Persistent inequity, practical solutions

Introduction

Many Americans and many Ohioans feel left behind. For 30 years, we’ve seen little relief from growing inequality. Workers have saved and struggled to get more education than their parents, but find themselves in jobs that pay less or the same. Ohioans who left the labor market during one of the last two brutal recessions have not been lured back in, in part because wages have not steadily grown. And for black Ohioans and those from many Appalachian counties, unemployment and low wages seem to be a constant.

It’s hard to say what role these economic struggles play in America’s shocking new divisions. What is clear is that racists and anti-Semites have used these anxieties and other antipathies to foment divides. Images that many of us hoped – and thought – were far behind us have reemerged with a vengeance. A swastika was sprayed onto a driveway in Lakewood, Ohio. An Ohio resident traveled to Charlottesville, Virginia to join a white supremacist march and was accused of driving his car into a crowd of counter-protesters, killing one and injuring many more.

Nothing excuses these actions.

But insecurity and anxiety need not send us toward division. Just the opposite. This State of Working Ohio report proposes solutions that would improve the lives of all working people in Ohio, regardless of race, ethnicity or gender. We put forth solutions that address low wages and too few jobs, high poverty and too few opportunities – and attack them in ways that bridge divides of race, ethnicity and religion. Wage growth has been too slow – we suggest a higher minimum wage and more access to collective bargaining. Job growth has been weak – we suggest deep investments in childcare, pre-K, green energy and transit that would employ people throughout Ohio. Inequality remains staggering – we recommend restoring more reasonable levels of taxation on income above $200,000 and $500,000 so that we have revenue to invest in programs that help all families thrive, from childcare to pre-K to transit.

America is a great experiment – a dream that people from all over the world can come together, that ingenuity and invention can take on big problems and employ all comers, that a large middle class is both possible and desirable. For big parts of our history we embraced those challenges, especially in Ohio. This is the place where 50 years ago Clevelanders elected the nation’s first big-city black mayor, the place where steel and cars and car parts were produced, the place where immigrants came from both Europe and the American south to find good jobs and a place to raise their families.

This State of Working Ohio, 2017 uses the best and most recent data available to understand what is happening in the Ohio economy. It is important to note that in some cases that data goes only through the end of 2016, while in other cases the data permits updating through several months of 2017.

Reforging an economy that works for all of us is essential to the future of Ohio and of America. This report puts forth dozens of practical steps that can send us in that direction.

Growing productivity, slow-growing or stagnant wages

Scoop: The average non-supervisory worker used to experience wage growth at the same rate that the U.S. economy was growing. Between 1948 and 1972, the economy’s productivity grew 92.05 percent and the average hourly compensation grew 91.24 percent. Since that time, compensation has remained almost flat while the economy again doubled in size. Between 1973 and 2015, productivity grew 6.6 times more than pay. Productivity has grown a bit more slowly in the last two years but the fundamental fact remains that compensation is not keeping pace with growth.

Solution: If we want pay to again grow alongside productivity, we need to take steps to raise the compensation of regular workers. This includes raising the minimum wage, making it easier to unionize, providing support to high-wage sectors, and making sure that contracts and economic development assistance never go to low-road firms.

Low labor force participation

Scoop: Ohioans left the labor force in droves during the Great Recession of December 2007 to June 2009 and have still not fully rejoined. Labor force participation, the share of Ohio workers either working or looking for work, was at 62.6 percent in 2016, up from 2015, but far below its peak level of 67.8 percent in 2007. The share of workers actually employed, called the employment-to-population ratio or E-POP, was 59.5 percent in 2016, down from a peak 64.6 percent in 2000. Both low numbers indicate that many Ohioans who could be working are not doing so. This means that there are not enough jobs, there are not enough good jobs, or some workers have lost the ability or desire to be part of the labor market. All indicate a problem.

