovered.
The deep job destruction of the two recessions since 2000 and the weak yearly growth in employment during the recoveries together explain Ohio’s low labor force participation and employment. By July 2016, Ohio had 5.5 million jobs, a solid uptick from the recent lowpoint of 5.036 million in 2010, but well below the 5.625 million jobs we had in the peak year of 2000.
Solution: Promote job growth. That Ohio has not regained the jobs it had more than 16 years ago means that both national and state policy must promote job growth here. Ohio has low childcare and preschool attendance, very low state investment in transit, an aging and energy-inefficient infrastructure and housing stock, high levels of infants not surviving their first year of life, high obesity, and low college attainment. All of these make the state less economically efficient and many of them raise our long-term costs. These are areas where state and federal policy can invest to employ Ohioans now while making our state more sustainable – economically, socially and environmentally – as we move into the next several decades.
Situation: Ohio trails U.S. While Ohio has finally regained the jobs lost in the most recent recession, we remain behind our job levels prior to the 2000 recession. This is in stark contrast to the nation as a whole. While the United States has 9.2 percent more jobs than it had in the year 2000, Ohio has 2.4 percent fewer positions than it had at the turn of the century (June 2000 through June 2016). This helps explain why so many Ohioans have left our labor force.
Solution: Invest in domestic energy, transit and manufacturing. States like Ohio, with a history of manufacturing, continue to struggle. This explains why both major-party candidates are arguing for better-negotiated trade agreements and shows the need to have standards in all trade agreements, to invest in transition assistance for workers and communities that have not recovered from manufacturing job loss, and to make deep alternative energy investments that would boost demand for domestic manufacturing. The recent award of federal dollars to the Lake Erie Energy Development Corporation project, which would install fresh-water wind turbines in Lake Erie, is the kind of forward-thinking project that could spark job growth for Ohio’s workforce, still rich in infrastructure and experience with gear production and other component part manufacturing. Deep transit investment could be similarly transformative if Ohio and the U.S. took steps to ensure a domestic supply chain for transit vehicles and tracks.
Situation: Ohio grows slowly. Ohio’s job growth lags behind that of the United States not just since 2000, but over almost any recent time period analyzed – since June 2005 when Ohio embarked on a tax cutting agenda, since December 2007 when the recession officially started, since January 2011 when Governor Kasich took office, and over the last year, since June 2015.
Solution: Restore taxes. Ohio’s legislature and governor have maintained that cutting taxes increases Ohio’s prosperity. In 2005 they embarked on a stark tax-slashing and shifting agenda, and since then they have repeatedly added new cuts to the existing ones. These moves have reduced what is paid by the wealthiest Ohioans and forced low- and moderate-income families to pay a larger share of their income. And they were sold to Ohioans on the claim that they would generate growth. But year after year since their passage, Ohio has underperformed the nation. Ironically, the cuts have forced austerity on the state, necessitating layoffs of public employees and underinvestment in the very things that could actually position the state to have a better economy in the future. A recent analysis by Jacob Hacker in the New York Times found that states which impose higher taxes on the top one percent of earners have higher life expectancy, higher rates of college attainment, more patents, and higher household incomes (even when adjusting for costs). This may be in part because those states have more to invest in educating their workers, cleaning their environments, and improving the conditions under which their residents live.
Situation: Public job loss weakens Ohio. Ohio has eliminated many of the jobs over which the state has most control – public jobs. Doing this not only puts people out of work and contributes to our low level of job growth – it also deprives Ohioans of the infrastructure and services that they need to build successful businesses, communities and families. Since the most recent recession started in December 2007, Ohio has shed more than 17,000 state and local government jobs. In fact, the most recent revised jobs report (July 2016, 11,400 jobs added) was better in large part due to the restoration of about 4,800 state and local government jobs.
Solution: Restore and add public jobs. In a slow-growing economy with so many unmet needs, cutting public sector workers makes no sense, particularly since doing so can mean increasing class sizes, reducing course offerings, leaving roads in poor repair, or compromising public safety. Ohio should not only restore the public jobs it has slashed but it should invest in proven public services, like early education or infrastructure repair, to improve our jobs climate and make our state more efficient going forward.
