"We expect the post-rent wages for blue-collar and service workers to continue to decline in 2016 and 2017 in metros where rents are still rising rapidly," notes Sydney Bennet, content marketing associate for ApartmentList.com — and she points out that rent costs in metro Denver are increasing at among the most rapid rates of any city in the United States.
We explored some of these issues in "Why It's So Hard to Make a Living in Denver Despite Strong Economy," an April interview with Andrew Hudson, the namesake creator of Andrew Hudson's Jobs List. One person posting to Hudson's website spoke for many when he wrote, "If in my fourteen years in Denver my salary increases had matched the cost of living increase, I wouldn't have any ardent complaints, as I would have at least stayed even. The reality is that since my raises haven't matched the increased cost of living — in particular housing — I actually am making less money than fourteen years ago."
This observation is reinforced by Bennet's ApartmentList.com piece, "As Knowledge Workers Thrive, Blue Collar and Service Sectors Left Behind." The study focused on renters divided into three categories: blue-collar workers, knowledge workers and service workers. The findings showed that nationwide, the amount of money left for employees in two of these divisions — blue-collar workers and service workers — after paying rent actually declined between 2005 and 2015, the most recent year for which data is available. Only knowledge workers experienced an increase, with their post-rent wages rising 6 percent over the same span.
Unfortunately, the situation is worse in Denver for all three worker classes. Denver-specific data supplied by ApartmentList.com shows that post-rent wages for blue-collar workers in the Mile High City tumbled by 10.2 percent from 2005 to 2015, more than double the national average, while service workers' post-rent wages went down by even more, 12.3 percent. And while post-rent wages for knowledge workers in Denver increased, the amount of the rise — 1.9 percent — is less than a third what the average person fitting this description experienced across the country over the decade in question.
Why? Bennet digs deep into the digits in the following e-mail interview. But the main reason is that rent prices in Denver have skyrocketed even as wages in one of America's hottest economy have remained stagnant.
Continue for our Q&A with Bennet. That's followed on page two of this post with the aforementioned Denver data.
There are no shortage of apartment-construction projects in Denver right now, but housing costs are still pricey.
Photo by Nate Hemmert
Sydney Bennet: In order to analyze how economic changes over the past decade have affected different types of workers, we categorize workers as blue-collar, knowledge, and service workers. Blue-collar workers are traditionally defined as working-class people who perform manual labor and are paid hourly. In our study, blue-collar occupations include manufacturing, police officers, construction, transportation and maintenance. Knowledge workers are workers whose main capital is knowledge, with jobs that emphasize the types of problem solving that rely on critical and creative thinking. In our study, knowledge worker jobs include lawyers, scientists, managers, doctors and artists. Service workers are people whose occupations center around providing a service for others, including waiters and cooks, teachers, office support roles and health-care support roles such as home health aides.
The national average of your findings show that blue collar workers' post-rent wages — the wages left after rent has been deducted — are down by an average of 5 percent, service workers' post-rent wages are lower by 7 percent and only knowledge workers have seen an increase, with their post-rent wages up 6 percent, over the decade between 2005 and 2015. What are the major factors for the decrease for blue collar and service workers, and the modest upswing for knowledge employees?
Stagnant wages along with rent increases explain why post-rent wages have declined for blue-collar and service workers. Over the past decade, inflation-adjusted wages remained stagnant for blue-collar workers and declined slightly for service workers, but rents have increased significantly, leaving workers with far less post-rent income. In many metros, including Denver, large increases in both knowledge worker employment and salaries are a driving factor behind rent increases.
Despite low unemployment, wages remain stagnant for blue-collar and service workers. Economists offer many potential explanations for this wage stagnation, including declining union membership, limited increase in the minimum wage, global competition for low-skilled jobs and changes in welfare policies, including unemployment reform. Legislation to limit the time individuals can receive unemployment benefits increases the pool of low-wage workers who are willing to work for wages that are too low to live off of. Additionally, blue-collar employment declined over the past decade, creating more competition for low-wage jobs, driving down wages.
Knowledge worker wages have increased by 6 percent over the past decade, and knowledge worker salaries are significantly higher than salaries of blue-collar and service workers. This means knowledge workers are less affected by rising rents. Rising returns on education have driven up wages for knowledge workers, as well as large income gains for top executives.
According to the Denver specific data, workers in the Mile High City did worse in all three of these categories than the national average. The fall by service workers is especially steep — a 12.3 percent decline. Is this one of the worst performances for any major city in your study? If so, what are some of the other cities that had numbers close to this one?
Service workers in Denver fared worse than service workers in about 90 percent of metros. San Jose, Washington, D.C., Bridgeport, Seattle, and Detroit were the only metros with larger post-rent wage decreases than Denver. San Jose was the metro where service workers fared the worst, with post-rent wage declines of about 20 percent.
To what do you attribute Denver's terrible performance in this category?
Sharp rent increases in Denver, about 26 percent over the past decade, are responsible for the large declines in post-rent wages for service workers. Inflation adjusted service worker wages decreased by 1.3 percent, but rents take up a much larger share of their wages in 2015 than in 2005, leading to a 12.3 percent decline in post-rent wages.
