Connecting the Dots Between Unemployment and Wage Growth

Mark Price |

Colin Gordon of the Iowa Policy Project (and the Tell Tale Chart) has a new graphic illustrating the connection between unemployment and wage growth across the states (see Colin’s summary of the data here).

The figure below plots the change in real wages for two seven-year periods, from 1996-2002 and from 2006-2012, against each state’s unemployment rate at the midpoint of the period (1999 and 2009, respectively). The red dot is the national average and the orange dot is the Pennsylvania average.

What you see is that on average the lower unemployment (the closer to the origin of the x-axis) the more wage growth there was in a state (the farther away from the origin of the y-axis).

You can see that relationship most clearly if you examine wages at the 10th percentile.

This graphic is a great reminder that it’s not just the unemployed who are hurt by high unemployment; even people with jobs get hurt because their wages grow more slowly as a result of high unemployment.