Situation: Official unemployment low. The official unemployment rate in Ohio was 5.0 percent in June (it fell to 4.8 percent in the July not-yet-adjusted numbers), compared to 4.9 percent nationally for June and July. While not as good as at its lowest point – 4.0 percent in 2000 – it is better than for any full-year period (except last year) since 2002, and better than at any point between 1979 and 1995. The year-end rate last year was 4.9 percent. However, the all-time low in labor force participation and the weak employment-to-population ratio are both signs that the low unemployment rate is somewhat deceptive. Departures from the labor market mask the fact that many who want jobs still can’t get them.
Solution: Keep interest rates low. Our relatively low unemployment rate is a good sign even if it has yet to lead to the kind of wage growth and poverty reduction that would ultimately reflect a truly vibrant and inclusive economy. Continued efforts to improve job creation would pull more people into the labor market and generate an economy that is really working for all in Ohio.
Situation: Some counties suffer more. While official statewide unemployment numbers show a positive picture, there are wide variations between counties in Ohio. In much of southwest and west central Ohio, official unemployment is as low as 3.3 percent, which is practically full employment. But in parts of southeast, south central and northeast Ohio, the situation is much more challenging. Monroe County had a 10 percent unemployment rate, and Jefferson, Noble, Miegs, Jackson, Pike, Sciota and Adams Counties, unemployment was between 7.4 and 8.7 percent in 2015.
Solution: Protect unemployment compensation. Even in good times, we need unemployment compensation. A bill before the legislature would dramatically undermine it, cutting benefits from 26 weeks to as little as 12 – too short a time for many to find a new job, let alone get retraining. The bill would make Ohio’s system worse than any state in certain respects and second only to North Carolina in other ways – and we already have a lower-than-average share of unemployed workers who can get assistance. The bill does not fix the solvency of the system, which it is purportedly designed to address, because it cuts already-low employer taxes, leaving the system underfunded. Legislators and Governor Kasich should reject this bill and its draconian benefit cuts, properly fund the system and continue to let workers get help for up to 26 weeks. Unemployment compensation is our best defense against recessions, helping ensure that a small plant closure doesn’t send a community and its families into immediate downward spirals. We must maintain this defense.
Situation: Black community struggles more. While overall statewide unemployment rates look quite good, for African American workers, official unemployment rates are much higher. As of the end of 2015, the black community in Ohio faced an unemployment rate (11 percent) that was well over twice that of white Ohioans (4 percent). Unemployment rates in the black community are much better than they were throughout the 1980s and since 2002. However, they remain above the levels we saw in the late 1990s, when the United States approached full employment and actually had jobs for nearly everyone who wanted them. This gap persists despite increases in educational levels for black Ohioans over that period.
Solution: Restore local hire, fight discrimination. That black workers consistently face unemployment levels between two and three times those of white workers illustrates a need for policy to address racial disparities in job access. Unfortunately, Ohio’s legislature seems determined to take away tools that help. In 2015 Governor Kasich signed a bill prohibiting Ohio cities from setting standards to ensure that local residents could benefit when local public dollars are invested in construction project. That knee-capped Cleveland’s so-called Fannie Lewis law, which had enabled the city to require 20 percent local hire on publicly-funded construction projects in Cleveland. This state over-reach makes it harder for cities and contractors to diversify their workforce, makes economic development spending less effective at improving local economies, and ensures that black unemployment will remain elevated.
Situation: Male and female unemployment now similar. Official unemployment is low for both men (5.0 percent) and women (4.8 percent), but both have seen their labor force participation levels fall. Both men and women have unemployment rates now that are less than half what they were during recent recessions. Men’s unemployment had gotten as high as 11.8 percent in 2009 and 13.2 percent in 1982. Women’s unemployment peaked at 11.2 percent in 1982 and at 8.6 percent in 2009.