Solution: Unemployment is lower than it has been in many years — a great thing. Often low unemployment begins to drive up wages, attracting more people into the labor market. That hasn’t happened this time – too many jobs remain low wage. Policy to improve job quality could help attract workers. That includes raising the Ohio minimum wage, allowing more workers to join unions, and making public childcare available so that workers can afford to take jobs. Fixing Ohio’s Earned Income Tax Credit – which is one of the few state credits that is not refundable (thereby not going to the poorest workers) – is another needed solution.

Many demographic groups have very low employment levels

Scoop: Ohio’s employment-to-population ratio in 2016 was lower than it should be. For certain demographic groups, it was much worse. More than two out of three workers with less than a high school education are not working and only slightly more than half of those with just a high school degree are employed. Structural barriers impede employment for black Ohioans – jobs have left black neighborhoods, car ownership rates are low, transit investments are lower than almost any other states. Just 52.6 percent of black Ohioans are employed, compared to 60 percent of white workers and more than 65 percent of Hispanic and Asian residents. One sign of a truly tightening labor market – like that of the late 1990s – is that black employment rates rise. Employment rates are also very low among young Ohioans (55.9 percent for age 16 to 24) and older ones (37.6 percent for age 55 and up).

Solution: The very low E-POP among black workers and less educated workers demonstrates a labor market that is still not pulling many people in because jobs are too few, or so low-paying that workers can’t afford the childcare, transportation and other costs of taking them. Employers are also still leaving some workers behind. Today’s high rates of incarceration mean that many people seeking work have criminal records. Taking steps to reduce unnecessary incarceration and to encourage employers to consider those with a record are two ways to stop taking people permanently out of the labor market when they have committed only a minor offense.

Ohio job growth lags badly

Scoop: We are one of only a handful of states that still, in July 2017, had fewer jobs than we had prior to the 2001 recession. Job growth this year has been slower than last year’s growth and 2016 was Ohio’s slowest year since the end of the recession. There were 5.538 million jobs in Ohio as of July 2017.

Solution: Ohio’s continued sluggish job growth, combined with our low labor force participation, means that we still need to create jobs in Ohio. Big expansions to public childcare and public preschool would be job generating while also helping our youngest Ohioans be ready for kindergarten and helping their parents work. Deep investments in wind, solar, insulation and transit would reduce pollution and carbon emissions, employ people now, and reduce fuel costs in the long run.

Ohio still behind since 2000, U.S. has added

Scoop: Ohio’s job loss since 2000 is in stark contrast to the country as a whole, which has added more than 10 percent to its job levels since 2000. The country continues to add jobs at a faster rate than Ohio – 1.6 percent last year nationally compared to just 0.9 percent last year here.

Solution: Overt policy to create jobs is needed, as mentioned above. One area where Ohio has created jobs is in health care. Between 2000 and 2015, the percentage of Ohio jobs provided by the private health care sector increased from 11.1 to 14.9 percent of our economy. More than one of seven of our neighbors, nearly 677,000 Ohioans in 2015, worked in the private health sector. Ohio should continue to use public policy to support creation of jobs that also improve lives and communities.

Ohio lags over many periods

Scoop: Over a variety of time periods – since 2005 when Ohio passed tax cuts in the name of job creation; since December 2007 when the recession officially started, since January 2011 when Governor Kasich took office, or since June of 2015, two years ago, Ohio has added a smaller share of jobs than the country as a whole. Since the recession ended, the state has outperformed the US in one year only: 2010. The same year Ohio received large scale investments from the federal government through the federal stimulus and automobile recovery efforts. In that year, overall job growth in Ohio was 1.2 percent compared to the national average of 0.4 percent. The following year, Ohio performed in line with the national average, but the gap continued to grow.

Solution: We should keep in place Medicaid expansion, as Governor Kasich consistently advocates, as that has been a source of job growth. We should stop cutting public jobs which both employ people and deliver public services. And we should work to support manufacturing, by defying President Trump’s vow to cut the Manufacturing Extension Partnership and by renegotiating trade agreements in ways that foster domestic investment.

