It turns out 2020 was a fairly good year to be an employed Californian, at least according to one compensation metric.
The quarterly Employment Cost Index, a federal yardstick of employee costs, tracks 15 large job markets in the nation — including a 12-county Bay Area region and a five-county area in Southern California.
My trusty spreadsheet, loaded with 15 years of these compensation trends, found the typical employer in California’s two giant job markets raised total pay in 2020 at a pace exceeding the U.S. average, despite the state’s pandemic-scarred economy.
In the Bay Area, increases in total compensation averaged 3.4% last year — fourth-best among the 15 local markets tracked. Southern California averaged 3.35% increases in 2020 — No. 5 of 15. A nationwide index showed 2.63% average increases.
Let’s not forget California’s record-breaking unemployment in 2020. Joblessness averaged 10.2% — twice the 5% rate seen in the previous five-year period. The state was well above the nation’s 8.1% joblessness rate in 2020, a jump from a 4.4% average in 2015-19.
One might think an expanded count of jobless workers would allow bosses to trim compensation. Instead, we see a peculiar economic puzzle created by business limitations aimed at slowing the coronavirus’ spread.
There’s been plenty of debates surrounding a proposed stimulus plan devised to help folks in the most financial pain. Decent pay raises for the employed is just another example of how split the economy has become.
Pandemic restrictions, as well as consumer preferences, ravaged employment for those who couldn’t work from home, notably low-paying leisure and hospitality industries.
Meanwhile, more lucrative white-collar jobs that could be done remotely were fairly stable. Just think of California’s technology industries.
It’s quite surprising, however, to see those employed in 2020 getting compensation increases larger than averages seen in the previous five years. Some of that extra pay could be pandemic related, such as “hero” pay hikes for essential workers or incentives paid for remote work.
Last year’s pay and benefits increase in the U.S. overall was 0.16 percentage points above the 2015-19 average of 2.47%. California workers did even better.
In the Bay Area, last year’s increases were, on average, 0.61 percentage points higher than of the previous five years at 2.79% — the seventh-biggest gain of the 15. Southern California saw gains of 0.25 percentage points — No. 11 of 15 — from 3.1% of the previous five years.
By the way, the biggest gain in the U.S. was found in Dallas — up 1.16 points last year vs. 2015-2019 to 3.23%. And before you think it must be due to conservative politics in Texas, the biggest drop came from Florida, another conservative state where Miami’s compensation gain decreased by 0.92 points to 1.68%.
How odd is this pandemic pay pattern? Well, employers — locally and across the U.S. — acted quite differently during the Great Recession, a debacle that left few industries unscathed.
In the U.S., compensation gained 1.8% in 2009, a drop of 1.4 points from pay hikes seen in 2007, in a period where unemployment rose to 9.3% from 4.6%.
In this downturn, California’s pay raises fared worse than others as joblessness soared to 11.1% from 5.4%
The Bay Area’s 1.5% increases of 2009 were down 2.3 percentage points from 2007 — the worst loss nationally. In Southern California, gains of 1.7% in 2009 were off 2.1 points in two years — the fifth-biggest decline.
Yes, the pandemic and the financial meltdown of the late 2000s were different economic disasters. Maybe we’ve learned a trick or two since then. Last year’s government responses were far more generous to the unemployed as well as workers and bosses.
Remember, indexes and averages don’t speak to every worker’s situation. And I’m not dismissing the pandemic era’s hassles and anxieties for the folks, like myself, who were fortunate enough to remain employed last year.
But according to this pay-raise index, many workers got surprising jumps in compensation for meeting the numerous workplace challenges that the pandemic created.
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