Solution: Broaden eligibility for unemployment help. Although men and women have similar rates of official unemployment, women are less likely to be covered by unemployment compensation benefits because of choices Ohio has made in structuring its system. Ohio consistently ranks well below average in the share of our workers who can get benefits. This is in part because we have among the highest earnings requirements (second or third highest in 2013) and in part because we don’t allow those seeking part-time work to receive benefits (so a working mother seeking a 32 hour a week job to save on after school care costs could not receive unemployment benefits). Improving our eligibility rates would help both female workers and workers of color, both of whom are less likely to qualify for assistance in Ohio than white, male workers are.
Situation: Income is extremely unequal. Average income for the top one percent of earners in Ohio was more than 17 times that of the bottom 99 percent combined in Ohio in 2013. The disparity was even worse at the national level, where the top 1 percent had an average income of $1,153,298 in 2013 compared to an average of $45,567 for the other 99 percent, according to a recent study by the Economic Policy Institute.
Solution: Tax those most able to pay. Our economy is extraordinarily unequal and grows more so. Yet Ohio continues to shift taxes from the wealthiest to moderate and low-income families and to cut taxes on the wealthiest, depriving the state of the resources needed to invest in programs that help all families. The staggeringly unequal wealth in our state and country mean tax policy should be more progressive – raising more from those most able to pay. Ohio should move in this direction by restoring the 7.5 percent rate on the top tax bracket that we had in 2004, and adding a new bracket for income exceeding half a million dollars a year.
Situation: Income varies widely by county, unequal everywhere Income is extremely unequal in Ohio both within and between places. Several counties – Geauga, Monroe and Delaware – have average income in the top one percent that exceeds $1.25 million a year. Note that Monroe County is so small that the top one percent might be skewed by a handful of wealthy families. Four other counties – Hamilton, Warren, Cuyahoga and Putnam – have top 1 percenters who earn more than $901,000 a year. The differences within counties are stark. In Hamilton County, for example, while the top 1 percent of earners bring in nearly $1.2 million a year, the bottom 99 percent combined earn just $46,000 on average. The top 1 percent earn more than nine times as much as the rest of their neighbors combined in nearly every county. But the rich are not equally rich everywhere. For example in many rural southern counties – Adams, Brown, Highland, Pike, Vinton, Meigs, Morgan and Perry – the top one percent earn just between $200,000 and $300,000. And in many of these places, the bottom 99 percent of earners combined earn amounts that wouldn’t get many families out of poverty – amounts in the $26,000 to $30,000 range. All in all, the map reveals extreme inequality within counties and even more extreme inequality between them.
Solution: Boost the bottom. There is inequality in every county in Ohio and inequality between counties. This means that proposals to improve the lives of low and middle-income Ohioans would be helpful from Williams to Washington County, Ashtabula to Hamilton, and everywhere in between. Ohio should raise our statewide minimum wage, allow the childcare and home health workers in all of our communities to unionize, and put public money into initiatives that employ people while helping families afford the basics: from pre-K, to transit, to home weatherization. That kind of creative investment will make Ohio’s economy work, not just for the wealthiest in the richest neighborhoods, but for every Ohioan in every corner of the state.
Situation: Wages finally grow. Ohio wages plunged steeply with each of the last two recessions and have not repeated the long, strong rally we saw in the late 1990s, and that had been typical of the middle of the 20th century. Between 2014 and 2015 Ohio saw a respectable 3.3 percent growth in our inflation-adjusted median wage. This meant a 54 cent increase for the median worker from $16.07 to $16.61. The last time Ohio’s median worker got a raise this large was in 1998 in the middle of a five-year trend of wage growth. Since 2000, Ohio’s inflation-adjusted median wage has not risen for two consecutive years. Time will tell if the healthy 2015 increase can be sustained. One caveat is that inflation was less than one percent in 2015, so an inflation-adjusted increase in wages did not require much adjustment. State level median wage data is only available for full years, but the most recent national wage report showed an average hourly earnings increase of 2.6 percent in July from the previous year.
