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Economists: LI has ‘pay paralysis’ despite strong job market

Steve Schlansky, chief operating officer at Worldwide Security

Steve Schlansky, chief operating officer at Worldwide Security in Garden City, said the company is experiencing a shortage of qualified installers, service technicians and sales people. Credit: Steve Pfost

The Long Island job market is a study in contrasts between strong employment data and weak wage growth.

For the past three years it’s reached a record number of jobs, and for three consecutive months the Long Island market has been considered to be at full employment, with a jobless rate of 4 percent or less.

The Island had 1.36 million jobs in May, the highest number for that month since the state Labor Department began using its current methodology in 1990. May’s unemployment rate was 3.9 percent.

A job market that tight typically translates into significant wage increases for workers as employers have to pay more to attract and retain employees, local economists said.

However, wage increases on Long Island, when adjusted for inflation, averaged a mere 2.6 percent per year between 2012 and 2017, a Newsday analysis of state Labor Department data shows.

That mirrors what is happening nationwide: The June national employment report released this month showed average hourly earnings rose 2.5 percent in the past year.

In contrast, in December 2006, the year before the Great Recession started, average hourly earnings nationwide were up 4.2 percent from a year earlier. Both national numbers aren’t adjusted for inflation, which has a small impact in a single year.

The continued slow rise in wages despite the strong job market — and eight years after the recession ended — causes some Long Island residents to feel they are living in a plodding, uncertain economy.

Uniondale resident Aurora Workman says she feels she is suffering from pay paralysis. The assistant director for equity, inclusion and affirmative action at Nassau Community College, she said she hasn’t gotten a raise in eight years. And in that time, her household expenses, including utilities and groceries, have gone up, she said.

Workman, who is separated, said she sometimes has to go to a food pantry to ensure she has enough food for her three children, ages 10, 16 and 17. For the last three years the family has had to give up going to the movies or eating out.

Some of her friends and family who struggled here have moved to the South, she said. She wants to stay but feels she has to get a second job to make ends meet.

“Having a second job is going to be part of my reality,” Workman said.

The contrast between low unemployment and weak wage growth has also confounded some local economists.

“It is puzzling that not only on Long Island but nationally wages continue to grow modestly when unemployment is so low,” said John A. Rizzo, a Stony Brook University economics professor and chief economist for the Long Island Association trade group.

At stake is a stronger local economy, which is largely powered by consumer spending.

“If you want to see a big bump in consumption, I think we are going to have to have accelerated growth in wages to give consumers the conviction to spend more,” Rizzo said.

Several factors are weighing on wages. They include the spread of automation and computing power to replace workers, the rise of lower-wage jobs, and the underemployment of millennial college graduates, said economist Gregory DeFreitas, who heads Hofstra University’s labor-studies program.

“It’s a national problem that Long Island has not been immune to,” he said.

Local economists have long noted that automation in manufacturing, one of the Island’s highest-paying sectors, has contributed to shrinking employment in the industry. The sector had 70,200 jobs in May, down from 86,100 in May 2006.

By contrast, the Island’s private-education and health-services sector had a record 271,500 jobs in May, Labor Department data show. That sector, which leads job growth on Long Island, is a mix of high-wage and low-wage jobs. Lower-paying health care jobs, including home-health aides, are some of the fastest growing.

Meanwhile, the Island’s highest-paying sector, financial activities, has yet to return to pre-recession levels of employment. The sector had 71,100 jobs in May, compared with 79,900 in May 2006.

In addition, DeFreitas estimates that 40 percent of college-graduate millennials work in low-wage jobs that don’t require a degree. That’s because high student-loan debt “makes them desperate to grab a job fast,” he said. “I think that contributes here and around the country to underemployment.”

Wages in some of Long Island’s biggest job categories, when adjusted for inflation, actually fell between 2006 and 2016, DeFreitas said. The median hourly wage of home health aides fell 4.7 percent during that period, he said. And the median wage in retail, still one of the Island’s biggest employers despite some store closings, fell 7.5 percent.

“There’re more jobs, but with those jobs we’ve had pay paralysis or a decline in real wages,” DeFreitas said. “It’s worrisome.”

Some economists also believe that the continued high number of “involuntary part-time workers,” or those forced to work fewer hours because their hours were cut back or they are unable to find a full-time job, also has affected wage growth. Nationally they totaled 5.3 million in June, compared with 4.2 million in December 2006, U.S. Bureau of Labor Statistics data show. The data aren’t reported on a local level, but Long Island has mirrored a number of trends in the national job market.

The news on wages isn’t all bad, particularly for workers with skills.

Steve Schlansky, chief operating officer at Worldwide Security in Garden City, which installs security systems, said the company is experiencing a shortage of qualified installers, service technicians and sales people.

Hiring more of those workers is key to the company’s growth. “It helps us to generate more revenue,” he said.

Schlansky said his company had to raise his employees’ pay 5 percent in the past year to retain workers, after holding the line on pay for several years. And he said it has had to increase salary offers to attract new hires.

“We’re growing, but we’re having the same problems as everyone else: We’re trying to get good employees,” Schlansky said.

DeFreitas said the wages in some occupations on Long Island rose by double digits in the 10-year span ending in 2016. For example, the pay of human resource managers rose 14.6 percent, and financial managers saw their pay increase 11.1 percent

Maria Themistocleous-Frey, who since 2012 has run the Port Washington Library’s Job Search Boot Camp, an eight-week career-strategies program for job seekers, said she has seen some encouraging movement on wages in the past two years.

Themistocleous-Frey, who is also the founder and president of Bohemia-based Executive Consultants of New York Corp., a career strategies and executive search firm, said that companies are more open to negotiations for higher pay, especially if a candidate has the skills to help them meet their objectives.

“We have been seeing much greater success,” she said. “When people meet you and know who you are and know your skill set, everything does change.”

Katherine Sarosy, a Flower Hill resident who graduated from the boot camp in May, agrees that the job market seems more promising these days than when she was looking for a part-time job in 2012 after her twins, a boy and a girl, turned 5. Back then she couldn’t find anything until she decided to apply to St. Francis Hospital in Roslyn, where she had volunteered for many years. She got a part-time job as the secretary in the surgical intensive care unit but now is in the market for a full-time job. She had one recent interview and is scheduled for another.

“It seems to be a lot better now,” she said.

Despite slow wage growth, consumer confidence in the metro area continues to rise.

The Siena College Research Institute this month said its consumer confidence index for the metro area, including Long Island, inched up to 93.3 points in June, from 92.4 points in March, when the index reached a 10-year high. Job market stability is one of the reasons for the positive sentiments.

Rizzo said significant wage increases are inevitable if the Island continues at full employment. “With such a low unemployment rate, wages are going to have to accelerate,” he said.

But he added, “I wish I could tell you when.”

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