The decline in the blue collar category is also precipitous — a 10.2 percent decline over ten years. What other cities did this poorly, or close to this poorly, in this category? Do the poor performers have anything in common?
Denver is also one of the metros where blue-collar workers fared worst. The only metros with larger declines in post-rent wages for blue-collar workers are San Jose, Grand Rapids, Detroit, Minneapolis, Dayton and Atlanta. The metros where blue-collar post-rent wages declined the most fit into two categories: metros with large rent increases and metros with struggling manufacturing industries. San Jose, Denver, San Francisco and Raleigh all fit into the first category, where severe post-rent declines were caused primarily by rent increases, while wages remained relatively stagnant. Other metros, primarily in the Midwest, such as Detroit and Dayton, experienced fairly stagnant rents but declines in the manufacturing sector that caused wages to fall. The Midwest has lost 1.5 million manufacturing jobs and experienced a decline in the manufacturing premium, the additional amount manufacturing workers make compared to service workers.
What do your findings say about why Denver did so badly in this area?
As was the case with service workers, sharp rent increases are responsible for the large declines in post-rent wages for blue-collar workers. Wages decreased by 0.3 percent in Denver, but due to rent increases, post-rent wages decreased by 10.2 percent.
While knowledge workers post-rent wages went up by 1.9 percent, that's less than a third of the average increase nationwide. Did any other cities have growth this anemic or actual declines for knowledge workers?
Post-rent wage increases in Denver were less than the nationwide increase of 6 percent, and most metros had larger post-rent wage increases than in Denver. Over the past decade, Denver had the third largest rent growth, only trailing San Jose and Seattle. This helps explain why post-rent wages increased less for knowledge workers in Denver than in other metros. Six metros had declines in post-rent wages for knowledge workers. These metros were primarily ones with struggling economies, such as Detroit and Grand Rapids.
To what do you attribute this weak rate of growth?
Over the past decade, rent increases prevented knowledge workers from making large post-rent wage gains in Denver, although knowledge workers are much better off than service and blue-collar workers. Wages increased by 5.1 percent for Denver renters, but post-rent income only increased by 1.9 percent.
When the post-rent wages of all these workers are added together, the overall decline is 0.4 percent. And while this isn't a huge number, is it still surprising, especially given that Denver has had a booming economy for the past several years?
It is surprising that overall post-rent wages have declined despite a booming economy in Denver, but much of this is driven by rent increases. Overall employment in Denver increased 17 percent over the past decade, about double the rate nationally. Rental and home construction has lagged behind job growth, causing steep rent increases. Even with higher rents, Denver’s economic boom has primarily benefited knowledge workers, who have more post-rent wages than a decade ago. Wages for blue-collar and service workers, on the other hand, did not keep up with rising rents.
Do you have any data to suggest that this situation has or seems to be improving in 2016 and 2017, years that aren't included in your analysis? Or is it too soon to tell?
We do not have data for the current year yet, but rising rents in most metros indicate that the situation has not changed. We expect the post-rent wages for blue-collar and service workers to continue to decline in 2016 and 2017 in metros where rents are still rising rapidly.
Is it fair to say your study suggests that among Denver renters, people who make the lowest wages are struggling the most, while those who bring home higher wages are doing better? Are the rich getting richer and the poor getting poorer?
While we’d expect service and blue-collar workers to earn less than knowledge workers due to educational and occupational differences, the fact that this gap is growing is concerning. Knowledge workers had more than double the post-rent income of blue-collar and service workers in 2005, and that difference was even larger in 2015. Higher-wage knowledge workers made post-rent income gains over the past decade, while lower-wage blue-collar and service workers have less post-rent income than a decade ago.
What can workers in the blue collar and service categories do to improve their situations? Or does it appear that their money will be tight for the foreseeable future?
Options are somewhat limited for blue-collar and service workers. These workers can pursue new jobs, potentially requiring additional training and education, or move to more affordable metros. Policymakers and cities can take actions to improve the situation for knowledge and service workers, for example through building more affordable housing or increasing the minimum wage.
Continue to see data showing why Denver renters are hurting despite the economic boom.
Blue Collar Workers in Metro Denver
2005 post-rent wages: $30,119
2015 post-rent wages: $27,060
Change: -10.2 percent
2005 employment: 306,420
2015 employment: 321,750
Change: 5 percent
2005 share of workforce: 26 percent
2015 share of workforce: 23 percent
Change -10.3 percent
Knowledge Workers in Metro Denver
2005 post-rent wages: $74,567
2015 post-rent wages: $75,982
Change: 1.9 percent
2005 employment: 295,860
2015 employment: 400,060
Change: 35.2 percent
2005 share of workforce: 25 percent
2015 share of workforce: 29 percent
Change: 15.6 percent
Service Workers in Metro Denver
2005 post-rent wages: $28,070
2015 post-rent wages: $24,615
Change: -12.3 percent
2005 employment: 572,260
2015 employment: 652,460
Change: 14 percent
2005 share of workforce: 49 percent
2015 share of workforce: 47 percent
Change: -2.6 percent
Overall
2005 post-rent wages: $40,317
2015 post-rent wages: $40,141
Change: -0.4 percent
2005 employment: 1,174,540
2015 employment: 1,374,270
Change: 17 percent