Solution: Wage standards and unions. With wages remaining below previous peaks despite decades of economic growth, it is time to reinstate policies that increase worker bargaining power. These include wage floors and union rights. Ohio should raise its state minimum wage to $12 by 2021 and to $15 by 2025. At the same time, we should reject the so-called “right to work” proposal that keeps being advanced – states that have gone in this direction have lower wages than states that allow unions to negotiate stronger contracts. Finally, in 2015, Governor John Kasich denied home health and in-home childcare workers the right to join a union that collectively bargains in Ohio. This stifles wages for these mostly female workers who do important work to care for our parents and our children.
Situation: Most still behind. While 2015 was a better year for median wage growth than many recent years, all Ohio workers from the median on down earn substantially less than comparable workers did in 1979 when adjusted for inflation, despite tremendous productivity growth over that period. The chart below breaks the workforce into 10 equal parts and finds that strong wage growth over the past three dozen years has eluded all but the top of the earnings spectrum. While these numbers are dwarfed by the differences between the top one percent and others shown above, they help to capture the fact that inequality is increasing throughout our labor market. The worker at the 90th percentile earns $7.17 more an hour than a similarly positioned worker did in 1979, while workers at the tenth through 60th percentile earn between 83 cents less and just 4 cents more than similar workers did three dozen years ago.
Solution: Make Ohio’s EITC refundable. A higher minimum wage and better access to unions would improve compensation of those at the bottom and in the middle in Ohio, as described above. Wages have eroded in part because of a lower inflation-adjusted minimum wage and weakened unions. The continued growth of low-wage jobs also points to the need to shore up Ohio’s state Earned Income Tax Credit, which helps low-wage working families with children through a tax credit. Ohio’s credit is not refundable, meaning it doesn’t help those who could most use a hand. This makes it much less effective than almost every other state’s similar program.
Situation: Low-wage sectors grow, higher-wage sectors shrink. Sectors that traditionally paid higher wages to workers without a college degree, like manufacturing and construction, have lost jobs over the past decade. Education and health, leisure and hospitality, and professional and business services have gained jobs during the recovery.
Solution: Improve quality of service sector jobs. Policymakers need to recognize that a growing share of Ohioans will be employed in service sector, leisure or hospitality jobs. That means that we need to take steps to create career ladders in these roles, and to enable workers in these jobs to bargain collectively for higher wages. Doing so will enable these new Ohio positions to facilitate the kind of strong middle class that was previously created by manufacturing and trade jobs.
Situation: Manufacturing remains important, service sectors comprise nearly half of economy. Although jobs in the Manufacturing and Trade, Transportation and Utilities sectors have left Ohio, these still remain important sectors employing 12.7 and 18.7 percent of Ohioans respectively. Education and Health and Professional and Business Services, Education and Health Services, Leisure and Hospitality, and Other Services together employ more than 43 percent of Ohioans. Government also remains an important sector with 14.1 percent of Ohio workers.
Solution: Bolster domestic manufacturing. The sectoral mix in Ohio implies that we cannot give up on positions in manufacturing and trade, which together still make up nearly a third of our economy. National policies that bolster domestic manufacturing, particularly by sparking demand for products that can boost energy efficiency, will be a boon to Ohio.
Situation: Most jobs pay too little. The most common jobs in Ohio pay too little for families to thrive. In fact of the thirteen most common Ohio jobs only two – registered nurses and truck drivers – pay more than 200 percent of the official poverty line for a family of three, a common measure of job quality. This assumes that these workers can get full-time, year-round hours. Nine of these most common jobs pay less than $30,000 a year (about 150 percent of the official poverty line for three), and two of the four most common actually pay less than the poverty line itself – a standard that does not include costs for work transportation or childcare. Together these most common positions employ nearly a quarter of Ohioans.
Solution: Boost job quality. The incredibly low compensation of the most common jobs open to Ohioans confirms that we must take steps to increase job quality and to ensure that working families can get help with the basics. This includes raising Ohio’s minimum wage to $12 by 2020, making our state Earned Income Tax refundable as most other state credits are so that the poorest families can benefit from that program, and providing childcare assistance to families up to 200 percent of the poverty line or $40,180 for a family of three.
Situation: Gender pay gap endures. Women still earn just 81 cents for each dollar that men earn in Ohio at the median. This amounts to $3.34 for each hour of work and would add up to almost $7,000 over a year of full-time employment. The gap actually crept up slightly in 2015.
