How are we doing?
In 2018, the wage distribution for the Tucson Metropolitan Statistical Area (MSA) fell short at every percentile, except for low-wage earners, when compared to the state of Arizona and the U.S. Low-wage earners (those in the 10th percentile) in Tucson earned $22,260, slightly less than the 10th percentile wage for Arizona ($22,470) but more than the U.S. ($20,690). When comparing median wages, those in Tucson earned nearly $1,600 less than Arizonans and more than $3,200 less than the nation. In the U.S., 90% of jobs paid less than $98,410 per year, compared to $87,150 in Tucson, more than a $10,000 difference. Thus, high-wage earners in Tucson earned substantially less than those in the U.S. High-wage earners (those in the 90th percentile) in Tucson made 3.9 times more than low-wage earners (those in the 10th percentile).
Why is it important?
Wages, compensation received from working, are the primary source of income for most individuals. Higher wages are often associated with increased economic opportunities and ability to acquire goods and services. Individuals in a region may earn different wages for a variety of reasons, including differences in education, occupation, industry, sex, age, race, and other personal and regional characteristics. The gap between high-wage and low-wage earners gives us an indication of the wage inequality within a region. This matters because regions with high inequality may be distributing the benefits of economic growth in a narrow way.
How do we compare?
The wage ratio between the 90th (high-income earners) and 10th (low-income earners) percentile of the wage distribution reflects a region’s wage inequality. This measure is referred to as the 90/10 wage ratio. The smaller the ratio, the less wage inequality a region displays. In 2018, the 90/10 ratio for the Tucson MSA was 3.9 while the U.S. had a 90/10 ratio of 4.8. In Tucson, wage earners at the 90th percentile earned $87,150, which is 3.9 times more than workers at the 10th percentile. That difference was higher for the U.S. at 4.8, reflecting a wage of $98,410 for those in the 90th percentile and $20,690 for those in the 10th percentile.
The Tucson Metropolitan Statistical Area (MSA) ranked first in wage inequality when compared to other MSAs around the west. Tucson’s 90/10 ratio was 3.9, meaning that wage earners in the 90th percentile earned 3.9 times more than wage earners in the 10th percentile. Denver and Austin had the largest wage inequalities with 90/10 ratios of 4.9 and 5.0, respectively.
What are the key trends?
Wage disparities increased between 2001 and 2016 for the Tucson MSA, the state of Arizona, and the U.S. However, in 2017 the wage disparity or 90/10 ratio decreased significantly for Arizona and Tucson. This decrease may reflect, in part, the increase in the minimum wage in Arizona during 2017. As the minimum wage continues to rise through 2020 it will put upward pressure on wages for low-paying occupations, which will put additional downward pressure on the ratio. In 2018, the 90/10 ratio for Tucson was 3.9, down from a high of 4.6 in 2006 and at its lowest level since 2001. The state of Arizona’s 90/10 ratio decreased to 4.0 from 4.3 in 2017, while the nation’s level remained the same.
How is it measured?
The U.S. Bureau of Labor Statistics collects survey data on wages by occupation and industry and then reports this data annually as their Occupational Employment Statistics (OES). The OES data includes detailed employment-and-wage data for over 800 occupations and industries. Wages are compensation received from working and do not include fringe benefits or other sources of income such as interest, bonuses, dividends and rents. The 10th percentile represents the wage at which 10 percent of workers earn less. Likewise, the 90th percentile reflects the wage at which 90 percent of workers earn less. Median refers to the midpoint of the income distribution, with half of the wage earners receiving wages above the midpoint and half receiving wages below.