Public job loss worsens situation

Scoop: Public jobs can stabilize economies when private layoffs occur. Ohio cut public jobs during and after the recent recession, slowing our recovery. Recently, the return of some public-sector work has offset private sector losses. Still, with just 779,000 public sector jobs, Ohio has 15,600 fewer public workers than at the start of the last recession. This is despite the fact that Ohio has many public needs that would be well served by more public employment.

Solution: Public sector workers can help deliver education, higher education, transit, health care, infrastructure maintenance and more. Ohio has a need for all of these services. Public jobs are the jobs we actually have most control over as citizens. We should restore public jobs, channeling toward areas of greatest need.

Low unemployment is good news for Ohio

Scoop: Unemployment levels have remained quite low in Ohio and in the United States but over the last six months, the unemployment rate in Ohio has crept back up to 5.2 percent. The state’s rate has been higher than the national average since November 2016. This reverses a trend that had been in place since 2014.

Solution: Ohio’s unemployment rate along with the labor force participation and employment to population measures reinforce the weakness of our state’s recovery. Ohio still needs good jobs to draw people back into our workforce. A public works program is still needed in Ohio to ensure enough jobs to employ everyone who has left the workforce. We should also take steps recommended elsewhere in this report to raise job quality so that workers are paid enough for compensation to cover the travel and childcare expenses of working.

High unemployment in many counties

Scoop: While statewide unemployment is good, many Ohio counties had high unemployment in 2016. Counties along the entire eastern border had official unemployment rates over 6 percent and 14 southeast Ohio counties had rates over 7 percent. Monroe County’s 2016 unemployment was over 11 percent. These fluctuate monthly – some counties have seen improvement in 2017.

Solution: Ohio needs a strategy to address persistent disparity with Appalachian counties, including providing broadband, addiction services, and quality childcare to working families.

Unemployment low, but not for black workers

Scoop: In 2016, Ohio’s official unemployment rate for white workers is 4.1 percent, a very good rate. Of course, many people have not been lured back into the labor market as detailed above, so the number is not as good as it sounds. Still, it’s a lot better than the 9.9 percent rate that black workers in Ohio face. In fact, 9.9 percent unemployment is higher than what white workers faced at the height of either of the last several recessions – not since the early 1980s recession have white workers faced such high levels.

Solution: Black unemployment remains high for many reasons – lower quality schools, lower educational attainment, outright employer discrimination, high rates of former incarceration, poor public transit and more. Investing more in schools and transit, enforcing anti-discrimination laws, reducing incarceration, and eliminating barriers to employment for the formerly incarcerated are some clear solutions.

Unemployment low for men and women

Scoop: Many people called the early 2000s recession a “mancession” because men were particularly hard hit with their unemployment rates spiking to 11.8 percent. At the end of 2016, both men and women’s unemployment rates were low at 5.2 and 4.7 percent.

Solution: Low unemployment for both genders is a good thing. But both men and women still have levels of labor force participation far below their peaks. Raising wages would draw more workers of both sexes into the labor market – an increased minimum wage would be one good way to do so.

Income inequality high throughout Ohio

Scoop: Income inequality in Ohio is high with the top 1 percent earning more than 20 times what the median earner brings home in 11 counties. The top 1 percent brings home more than $1.9 million in exurban Geauga County, more than $1.6 million in exurban Delaware County, $1.4 million in rural Monroe and $1.3 million in Cincinnati’s Hamilton County. Meanwhile, in at least 19 counties, the median household – at the midpoint – earns less than $34,000.

Solution: In addition to applying higher income tax brackets to top earnings, Ohio should invest in high quality education from pre-K through college, infrastructure repair, green energy and conservation, and mass transit.

Income inequality remains staggering

Scoop: As of 2014, the top 1 percent of earners in Ohio were bringing in more than 19 times as much as the average of the bottom 99 percent of earners combined.