Solution: Boost women’s wages. Raising the minimum wage, allowing parental leave, and better enforcing anti-discrimination law are three policy changes that could help address this persistent disparity. Ohio’s legislature is considering weakening our anti-discrimination law, which would be a mistake. Expanding eligibility for quality childcare and preschool would also enable more women to pursue better jobs and to be assisted with basic costs when their wages are too low to get by.
Situation: Race gap grows. African Americans in Ohio earn just 76 cents for every dollar that white workers earn at the median, a gap that has worsened substantially, from 91 cents in 1979. Last year, the median black Ohio worker earned a full $4.22 less than the median white Ohioan each hour. This equates to more than an $8,700 disparity over the year, assuming full-time year round work. Black workers actually earn nearly $2.70 less each hour than black workers did in 1979, despite having much higher educational attainment. One positive glimmer – both white and black median workers saw a small boost in last year’s wages, in contrast to many recent years. Sample sizes are too low to say how Ohio Asian and Latinos did last year, but nationally Asian-American workers earn the highest hourly wages, followed by white, black and Hispanic workers.
Solution: Target black community for quality jobs. In the labor market as in many other markets, black Ohioans face discrimination and unequal access. In addition to allowing cities to enact local policies that prioritize hiring of workers from underrepresented communities, as the state now forbids, Ohio should invest in mass transit and target economic development spending toward jobs that provide access to urban workers. Other policies already mentioned to boost wages at the bottom would also help address these disparities.
Situation: Unions help. Workers in unions earned more than four dollars more each hour ($20.03) than workers who were not in unions ($15.90) in Ohio in 2015. Over the course of a year of full-time work, this would translate to more than an $8,500 bonus for your union card.
Solution: Promote unionization. Unions improve wages but Ohio’s legislators and governor have often taken steps to weaken unions and reduce the number of workers who can get the protection, training and compensation benefits that come with being a member of a labor union. In order to broaden unionization in Ohio, the state should reject the mis-named “right to work” initiative – states that take this approach end up with lower wages. Ohio should also allow home health workers and childcare workers to become part of a union – two particularly important and low-wage occupations that were once promised the right to organize into unions. For both groups, Governor Kasich has eliminated the right to join a union and bargain collectively.
Situation: Unions reduce inequities. White and male workers benefit when they are in a union. But black and female workers benefit even more from the non-discrimination, transparency and collective bargaining that unions offer. Black workers who are in a union earn $4.31 more each hour, equating to nearly $9,000 more over a full-time work-year (2080 hours). Women benefit almost as much – a $3.91 hourly boost, more than $8,100 more than their non-union sisters over the course of a full-time work-year. Black workers are actually now more likely to be in unions than white workers, making unions an important contributor to racial and economic justice. Sample sizes of Asian and Latino workers in Ohio are not large enough to say with certainty how unions aid these workers.
Solution: Broaden unionization. Ensuring that more workers can join unions will better spread the benefits of unionization. In addition to the efforts mentioned above, Ohio communities should put in place Community Benefit Agreements that help the skilled building trades diversify their membership, helping to bring higher-skill, higher-paid building trades jobs to all communities.
Situation: Education pays. In general, Ohio workers with more education earn more and each boost to educational level increases compensation substantially. The median worker with a college degree earned $24.95 each hour in 2015, more than two and a half times what the median worker without a high school degree earned that year ($9.96). Over the course of a year of full-time, year-round work, this translates to more than a $30,000 difference ($51,986 vs. $20,716).
Since 1979, the inflation-adjusted wages for those with no high school degree, just a high school degree, or some college (but no 4-year degree) have all plunged – by 36 percent for those who don’t finish high school, 17 percent for high school only, and 10 percent for less than four years of college. The “some college category” combines workers who started but didn’t finish a degree with workers who earned an associate’s degree because we don’t have data for every year of the series. Those who started and didn’t complete a degree earned just $15.87 an hour ($33,009 in a full work-year), while those with an associates’ degree did much better at $19.75 per hour ($41,080 in a full work-year) at the median in the combined years of 2013-2015.
