Study: employment and income in the Rockford area

During the past two decades, there has been a significant loss of better-paying manufacturing jobs in the Rockford area while overall labor force and employment has increased.

Despite the rise in the labor force from 179,324 in 1990 to 201,976 in 2003 and employment from 168,310 to 185,420 respectively, the employment in manufacturing declined from 53,000 workers to 39,900 during the same period. That’s a loss of 14,000 jobs.

As of August 2003, only 21.5 percent of those employed in the metropolitan Rockford area were engaged in manufacturing, a 10-percent drop since 1990. [Unless otherwise stated, all data concerning Rockford are for the Metropolitan Statistical Area (MSA), which includes Boone, Ogle and Winnebago counties].

Part of the employment expansion has been in the areas of retail and services with significantly lower wages, thereby holding back growth in the real per capita income (income after discounting for inflation). In fact, the real per capita income in 2001 was about the same as in 1994. Metropolitan Rockford:Labor Force & Employment (See graph below).

An overview of the compensation and wage differentials for broad occupation categories in the Rockford area indicates lower mean wages and salaries for services, $7.03, compared with $15.83 for blue-collar workers. But this type of comparison provides a distorted view as there are some traditionally recognized “service” jobs disguised under white collar, and of course, not all blue-collar jobs are in manufacturing.

A better broad comparison is the mean wages in the goods producing industries, $18.67, and the service producing industries, $12.55.

However, even this type of comparison does not reveal the wage differentials, partly because of definitional problems and partly because of disguised distortions or misrepresentation when a statistical mean wage is used for comparison.

Metropolitan Rockford: Mean Hourly Earnings, Private Sector (See graph at far right).

To arrive at a better perspective, one can examine the median wage and the range for various occupations. These graphed below provide the hourly wage rate at 50 percentile (i.e. Median) and the wage range from lowest 10 percentile to top 90 percentile for specific occupations.

The data covers both part- and full-time workers since a large number of employees in sales and services are employed on a part-time bases.

Since the readers may be interested, the median hourly wage and range is also provided for selected a number of higher-paying white-collar occupations, which are not the focus of this writing. All figures represent straight hourly wages and salaries excluding tips, bonuses, and overtime pay.

Metropolitan Rockford: Median Wage and Range for Selected Occupations, 2002 (See graph above).

According to these figures, the median wage in many service occupations is below the median wage for all occupations (excluding sales), $14.04, as well as the median wage in manufacturing.

Many jobs in service areas such as sales, food and health services, where there has been a significant growth in employment, show median hourly wages below $10, substantially lower than those in manufacturing.

Hence, while the jobs lost in manufacturing have been more than offset by employment growth in other areas, the compensation in many of these expanding areas is far below that of the lost manufacturing jobs. Of course, some upward adjustment to account for tips in certain occupations, such as food services, will improve earnings figures, but this will not alter the basic conclusion.

This is not to say that all employment expansion has occurred in low-paying occupations. Indeed there also has been employment growth in finance, trade and education with higher rates of compensation, but the bulk of the expansion has been in lower-paying occupations.

The employment, production, productivity and income are at the root of economic vitality of any community, and its potential for growth and prosperity is hampered when there is slowdown in any of these related areas; and so would be the case for tax revenues that provide for necessary services and improvements in the welfare of the community.

Copyright© 2003 Fred Rezazadeh. Fred Rezazadeh is professor of Business and Economics at Rockford College, a consultant and public speaker on local and national economic issues.

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