News Analysis

By Drew Phelps

Last week, the Fresno Bee reported some good news: Average income in Fresno County rose 2.5% from 2015 to 2016, making the average just above $40,000 for 2016.

While the growth shown in the Bureau of Economic Analysis data is a general trend signifying continuing emergence from the recession, presenting trends for compensation alone does not paint the full picture of what is happening.

On the whole, Fresno’s results are positive. On the national level, total compensation grew only 1.6%, meaning Fresno saw growth .9% above the average – a significant amount.

However, this is yet another instance of one data point presenting an incomplete narrative.

Though it is true that compensation is increasing steadily (at between a 2 and 3% rate), inflation (measured through the traditional Consumer Price Index) in California has risen at only a slightly slower rate (between 1.5 and 2.3% since 2013) according to the California Department of Industrial Relations.

Inflation Accompanies California Growth

The West Census region saw a .6% greater rise (1.9% total rise) in inflation than the nationwide average (1.3%) over the 2015-2016 period. California (2.3% rise) saw a greater increase than the region as a whole – a full 1% greater than the national trend.

Looking even deeper though, while the state level is the smallest unit for which inflation data is available, let’s assume that inflation in Fresno is slightly lower than the statewide average since it comparatively lacks some of the primary inflationary drivers like rapid wage growth, a tight job market, or scarcity of products.

Meanwhile, compensation in California grew .7% faster than Fresno County – 3% from 2015 to 2016.

So, what do all these details this mean?

Though not the only factors at play in this equation, inflation and compensation present a fairly complete picture of the economic effects at play for the lives of the “average” consumer/wage-earner.

Higher Costs Eat Up Pay Raises

Here in Fresno County, increases in compensation tend to barely eke out a positive margin above increases in inflation, meaning that, if you are an “average” wage-earner who receives a raise, that raise will probably not buy you much more than it did the year before.

Put simply, while your wages probably went up a little more than those of many people across the country in 2016, the prices of things you bought, like food or gas, also rose faster than in other places and, as a result, almost offset the gains you made in compensation.

At the macro level, this means that Fresno County also failed to grow much in terms of purchasing power, signaling a slowly improving, but mostly stagnant economy. While economists caution against growing purchasing power too quickly, this sort of growth is modest and easily falls within the safe spectrum, with plenty of room to expand.

On the national stage, some of these macro problems have been worked out to maintain healthy overall growth due to developments such as widening income inequality. Basically, our economy is still growing, but the benefits of the growth are flowing only to a select few.

At the individual level nationwide, the trends are far closer to what we see in Fresno: extremely limited growth for the “average” wage-earner. Since the early 1970s, inflation-adjusted compensation has grown only at a .2% rate each year.

Wealth of Richest 400 People in U.S. Grows

Meanwhile, 400 multi-billionaires own more wealth today than a combined 64% of the U.S. population — about 204 million people – according to researchers Chuck Collins and Josh Hoxie.

Overall, though any significant improvements to the current trend will likely come from the top down, some policies could be implemented locally to bolster the economy. A couple potential pieces of a solution are programs that expand educational opportunities, allowing for a more-skilled, higher-paid workforce to develop, and programs that encourage entrepreneurship, since new companies create new jobs with significant possibilities for growth.

A blunter tool would be raising the minimum wage, but other communities that have done so at the local level have been met with somewhat mixed results and the more left-tilted policy would likely be a tough sell here in Fresno.

Ultimately, our leaders would do well to understand both the good (wage growth) and the bad (its limitations in an expensive state like California).

From my perspective, the bad news is our lack of growth. The good news is, we are simply not much different than everyone else.

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