Solution: Restoring the 7.5 percent tax rate on annual income over $200,000 and creating a new 8.5 percent bracket for income over $500,000 would raise revenue which could be used for programs that help the other 99 percent – high quality education from pre-K through college, infrastructure improvements, and better public transit, to name a few where Ohio historically underinvests.

Wage growth at last, but more years of growth needed

Scoop: For the first time since 2004 through 2006, Ohio had two consecutive years of reasonably healthy inflation-adjusted wage increase (2.5 percent) in 2015 and 2016, bringing median hourly compensation to $17.36 in 2016. This still leaves Ohio’s median wage lower than during five previous peak years since 1979 and lower than the nation’s. Yet there is less of a gap between Ohio’s median wage and the national median wage than in any year since 2007. In both Ohio and the nation, wages have previously been higher, demonstrating that significant work is needed to have workers share in growth in the economy.

This positive news is tempered by relatively weak fourth quarter in 2016. Separate data from the Quarterly Census of Employment and Wages, which uses a very different methodology than the CPS, showed that from December 2015 through December 2016 the average weekly wage in Ohio fell by 2.5 percent. Budget forecasting models used by the state are also predicting a job and wage growth slowdown.

Solution: Ohio needs better wage growth, as does the country. To get there, Ohio should: increase its minimum wage, phasing it in to $15 an hour by 2025; make it easier, not harder, to unionize, by enforcing labor law and by allowing female dominated sectors, like home health care and childcare workers, to bargain collectively; require that any employer contracting with or receiving economic development assistance from any public entity pay $15 an hour now; raise wages and compensation for public sector workers, as mayors in Cleveland and Dayton have proposed.

Wage growth goes mostly to the top, more than half of Ohio workers behind

Scoop: Since 1979, despite tremendous growth in the national economy, 60 percent of Ohio workers have seen their inflation-adjusted wages decline in comparison to workers of that previous generation. Only the richest 30 percent of workers are doing better than comparable workers of 37 years ago. This is despite the fact that workers today are more likely to have a high school degree and more likely to have a college degree. Workers at the 80th percentile (those earning more than eight out of every 10 workers) earn $2.89 more per hour than comparable workers did in that previous generation, and those at the 90th percentile earn $7.16 more.

Solution: Gains in our economy are generally not going to wages at all, but rather to owners of capital. To rebalance the economy, we need to take steps to make work pay. This should include raising the minimum wage; raising the state Earned Income Tax Credit and making it refundable – this credit goes only to working families with children; and attaching higher compensation standards to public jobs and to jobs that get public funding through contracts or economic development assistance.

Manufacturing shrinks, health and education grow jobs

Scoop: Since the recession began, Ohio has lost jobs in many key sectors, especially manufacturing, which lost 77,400 jobs between December 2007 and May 2017 (with a slight uptick more recently). Job gains have been concentrated in education and health, together adding 140,000 jobs over that decade. Ohio has also lost government jobs – the jobs over which the public sector has the most control, and jobs which often deliver important services in our economy. We did add government jobs in June, as reflected in Figure 9 above.

Solution: It’s clear that we’re not adding enough jobs in Ohio and that our sectors are shifting. The shift to education and health jobs necessitates that we retain the policies that keep those sectors growing, like the Affordable Care Act and Medicaid expansion, and that we work to improve the quality of those jobs by allowing those workers to organize.

Source: EPI analysis of Current Employer Statistics data, seasonally adjusted numbers. Period from start of recession (December 2007) to May 2016 (revised monthly data).

Ohio employment spread evenly among many sectors

Scoop: Trade, transportation and utilities (19 percent); education and health (17 percent); government (14 percent); manufacturing (13 percent); and professional and business services (13 percent) are the largest employers in Ohio’s economy. Mining makes up less than 1 percent of jobs. The importance of government jobs illustrates the silliness of measuring job growth by looking at private sector jobs only, as the Kasich administration has sometimes tried to do.