For those with a college degree, the long-term trend – since 1979 – is upward, but the more recent trend – since 1999, is stagnant or downward. The median college-educated Ohioan earned $24.95 in 2015, up from $22.13 in 1979, but down from a peak of $26.85 an hour in 1999.
Solution: Make college affordable. Ohio has taken some small recent steps to make college more affordable, which should be applauded. But college costs have moved out of reach for many working and middle-class families. In the early 1980s, a student working full time all summer at the minimum wage, plus ten hours a week during the school year, earned enough to pay tuition, room and board at a public university in Ohio. Today that student would have to work close to full time all year to cover tuition. Similarly, in 1980 the maximum Pell grant covered more than three quarters of a four-year public university, while in 2013 it covered less than a third of the costs. Allotting more state funding to keep college affordable is one part of the solution. Ohio’s need-based aid lags $300 million below where it was in real terms before the recession and overall state support to higher education is half a billion dollars lower this fiscal year, when adjusted for inflation, than in 2008. Increasing the size of the federal Pell grant is the other half of the necessary solution.
Situation: Education pays, but not equally. Getting more education is almost always helpful, but not always equally so. Black workers earn much less than whites at the median at every educational level. Similarly, women earn less than men at the median, even with the same educational credentials. Still, for male, female, white and black workers, graduating from high school, gaining an associate’s degree, or graduating from college all boost wages substantially. Here we provide new data that sheds particular light on the benefits of an associate’s degree. For men, an associate’s degree generates wages of nearly $5.00 an hour more compared to workers who started but did not finish college – over a full-year’s work, the raise would be worth more than $10,000. For black workers, an associate’s degree generates a raise of $2.75 an hour, more than $5,700 over a full-year’s work. Bigger educational leaps generate even bigger gains – men with college degrees earn over $20 more each hour than men without high school degrees and more than $43,000 more over a full-year’s work (which men without a diploma might not even be able to get). Yet, even the most educated workers cannot erase race and gender wage gaps. Men with a BA at the median earn $7.62 more each hour than similarly educated women (which would exceed $15,800 over a year). White workers with a BA earn $5.24 more each hour than similarly educated black workers at the median, a nearly $11,000 difference over a full-time year. There may be differences that partly explain this – women may get more social work degrees while men get more business degrees, for instance – but the numbers show that similar credentials don’t ensure equitable outcomes. In fact, female and black workers with associate’s degrees actually each earn less than men and white workers with just high school degrees.
Solution: Reduce discrimination. The enduring racial and gender wage disparities point to a need to retain, strengthen and enforce anti-discrimination laws, to ensure family-friendly workplaces, and to make sure that we haven’t built discriminatory norms into our wage structures. For example, childcare providers and preschool teachers do a very challenging and important job and are disproportionately female. Yet these jobs are extremely low-paid, paying less than some other roles that are traditionally done by male workers. By expanding a public role in preschool and childcare and allowing unionization, we can begin to rectify this. Finally, labor law in general is not always well enforced. For example, many workers are forced to arrive early before punching in, to work overtime without appropriate compensation, or to be classified as independent contractors (who are denied many benefits) when in fact they are really employees. These violations of labor law – dubbed wage theft because they steal wages from workers – must be eliminated. Enforcing labor law will help workers and will also help responsible employers by not forcing them to compete against law-breakers.
Situation: Counties vary widely. Another reflection of inequality in Ohio is the wide variation in median household income by county. The map below shows the household income for the median household in each county in Ohio. Half of the households in each county earn less than this amount and half earn more. The incomes vary widely from as low as $33,773 in Athens County to as high as $91,936 in Delaware County, the wealthiest.
Solution: Levy fair state taxes. The wide disparity in income among counties points to the unfairness of relying on local taxes to fund schools and other basics. While state support balance out some of the difference, schools or social services funded by local taxpayers in Adams County (median income $34,733) are likely to have fewer resources than those funded by residents of Delaware, Warren or Geauga Counties, where the median household earns more than twice as much. This provides another reason to restore an adequate state income tax, based on ability to pay. Children’s opportunities should not be dictated by their zip code.
