Tag: Wages

Healthcare, Extractive Industries, and Wages

horvath Leave a comment

Looking ahead to 2015 there are three issues that will impact the economy in 2015: healthcare, extractive industries, and wages.

Healthcare
The healthcare industry may play an important role in the economy in 2015.
• First, there are shortages of workers in many key positions. This may affect the care consumers receive from their service providers and it may increase the costs of doing business.
• Second, providers are being pushed by Obamacare and insurance companies to reduce the fees they charge. In turn, this may reduce their margins.
• Third, it was recently announced that Colorado employers will face an 8% increase in the cost of insurance. Likely, a portion of that increase will be passed on to workers. That could reduce that amount of discretionary income, which in turn could reduce retail consumption.
• In addition, it has been announced that Connect for Health Colorado, will reduce subsidies. In other words, many Coloradans will have to pay significantly more for coverage, go without healthcare, or pay a fine to the government. Coloradans will face sticker shock when they get their health insurance bills in 2015.

Extractive Industries and Prices of Oil and Gasoline
The extractive industries will continue to face challenges in 2015. Fracking is still an issue in Colorado that will not go away. Local governments are pushing to have greater control over the way the extractive industries operate in their jurisdiction.

In addition, the price of oil has trended downward for the past six months. If these trends continue, it may impact production in Colorado, which will hit the smaller companies first. It will also impact severance taxes paid to the state government.

At the same time consumers have enjoyed lower prices at the pump. Their gasoline bills for 2013 and 2014 will be similar. If lower prices continue into 2015, consumers may notice a reduction in their annual gasoline bill in the range of $400 to $800 for the year.

If prices at the pump continue to decline Colorado consumers will be the benefactors, but state coffers suffer. Typically the negative impact for the state outweighs the positive impact on the consumer.

Wages
Typically, when unemployment dips below the natural rate of employment, 4.5% to 5.0%, there is usually upward pressure on wages. Overall that has not been the case in Colorado.

Between 2007 and 2014
• The Denver Boulder Greeley CPI  (DBG) increased at an annualized rate of 2.4%
• The Private Sector Average Weekly Wages (AWW) increased by an annualized rate of 1.7%.
Inflation for this period grew at a faster rate than private wages for this period.

Between 2013 and 2014
•  The DBG CPI is projected to increase by 2.8%/
• The Private Sector AWW will increase by 2.0%.

The Construction and Financial Activities are isolated sectors that have seen strong wage growth in the last couple of years because the demand for qualified employees has exceeded the supply of workers.

Construction Wages
• Between 2008 and 2012 AWW declined. In 2013 it increased by 11.0% followed by an increase of 11% in 2014. Construction businesses have found that it has been necessary to raise wages this amount to attract workers. Ultimately these labor costs will be passed on to consumers.
Financial Activities
• The financial activities sector has also had strong wage growth, 5.0% annualized growth, from 2007 to 2014. Between 2007 and 2010 Average Weekly Wages decreased, but they have increased significantly since.  AWW will increase by 7.3% in 2014

On the other hand, 2014 inflation growth will exceed the change in wages for Manufacturing, Tourism, and Professional and Business Services. These three industries are critical to the state economy for different reasons.

Watch for healthcare, extractive industries, and wages to impact the Colorado Economy in 2015 – and the impact may not always be positive.

 

Changes in the Colorado Newspaper Industry – Increased Importance, Declining Employment

horvath Leave a comment

Earlier this year Richard Ballantine, publisher of the Durango Herald, announced to his staff that he was stepping down after 30 years in charge of the organization. Ballantine indicated that new skills and ideas were needed to deal with changing times and technologies.

An August 24 Herald article, “Richard Ballantine has left the Building,” stated, “It was precisely the same reasoning his mother cited when she passed the publisher’s mantle to her oldest child.” (For those not familiar with the Herald, it is been in the Ballantine family since 1952.)

  • Morley Ballantine, 1983: “In this swiftly-changing time when we’re in transition between the age of technocracy and the coming information age that prophets predict, it’s important to have vigorous leadership. … Richard’s bright and quick and, above all, he has common sense.”
  • Richard Ballantine, 2013: “Digital distribution and digital interactivity is where communication is and is going. We felt we had to have a leader who knows how we can play a role in that.”

The change in newspaper publishing pointed out by the Ballantines shows a drastic decline in the number of jobs. In Colorado, employment in the sector dropped from 7,508 workers in 2001 to 3,642 jobs in 2012. This is an annualized 6.4% rate of decrease. During this period the number of Colorado newspaper publishers dropped from 176 to 150.

In 2001 the Colorado newspaper industry paid about $278.5 million in total wages. By 2012 that amount had plummeted to $161.4 million, an annualized decrease of 4.8%.

Despite the changes in technology and the downward trends in employment, firms, and wages, newspapers remain a unique and credible form of communication that will continue to fill a critical role in our democratic process. It will be interesting to see whether Balantine’s successor lasts 30 years and what the industry looks like at the time he steps down.

©Copyright 2011 by CBER.

Colorado’s Smaller Firms Pay Lower Wages

horvath Leave a comment

As discussed in the blog post Most Colorado Firms have Fewer than Twenty Workers, BLS data shows that Colorado has about 171,000 private sector firms.  Only 238 of those firms, or 0.1%, have 500 or more workers.  There are just under 19,000 firms, or 11.0%, with 20 to 499 workers. The majority of firms have fewer than 20 workers. Almost 152,000 firms, or 89%, are in this category.