Solution: Manufacturing remains an important employer in Ohio yet the Trump administration has proposed slashing funding for the Manufacturing Extension Partnership, a modest effort that helps manufacturers thrive. That funding should be restored. Four out of Ohio’s top 10 employers are in health care and 30 percent of the industries projected to add the most jobs between 2012 and 2022 are in health care. This highlights the importance of retaining Medicaid expansion, as Governor Kasich has repeatedly articulated and fought for. While all jobs are important, the tiny sliver accounted for by mining makes clear that expanding alternative energy and conservation could be fruitful ways to add jobs in growing parts of the economy. These sectors create more jobs for each unit of energy produced.

Ohio’s most common jobs are low-wage

Scoop: Of the 13 most common occupations in Ohio, 11 pay less than $34,000 a year, which is well under 200 percent of the poverty line for a family of three, a common standard for defining a low-income household. These positions employ more than 1.3 million Ohio workers. The fact that our most common positions are low-wage is a sign of a structural problem in our labor market.

Solution: The brutally low wages that workers can earn in these jobs is the clearest indication that we need to raise the minimum wage in Ohio. Doing so would immediately raise the incomes of hundreds of thousands of workers trapped in these low-wage roles. Other solutions include encouraging unionization, providing assistance with childcare and pre-K so these workers can get by on what they earn, and making Ohio’s Earned Income Tax Credit larger and refundable, so all parents trapped in low-wage jobs can have a better shot at supporting their families.

Men’s wages have plunged but they still earn more than women

Scoop: The median man, at the midpoint in earnings, earns $3.36 more each hour than the median woman in Ohio. Men in the third decile of the labor force make roughly what women make at the median. The gender pay gap has narrowed over time, partly because women are earning more than they used to. In 2016, women earned $2.66 more in inflation-adjusted 2016 dollars than they did in 1979. However, some of the gap closing is due to decline in men’s wages, which fell by $2.45 between 1979 and 2016, inflation adjusted. Both men and women saw gains between 2015 and 2016.

Solution: To close the gender gap, we should make it easier for women to work and advance in the workplace. One way to do that is to make high quality early care and education available to all Ohio infants, toddlers and preschoolers. Ohio currently ranks in the bottom five states in how low earnings have to be before a family can get help with childcare. Just 4 percent of 4-year-olds from low-income families were enrolled in preschool here in 2015, compared with 29 percent nationally. We should improve eligibility so that families earning up to 200 percent of poverty (about $40,000 for a family of three) can get help with childcare, and boost preschool spending. The legislature has taken some steps in the right direction and communities like Cincinnati, Dayton and Cuyahoga County have invested as well. Our goal should be to increase investment annually until every preschool-aged child can attend. This will help families with expenses, especially families with low-wage women as the primary earner.

Racial wage gap remains appalling but black workers gained in 2016

Scoop: Black workers make much less than white workers at the median and the gap got much worse between the late 1970s and the 2000s. That said, African-American workers got a hefty 8 percent inflation-adjusted increase between 2015 and 2016 to $14.61 an hour at the median, more than they’ve earned in any year since 2006. Not since 1984 have black workers seen as big of a one-year increase. Still, African-American workers earn $3.35 less each hour than white workers at the median, which translates to nearly $7,000 less with full-time, year-round work. This stands in contrast to 1979 when black workers earned just $1.65 less than white workers in 2016 dollars.

Solution: Raising the minimum wage would raise wages at the bottom which would reduce both gender and race disparities. Reducing incarceration and helping employers hire formerly incarcerated adults would begin to compensate for a criminal justice system that overwhelmingly targets black Ohioans with more investigations, arrests and convictions. We must also better enforce anti-discrimination law. Finally, raising union levels, as subsequent data will show, is a great way to reduce discrimination.

