- The Midwest lags other regions in terms of real wage growth.
- Average wage growth for the Midwest was just 0.4% from 2019 to 2022, compared to 5.7% in the Northeast.
- Declining unions and a lack of minimum wage increases have kept wage growth low.
The Midwest may have the lowest unemployment rate of any U.S. region, but it lags behind in increasing the wages of its workers.
Compared to the rest of the U.S., the Midwest lags in terms of real average wage growth, increasing by just 0.4 percent — or eight cents — from 2019 to 2022. new research from the left-wing think tank Institute Economic Policy shows. This contrasts with the country's average wage increase of 3.1% over the same period.
Workers in the North East saw an average wage increase of 5.7% over the three years, while in the West they increased by 4.7%. The South was just above the Midwest at 0.9%.
That puts the average wage in the Midwest at $22.10 an hour, slightly above the South at $21.50 but well below the Northeast at $24.94 and the West at $24.01. Only half of Midwestern states saw average wage growth since 2019, according to the EPI.
Although federal funding from the American Rescue Plan and the CARES Act helped many Midwesterners stay afloat, the Midwest “has endured years of slow wage growth, slow job growth, public sector job shortages and declining unionization.” , the report notes.
“This decline began with a period of austerity – disinvestment in the public sector, as well as public sector employment – trade policies that encouraged offshoring and a range of anti-labour policies that have limited the collective bargaining power of workers and the ability of unions to secure higher wages for their members, and in turn, all workers in the region,” Nina Mast, one of the study's authors, told Insider.
EPI argued that the wage growth lag in the Midwest is due to policy decisions that have kept the minimum wage stagnant in six states, laws that have prevented some local governments from passing minimum wage increases and legislation that weakens unions. Union workers earn approx 13.5% more in wages than their non-unionized peers, EPI noted.
Many Midwestern cities are experiencing a so-called “urban blight,” as working from home has hurt the economies of central cities like St. Louis, Indianapolis and Minneapolis. These cities have seen a particularly slow recovery as office space remains relatively vacant.
Of all Midwestern states, only Minnesota and Illinois have average wages above the national average by 2022, according to the EPI report. South Dakota, Missouri, Ohio and Iowa saw losses in median wage from 2019 to 2022. However, Kansas saw a median wage increase of more than 7% over the same period, while Nebraska was just under 7%.
But low-wage workers in the Midwest have experienced historic wage gains in recent years — wages for those in the bottom 10 percent have risen 8.6 percent since 2019, EPI reported, to $12.45 an hour. The number of workers making less than $15 an hour in the Midwest has fallen from over 28% to just under 15% from 2015 to 2022.
However, average wage workers have struggled compared to other regions. That trend was similar to the three years after the Great Recession began in 2007. EPI argued that right-to-work laws and limits on public sector collective bargaining rights passed since 2009 left many Midwestern workers with lower wages than their peers outside the West.
Sure, some believe in right-to-work laws can encourage new investment which can lead to job growth as well as giving workers more autonomy to negotiate their career paths.
Although the Midwest gained 151,700 jobs since February 2020, more than the Northeast by just 3,000, the Midwest is the only region experiencing a job deficit relative to pre-pandemic growth trends, with 116,000 fewer jobs. than would be expected from population growth. at the February 2020 employment level, EPI found.
“The Midwest has consistently had high employment rates among prime-age workers and a low unemployment rate,” Mast said. “Given these factors and in a tight labor market, employers must raise wages to attract workers to industries facing job shortages — such as the public sector. Investing in the public sector has ripple effects that benefit the entire economy state.”
The labor market has rebounded fairly quickly in the Midwest, with the prime-age employment-to-population ratio — meaning people aged 25 to 54 who are currently employed — at 82 percent, just above any other region. The Midwest unemployment rate is just 3.2% in May 2023, below the national average of 3.7%.
Despite these improvements, however, racial disparities remain high. Over 7% of Black, Asian American/Pacific Islander, and multiracial Midwesterners are unemployed, compared to 2.8% of white Midwesterners. There is also a large gender employment gap that remains, with men having over 10 percentage points higher prime-age employment-to-population ratios than women.
The report noted how the CHIPS Act and the DEA could continue to provide significant job opportunities, though without more worker protections or broader wage increases, the Midwest could fall further behind on some metrics.
“Midwest lawmakers must also invest in the care economy to support working families — paid sick leave and paid family and medical leave, making child care more affordable for families and supporting child care providers — and expand the social safety net,” Mast said.