In Q3 2012, Colorado’s private sector firms paid about $23.1 billion in payroll. About $13.0 billion, or 56.4%, is paid to workers at firms with 20 to 299 employees.  About $6.2 billion, or 26.8%, is paid to companies with fewer than 20 workers. Finally, total wages at the firms with 500 or more workers is 3.9 billion, or 16.8% of total wages.

In other words, about 17% of total wages are paid at 0.1% of the state’s firms (the largest). Meanwhile, about 27% of the state’s wages are paid at 89% of the firms.  Higher wages are paid at firms with more employees.

Average annual wages for firms with less than 20 workers is $43,304, firms with 20 to 499 workers have average annual wages of $47,423 and firms with 500 or more workers have average annual wages of $65,048.

Clearly, large and small firms are important to the economy for different reasons.

©Copyright 2011 by CBER.

Colorado Manufacturing Wages Higher than State Average

horvath Leave a comment

Manufacturing is a source of primary jobs, or jobs that create other jobs, for about 130,000 Coloradans. As well, some manufacturing jobs pay higher than average wages.

In 2011, the year that data is most currently available, the average annual wages per three-digit NAICS manufacturing sector was $61,668 (Colorado). By contrast, the average for the state was $49,245.

Of the 21 sectors, 5 have average annual wages above the Manufacturing average:

  • NAICS 324 (nondurable goods) Petroleum $106,413.
  • NAICS 334 (durable goods) Computers $94,452
  • NAICS 336 (durable goods) Transportation equipment $91,340
  • NAICS 325 (nondurable goods) Chemicals $75,217
  • NAICS 312 (nondurable goods) Beverage $62,099

The following two sectors have wages similar to the Manufacturing average:

  • NAICS 333 (durable goods) Machinery  $61,252
  • NAICS 335 (durable goods) Electrical equipment  $61,257

Of the 21 sectors, 14 have average annual wages below the sector average.

Overall, Colorado average manufacturing wages are higher than the state average.

For additional information on the state’s manufacturing sector check out Colorado Manufacturing Update Analysis of Employment Data Through 2012. It is available in the Special Reports section at https://cber.co.

©Copyright 2011 by CBER.

Sectors Losing Jobs Have Higher Wages

horvath Leave a comment

Through the first 8 months of the year there are 7 sectors of the economy that have lost a net total of 25,100 jobs, compared to the same period last year.

Construction                                     -8,800
Financial Activities                            -4,200
Federal Government                         -3,400
Information                                       -3,400
B-to-B (Not Employment Services)  -2,600
Local Government (Not K-12)         -1,600
K-12 Education                               -1,100

These sectors account for 33.3% of total employment. Average wages for this mix of workers is about $56,600 compared to average annual wages for all employees of about $47,900 (calculations based on 2010 QCEW data). In other words, the average wages for the sectors that are losing jobs is significantly greater than the overall state average, based on 2010 data.

The 2011 prognosis is that each of these sectors will show job losses for the year (2011) and that average annual wages for the group will remain well above the overall state average.

For a comprehensive review of the Colorado economy visit the CBER website.

©Copyright 2011 by CBER.

Michael Porter Highlights Colorado’s Strengths and Weaknesses in New Study

horvath Leave a comment

Harvard Business Professor Michael Porter is widely recognized for his research in the competitiveness of cities, states, regions, and nations. His studies have emphasized clusters, specialized skills, infrastructure, and commerce as distinguishing factors that delineate the prosperity of these areas.

Most recently Porter measured the performance of clusters within each of the states at the National Governors Association Winter Meeting 2011 (February 26). At that meeting he talked about strategies that would allow the states to become more competitive in the future .

In addition, Porter prepared economic profiles for each of the 50 states. The 50-slide PowerPoint presentations, which were released at the NGA meeting, are formatted in a way that allows for easy comparisons between the states.

For example, it is to match Colorado’s biotech cluster against others in the nation. In 2008, Colorado was ranked 25th in biopharmaceuticals, with 2,032 employees and 11th in medical devices with 13,440 workers.

Each presentation begins with a performance snapshot with a position and trend ranking, by quintile, in five key areas. As well, Porter identified the “strong” clusters for each state.

Colorado’s overall prosperity rating was in the second quintile; however, it was rated in the 4th trend quintile. Essentially the state has strong output per capita; however, it is trending downward. This might suggest Colorado’s competitive position might be in jeopardy.

A second area of possible concern is labor mobilization (labor force/civilian population). On a positive note, Colorado is in the top ten; however, it is in the fourth trend quintile. Again, this is a strength that is trending downward.

There is better news for Productivity (average private wages) and Innovation (Patents per 10,000 workers). Colorado was ranked in the second quintile in both strategic categories. From a trend perspective it was also in the second quintile. These are areas where the state has maintained its strengths and remained competitive.

Finally, the state was ranked in the second quintile for cluster strength and in the top trend quintile. This points to increased strength, as defined by greater market share, in its “strong clusters”.

Porter identified Colorado’s top five clusters as:
• Business Services
• Distribution Services
• Entertainment
• Oil and Gas Products and Services
• Aerospace Vehicles and Defense.

The presentation highlights subtle strengths and weaknesses not mentioned in this brief overview. As such, it is recommended reading for any one interested in understanding the opportunities and challenges Colorado might face moving forward.

 

©Copyright 2011 by CBER.