It is widely accepted that average incomes can vary from location to location. A look at recent data on average earnings by state compiled by the Regional Economic Analysis Project demonstrates the variability in average earnings among Southeast states. Average earnings in all six states in the Federal Reserve Bank of Atlanta’s district fall below the national average. Within the district, average wages are notably higher in Georgia, Louisiana, and Tennessee than in Mississippi, and they are somewhat higher than in Alabama and Florida (see the chart).
Average wages largely reflect the mix of jobs in the state, and so the differences across states partly reflect differences in the industry mix as noted in this report. The table below shows the industry mix of employment among Southeast states:
We might expect to see similarities in average wages across state lines within a particular industry, but in fact average earnings also vary considerably from state to state among almost every broad sector (see the table; figures highlighted in yellow are above the national average):
This information suggests that there is also a lot of variation across states in other factors such as the types of jobs and the mixture of types of businesses within the industry. In fact, the industry categories used here are rather broad and probably encompass a wide range of possible job and business types.
The preceding gives a snapshot of the earnings picture in the region at a point in time. Another perspective is to look at the pattern of earnings over time.
In the chart below, we show for each state a ratio of per-worker wages to the national average. This ratio allows us to see how state wages have compared to the national trend over time (a reading above 1.0 for a given state indicates wages per employee are higher than the national wage per employee measure).
Several things jump out at you as you look at the chart. Once again, per-worker wages among Sixth District states have been below the national level during the last three decades. (The exception is Louisiana, which saw a run-up in wages that coincided with the sharp rise in oil prices in the late 1970s, followed by a sharp drop as the oil industry went bust.) Also, you can see the rise in wages following Hurricane Katrina’s landfall on August 29, 2005.
Wages in Alabama, Florida, and Tennessee were very similar from the late 1980s until the early 1990s, when all three (to varying degrees) experienced a decline in wages. Much of this decline coincided with the decline in manufacturing jobs that took place during this time and affected the entire region. The nondurable manufacturing sector, which accounted for nearly half of all manufacturing jobs in the region (but only about 40 percent of manufacturing jobs nationally), was particularly hard hit as many textile and apparel firms shifted jobs outside the United States after the North American Free Trade Agreement (NAFTA) was implemented on January 1, 1994 (as noted here and here). It wasn’t until the early 2000s that wages across much of the region began to rise. This period coincided with improvements in the manufacturing sector, driven by the durable sector as the automotive industry moved more production to the region, as noted in this paper, and new home production increased as well, particularly in Florida. The subsequent bust in the housing market later in the decade put downward pressure on wages, most notably in Florida.
Average Georgia wages grew strongly during the 1980s and very nearly equaled the national level from the mid-1980s to early 2000s. A striking feature is how Georgia has lost ground relative to the United States since about 2000. Interestingly, this decline in relative performance coincided with a sharp retrenchment in employment in the information technology industry from December 1993 to October 2000. Employment in the relatively high-paying information sector grew by 57 percent in Atlanta (a city that represented about 55 percent of Georgia’s employment base at the time), but by January 2005 employment in that sector had shrunk by 23 percent. Weaker demand for workers in the technology sector may have contributed to declining average wages in Georgia relative to the United States during the early 2000s even as relative wages were rising elsewhere in the region.
Since the end of the Great Recession, wages per worker have varied across the region, with the overall effect being flat to slightly falling average wages compared with the national trend.
So wages vary by location, and the industry and occupational mix clearly influences these differences. Moreover, over time, shocks (both positive and negative) to a particular industry can have a strong influence on average wage growth within a state.
By Whitney Mancuso, a senior economic analyst, both of the Atlanta Fed's research