Conclusion and recommendations
While the challenges facing Ohio are varied, a few bold policy reforms from the federal and state level could together address multiple challenges simultaneously. We have incorporated solution recommendations throughout this report which can be consolidated to include the following:
- Stimulate growth of jobs and the economy: To grow the economy more generally, we should continue to support the Federal Reserve’s policy of keeping interest rates low. This will also promote hiring and reduce layoffs. We can do more to promote job growth by restoring public jobs that have been cut and making deep investments that employ people now, particularly in things that will reduce our long-term costs, increase our quality of life, and make our communities more sustainable in the long run. This principally includes making investments in human capital (expanding quality childcare and early education, investing in home visiting programs for new babies, and providing aftercare with an exercise component for school age kids are three great starting points). It also requires deep investments in infrastructure, particularly the kinds of infrastructure that can reduce energy use and make us more sustainable. Great examples include transit, building weatherization, alternative energy and manufacturing efficiency. Today’s very low-interest rates make it a great time to invest.
- Improve job quality: As we grow jobs, we should make sure that they are good jobs. We can do that by making it easier, not harder, to join a union – fighting off so-called “right to work” laws that slash union resources and allowing all workers to bargain collectively are two reforms we should embrace. Governor Kasich and the legislature have denied home health and childcare workers the right to collectively bargain – that right should be restored. We should also raise the minimum wage as many other states have done so that every Ohio worker can make a living.
- Ensure the best possible workforce: Ohio underinvests in education. Discrimination locks many workers out of good jobs. By investing more in education – from early childhood through college – we can ensure that employers can always find the high-skilled workers they need, and that workers can afford the training that they want to thrive. And by enforcing anti-discrimination law and allowing cities to set standards for who they want to hire, we can make sure that African-American and Latino workers can have a shot at all jobs, public and private, and that women receive equal pay for equal work.
- Protect and expand programs for struggling families: While we push for policies that ensure that every worker can get a job and every job can support a family, we need to acknowledge that neither of those things are yet a reality. Last year the federal government made permanent some terrific improvements to our federal Earned Income Tax Credit – this year we should extend the federal EITC to adults who aren’t custodial parents and make our state credit refundable as most other state credits are. Last year we took some baby steps to improve childcare and pre-K – this year we should make sure all families under 200 percent of poverty can get help with these essentials. Legislators have taken aim at our unemployment compensation system, threatening to make it among the stingiest in the country, even though it is often our best line of defense against recession, and we already make it harder to qualify than most states. Instead we should shore up this program, widening eligibility and adequately funding it.
- Pay for it all: Ohio’s legislature and governor have maintained that cutting taxes increases Ohio’s prosperity. In 2005 they embarked on a stark tax-slashing and shifting agenda, making sure that the wealthiest paid much less, while the poorest actually paid more. Since then they have repeatedly added new cuts to the existing ones. These moves have reduced what is paid by the wealthiest Ohioans and forced low- and moderate-income families to pay a larger share, even though more and more economic returns are going to the wealthiest. And they were sold to Ohioans on the claim that they would generate growth. But year after year since their passage, Ohio has underperformed, with the country adding a larger share of jobs. Ironically, the cuts have forced austerity on the state, necessitating layoffs of public employees and underinvestment in the very things that could actually position the state to have a better economy in the future. We should instead restore the 7.5 percent rate on the top tax bracket that we had in 2004, and add a new bracket for income exceeding half a million dollars a year. By raising revenue at the state level from those most able to pay, and distributing it to communities as needed, we can also reduce disparities between places so that children’s opportunities are determined by their drive and ability, not their zip codes.
In short, a bold policy agenda that focuses on Ohio’s people and their needs could restore prosperity here and make sure that it is more broadly shared. In the past, when Ohio overcame policy challenges, it did so by investing in smart solutions that addressed the challenges of the time. We need the same thing today: a forward-thinking, solution-oriented approach that can make Ohio more vibrant, equitable, sustainable and inclusive, today and in the future.