Income varies by county in Ohio

Scoop: In 10 Ohio counties, median household income was less than $40,000 in 2016, meaning even households in the middle hover below 200 percent of poverty level for a family of three, a common measure of low-income. These counties are clustered in Southern Ohio.

Solution: Stingy state policies – on childcare, pre-kindergarten, school and transit funding to name a few areas – mean we are diverging, with some of Ohio getting better services than other areas. We need a renewed state-level commitment to strong public services that help families get out of poverty now and position the next generation for success.

Unions help

Scoop: Unionized workers in Ohio make $4.00 an hour more than their non-union counterparts, nearly a 25 percent difference. Over a year of full-time, year-round work, that translates to more than $8,000 more. And of course, unionized workers are more likely to get health insurance, a pension and paid sick days, and less likely to face unfair treatment at work. Unions also raise wages even when we control for race and gender. Black, white, male and female workers all earn more when they are in a union, and the gap between races and sexes shrinks when wages are collectively bargained.

Solution: Republicans in Ohio severely weakened collective bargaining for public sector workers in 2011, which would have devastated unions. Ohio workers fought back, exercising the citizen’s veto and restoring these rights with a ballot initiative that passed overwhelmingly. But other parts of the anti-union agenda are subtler. For example, in 2015, Governor Kasich rescinded the right to organize for home health workers and childcare workers in Ohio. Private employers routinely punish workers who try to organize. Workers in the “gig” economy and domestic workers fall outside of traditional labor laws and protections. Public officials should be making it easier, not harder, to join a union.

Unions raise wages, particularly for women

Scoop: Workers earn more when they are covered by a collective bargaining contract. In 2014-2016, this increase was 19.2 percent for women, 7.4 percent for white workers, and 22.6 percent for black workers. Men in unions earned about the same as men not in unions for this pooled sample ($23.42 v. $23.58, a 0.7 percent difference). The gender wage gap fell from 29.1 percent to 7.6 percent when workers were able to bargain collectively. The racial wage gap 35.8 percent to 19.0 percent. The share of Ohio workers in unions declined between 1983 and 2016 from 28 to 12 percent of men and from 18 to 11 percent of women. Since 2000, the share of white workers in unions fell from 14.4 to 11.7 percent and of black workers from 19 to 14.5 percent. The share of black workers (14.5 percent) who are in a union is larger than that of white workers (11.7 percent).

Solution: Unions raise wages. This is important for all workers, but particularly important for female and African American employees, who tend to earn less. Further, with workers getting a smaller and smaller share of our growing economic productivity, unions provide a vehicle to recapture some of the wealth they help to produce. Ohio should restore the right to unionize for home health and childcare workers and preference unionized workplaces for economic development assistance and contracts with public entities.

School pays, but less than it used to

Scoop: It pays to finish high school and college. Workers with a BA made well over twice as much as workers without a high school diploma in Ohio in 2016 and they are much more likely to be employed. Over a typical work year, this translates to nearly a $21,000 wage premium for sticking it out through high school and college. Wages grew by a healthy margin (nearly $5.00 an hour) for those with a college degree between 1979 and 2000 but have fallen by more than $2.00 an hour, adjusted for inflation, since then. However, for workers with just a high school diploma or less, wages have fallen more steadily and are between $2.00 and $5.00 less per hour than what comparable workers were earning 37 years ago. Worth noting is that a community college degree enables over $3.00 an hour more in hourly pay compared to a high school diploma only, at the median. Ohio’s policies should make getting an associate’s degree easier.

Solution: Although college pays, Ohio students have to pay a lot to get that degree. Ohio college enrollment dropped more than in any other state between 2010 and 2015. Ohio ranks 45th among states in college affordability and does not provide enough for need-based aid. Ohio should provide more for higher education broadly so tuition increases can be reined in and should provide more for need-based higher education, which we still underfund — though the last two budgets have at least moved in the right direction.

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2017Amy HanauerState of Working OhioWork & Wages