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Despite job gains, wages remain in decline on Long Island

Dawn Schober, of Amityville, at her home on

Dawn Schober, of Amityville, at her home on Monday, Feb. 9, 2015. The Amityville resident, who in January of last year was laid off from her massage therapist job, now works in a group home for developmentally disabled people and earns a third of her previous salary. Photo Credit: Steve Pfost

Hourly wages on Long Island have been declining for the last year and a half despite steady job growth, state and federal data show. The number of local jobs has increased each year since 2011, and the Island now has more jobs than it had before the recession. Average hourly wages were inching up each month compared with a year earlier -- albeit below the rate of inflation -- until about a year and a half ago, when they began an uninterrupted decline, U.S. Bureau of Labor Statistics data show.

Job growth normally leads to higher wages. Long Island's post-recession paradox worries local economists and other labor market experts because declining wages, especially in a high-cost area such as Long Island, cut consumers' buying power and hurt economic growth.

One key factor in the decline is that the types of jobs on Long Island are changing. Employment in higher-paying areas such as financial services and manufacturing is falling, while jobs in retail and lower-paid sectors of health care are growing. Another factor: A large pool of job seekers gives companies the upper hand in setting wages.

The slide in pay here may yet turn around. Local economists hope that the continued strengthening of the national labor market, where both job growth and wages jumped significantly in January, signals that Long Island wages will soon rebound.

"I think 2015 is the year we will see more wage increases nationally as well on Long Island," said John A. Rizzo, chief economist for the Long Island Association in an interview before the January federal numbers were announced on Feb. 6. "As employment continues to grow that is eventually going to put pressure on labor markets to raise wages."

The recent past, however, shows just the opposite on Long Island.

Wages have been falling steadily since July 2013, on a year-over-year basis, BLS data show. (Year over year comparisons are used because the data aren't seasonally adjusted.) In December, the latest month available, the average hourly wage of workers employed at Long Island companies dropped to $25.38, from $26.26 a year earlier -- a decline of 88 cents an hour.

Economist Gregory DeFreitas, who heads Hofstra University's labor studies program, noted when wages are adjusted for inflation, Long Islanders have been losing ground even longer. The median real hourly wage in 2013, when adjusted for inflation, was $20.08, compared with $21.80 in 2009, said DeFreitas, who computed the local statistics using Census data, and plans to present them in the spring issue of Hofstra's Regional Labor Review, a twice-yearly publication from the school's Center for the Study of Labor and Democracy.

"We really haven't seen a rebound since the recession in wages for most people," he said.

And the youngest workers have born the brunt of the declines, he said.

Between 2009 and 2013, the median hourly wage for workers 18 to 24, adjusted for inflation, fell 11.3 percent, he said. That compares with a 4.5 percent drop for those ages 35 to 54 and a 6.2 percent increase for workers 55 to 64.

Local job seekers are dealing with the effects of depressed wages.

After being laid off in January 2014 from her job as a licensed massage therapist that paid $30 an hour, Amityville resident Dawn Schober was hired three months later to work in a group home at one-third that rate. She opted to look for another job rather than start her own practice because it could take years to build up a clientele, she said.

Though Schober, 58, said her job at the group home "has its rewards," she admits that without her investment income, she wouldn't be able to cover her mortgage.

"I would have to definitely have a second job," she said.

Allen Levy, 49, an East Meadow computer consultant, has been happy to get some long-term contracts. He will soon wind down a four-year contract that expires in March. But in trying to get rate increases from companies that contract with him, he hasn't been so lucky. He said he hasn't gotten increases on new contracts in 10 years because of stiff competition from other consultants who went into business for themselves after being laid off, as he did after losing a job at a major computer company in 2007.

"The rates are down because the pool is full," said Levy, whose wife is unemployed. "The number of available consultants is greater than it was years ago, so [employers] can command lower rates."

Economists say several factors are likely weighing on wages.

The Island has gained back lower-wage jobs since the recession at a faster rate than higher-paying ones. More employers are offering part-time jobs. The more than 60,000 unemployed Long Islanders competing for jobs give employers the upper hand on wages. And productivity gains in sectors such as manufacturing allow employers to hold the line on both hiring and wages.

One of the fastest-growing sectors during the recovery has been health care, whose employment mix includes some of the lowest-paying jobs on the Island. The ambulatory health care services subsector, which includes home-health aides, added 14,500 jobs between December 2006, the year before the recession began, and December 2014.

By contrast, finance and insurance, a subsector of financial activities, the Island's highest-paying sector, lost 10,100 jobs in the same period.

That uneven growth would result in a wage decline, said Linda Barrington, executive director of Cornell University's Institute for Compensation Studies. "If you lose good middle-paying jobs and replace them with lower-paying jobs, this is the kind of pattern you would get," Barrington said.

Economists think that during this recovery employers increasingly offered part-time jobs, as a hedge against an uncertain economy. Part-time worker data aren't published on the county level. But national data indicate that despite strong job growth in recent months, many people remain stuck in part-time jobs because they can't find a full-time one. The number of part-time workers who would prefer full-time jobs stood at 6.8 million in January, compared with 4.2 million in December 2006.

"As the economy comes back, sometimes companies add part-time jobs as a way to test out if they can afford full-time workers," Barrington said.

Rizzo of the LIA noted that Long Island's employment gains, amid declines in both weekly hours worked and hourly wages, reflect a post-recession labor-market shift.

"This suggests that obviously there are more jobs being added that are lower paid and part time," he said.

The number of unemployed residents still exceeds pre-recession levels, which suggests continued tough competition for jobs. In December, the Island had 63,500 unemployed residents, compared with 50,200 in December 2006, state Labor Department data show.

And that number doesn't include discouraged workers -- those unemployed people who gave up looking for work because they didn't believe they could find any. Those local numbers aren't published either. Nationally, their ranks have been declining. They dropped to 682,000 in January from 837,00 a year earlier, but remain above the pre-recession 396,000 in January 2006, BLS data show.

Economists have noted that productivity gains from technological advances allow some sectors such as manufacturing to rebound without matching pre-recession staffing levels.

"Manufacturing as an industry has come back, but they are producing that output with fewer workers," Barrington of Cornell University said.

It's worth noting that the Island's private sector, which has averaged 1.9 percent job growth annually the past four years, has outperformed many other regions around the state, said Shital Patel, labor-market analyst in the Labor Department's Hicksville office.

"Out of the 10 regions in the state, Long Island had the second-fastest average growth rate in private-sector jobs between 2011 and 2014, second only to New York City," Patel said.

Despite that, wages have fallen.

"It is striking that [wages] have actually declined when you have had four successful years of employment growth on the Island," said Christopher Jones, vice president for research at the Regional Plan Association in Manhattan.

DeFreitas of Hofstra said Gov. Andrew M. Cuomo's proposal to raise the state's minimum wage to $10.50 an hour would help many New Yorkers, especially younger workers. The minimum is currently $8.75 and will rise to $9 on Dec. 31. "Raising the wage floor can create a ripple effect, especially for younger, less-skilled workers," he said.

Some businesses, however, argue that raising the minimum wage will lead to lower employment.

The Long Island Index, an organization that researches and reports on local issues, published a report this month saying that the Island could "stagnate" without efforts to promote a local biomedical industry and multifamily housing for younger workers.

Jones, of the Regional Planning Association, said that the Island desperately needs more higher-paying jobs.

"In the long run," he said, "more needs to be done to create more middle-income and high-income jobs on Long Island than has happened in the last decade."

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