State lags in pay, income growth - East Valley Tribune: Business

State lags in pay, income growth

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Posted: Tuesday, March 15, 2005 5:44 am | Updated: 9:05 am, Fri Oct 7, 2011.

Arizona continues to lag behind the national average in wages and personal income despite years of trying to attract companies that pay higher wages, according to two studies released Monday by the L. William Seidman Research Institute at Arizona State University.

"Arizona’s overall economy grows very rapidly, but per person or per worker measures of wages, compensation and income are below the national average," said Dennis L. Hoffman, the institute’s director and professor of economics at the W.P. Carey School of Business.

"No significant improvement has been made in raising Arizona’s average wage or per capita income relative to the national average," he said. "Indeed, Arizona is creating income, wealth and quality jobs at rates that are similar to those displayed by other states. Thus, disparities between Arizona and the nation will remain."

Economists at the institute reached that conclusion after examining data from several federal government agencies, including the Department of Commerce and Internal Revenue Service, dating back to 1970, Hoffman said.

The primary reason that Arizona continues to lag in income growth, Hoffman said, is that the climate and other factors are so attractive that people are willing to accept lower pay to live in Arizona.

"The labor supply is expanding at a rate that is slightly faster than the (job creation) rate," he said.

Economists disagree on whether Arizona’s relatively low wages even constitute a problem. The cost of living is also relatively low, and lower costs are often attractive to businesses looking to relocate. But Hoffman argued the state should be interested in more than just growth without concern for quality of growth.

"If you want to attract companies that are looking to pay low wages, it’s fine," he said.

"But it’s also perpetuating the problem . . . Arizona is not perceived as one of the states to go to to earn a great income, except if you’re in real estate."

Hoffman said the best way to improve the relative standard of living in the state is to invest in infrastructure such as transportation and communications technology and education to improve the work force quality — factors that would attract corporations that pay higher wages.

Tom Rex, associate director of the institute, also emphasized the link between increasing productivity and higher wages. He noted that many high technology manufacturing and mining companies have greatly increased their productivity using stable or declining numbers of workers.

Although some might argue that is a bad sign, he said quality of jobs is as important as the number of jobs.

"We have always made a priority of growing fast," he said. "But economists might also say, how are people living? What is more important, becoming big or becoming good?"

Rex argued that while growth itself is an important factor in the local economy, it is not driving the economy.

The real economic drivers are businesses that provide "export" jobs — jobs that attract money into the state by producing goods and services for people

outside the state or serving tourists who visit the state.

He cited the USAA Insurance complex in north Phoenix, which provides insurance policies to people living outside Arizona, and Intel Corp., which produces semiconductor chips that are mostly sold out of state, as examples of companies that provide export jobs.

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