Wages Key When Attracting Talent

With unemployment dipping as low as 3.5 percent, the Boise metro area labor market is tight, and businesses are struggling to find talented workers, often competing with other regional metro areas. For companies struggling to find skilled workers, it is worth knowing how Boise competes with other metro areas to attract and retain workers.

COL-BoiseSource: Center for Community and Economic Research (C2ER), Cost of Living Index, 2014

Boise’s relatively low cost of living is a selling point in attracting labor, but while the capital city’s cost of living is about 6 percent lower than the national average, wages are, on average, about 10 percent lower. There is a positive correlation between a metro area’s cost of living and its median wage. The interactive graphic shows all the metro areas where data has been collected, charted against the metro’s median wage.

Most of the metros are clustered at or below the national average — pulled up by the high-cost outliers like New York, San Francisco, Los Angeles, Alaska’s metro areas and Seattle — with Boise planted firmly in the middle. Wage-wise, too, Boise falls in the middle nationally, while the high-cost metros have significantly higher median wages.

A closer look at some of the western metro areas — the ones against which Boise competes for talent — reveals a different story.

Percent-COL-v-Wage_MetrosSource: C2ER, COLI 2014; Bureau of Labor Statistics, Occupational Employment Statistics, 2014

Of the 15 western metros referenced in figure 2, Boise’s cost of living is at or above five other cities, but its median wage is above only two — Idaho Falls and El Paso, Texas. In Idaho Fall’s case, the source of the city’s high wage jobs is actually outside the metro area – at the Idaho National Lab.

So, while Boise’s median wage is roughly correlated with its lower cost of living on a national level, compared with competitive western cities, Boise’s low cost of living makes up for its lower median wage only some of the time.

COL-index-metrosSource: C2ER, COLI 2014; Bureau of Labor Statistics, Occupational Employment Statistics, 2014

Figure 3 shows two bars for each city. The first bar represents the percentage difference in cost of living from Boise, while the second shows the percent difference in median wage. When the wage difference is greater than the Cost of Living Index (COL) difference, wages in that particular metro area are better than the Boise metro area. When the COLI difference outweighs the wage difference, Boise has a competitive advantage in cost-adjusted wages. Out of the five high-cost metros, only two — Seattle and Denver — offer better wages for workers. Of the 10 metros with cost of living closest to Boise’s, only two have lower median wages. That means job seekers who do their research would find their wages actually stretch further in other mid-sized, mid-cost metros than they would in Boise. This makes talent attraction a more difficult sell for Boise relative to those markets.

Next, people with higher levels of education tend to be more mobile, especially if they live in the Western United States.mobility-by-ed-levelSource: U.S. Census Bureau, Current Population Survey, 2015 Annual Social and Economic Supplement

Nationally in 2014, someone with a bachelor’s degree was 66 percent more likely to move out of state than someone with a high school diploma, indicating these workers tend to be less tied to a place where they grew up and more dependent on economic and social drivers like wage, amenities and family connections.

The following charts compare the difference in cost of living with the difference in wage for seven occupation groups that require significant education and training.

COL-v-Wage_West-CoastSource: C2ER, COLI 2014; Bureau of Labor Statistics, Occupational Employment Statistics, 2014
COL-v-Wage-IntermountainSource: C2ER, COLI 2014; Bureau of Labor Statistics, Occupational Employment Statistics, 2014

COL.v.Wage-ColoradoSource: C2ER, COLI 2014; Bureau of Labor Statistics, Occupational Employment Statistics, 2014

COL.v.Wage-TexasSource: C2ER, COLI 2014; Bureau of Labor Statistics, Occupational Employment Statistics, 2014

Looking strictly at only the cost of living to wage ratio, if the COLI difference is greater than the wage difference for a particular group, then workers in that group would be better off in Boise. For example, in San Francisco, the high cost of living is made up by the higher wages only if you are a health care practitioner, scientist or a manager. Compared with Boise, engineers, business and financial and computer workers in San Francisco pay too much for essentials, make too little and would be better off living in Boise. In fact, engineers in Boise get one of the best bangs for their buck out of these 15 metros. Only engineers in Pueblo, Colorado, with a 10 percent lower cost of living, do better than in Boise. Boise’s competitive advantage in engineering jobs is due to the presence of global competitors like Micron who rely on recruiting talent from outside the metro to fill their job vacancies.

Outside of engineering occupations, Boise tends to pay lower wages than most of the other 15 metro areas even after the cost of living adjustment. For education and training workers, only two metros pay lower adjusted wages — Idaho Falls and San Francisco. This represents an enormous challenge to recruiting and retaining teachers in the Boise metro and elsewhere in the state. For management positions, only in Portland are the adjusted wages lower than in Boise.

Additionally, expenses like college loan debt or online purchases do not change based on location. Recent college graduates have to make the same loan payment whether they live in San Francisco or El Paso, which is likely one reason that high-wage cities experience significant in-migration of well-educated young people despite the high cost of living.

Overall, quality of life issues will have to equate to the difference in cost-of-living-adjusted wages in order for the valley to attract skilled, talented workers. In some cases, that difference might not always be enough.

Ethan.Mansfield@labor.idaho.gov, regional economist
(208) 332-3570 ext. 3455