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Montana's 2015 Real Wage Growth is the Highest Recorded

Montana workers experienced very strong wage growth in 2015, with the average wage increasing by 3% up to $40,065. Montana’s wages have been increasing faster than the nation’s for most of the last ten years, with Montana’s wages increasing by 3.2% annually since 2005 compared to only 2.7% for the nation. In fact, Montana ranks 6th among states for the fastest wage growth over the 2005 to 2015 timeframe. In dollar terms, the average wage has increased by $10,900 over the last ten years and $1,170 over the last year.

What makes Montana’s recent wage growth remarkable is the real wage gains. With inflation at only 0.1% for 2015, Montana had real wage gains of 2.9% in 2015, which is the fastest gain in real wages recorded since the data series began in 1990. Real wage gains are increases that occur above the rate of inflation, which signal that workers are able to increase their standard of living with their work earnings. Montanans can now afford more goods and services with their wage earnings than ever before. Montana’s real average annual wages are illustrated in the figure below, with the growth rate over the prior year shown on the right hand axis.

Source: Quarterly Census of Employment and Wages (QCEW), U.S. Bureau of Labor Statistics. Inflated using the CPI-U.

Over the last five years, average wage growth has been fastest in the private sector, increasing at an average of 3.3% annually since 2010. In comparison, government wages increased at an average pace of 2.7% annually for federal government workers, and 2.3% annually for state and local workers. Over the last year, however, private sector average wage growth slowed to 3.0%, with faster growth in federal and state government. Slower private average wage growth occurred due to strong employment growth in low-wage industries combined with job losses among the high-wage oil and gas mining jobs.

A stronger economy, tighter labor markets, and industry mix all explain why Montana’s wage growth has outpaced the nation over the last decade. The industries of health and education, trade and transportation, and leisure activities all have had strong wage growth in the last five years, and are some of the largest employing industries in the state. These industries, as well as mining and utilities, are more concentrated in Montana than in the nation and have helped a large share of Montana workers obtain wage increases that outpaced their national counterparts.

In addition, Montana’s economy outperformed the national economy during the recession (partially due to strong prices for agriculture and energy products), which kept wages growing in Montana while they stagnated nationally. The better performance both during and exiting the recession kept Montana’s unemployment rate relatively low, keeping upward pressure on wages. In particular, Eastern Montana experienced very tight labor markets due to the boom in energy development, resulting in rapid wage growth across all industries. Average wages in Eastern Montana have increased by over $8,100 over the last five years, and the region has the highest average wages among all regions at $42,477.

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