Last week I wrote about some data analysis I had done. I tried to identify instances in which the earnings for a particular occupation in a particular metropolitan area were significantly higher than would be expected from the general level of wage inflation in that area. I devised a formula to measure this and applied it to data from the Occupational Employment Statistics survey of the Bureau of Labor Statistics.
The purpose was to find outliers—occupations in metropolitan areas that were paid dramatically higher than would be expected. Some of the outliers that I found made a lot of sense from what I know about the occupation and the metro area. In other cases, I did not have a ready explanation, although that doesn’t mean that a good one can’t be found.
An example of one that is easy to explain is the 70 lawyers in the Rocky Mount, NC, area, whose median earnings were $157,990, a level that exceeded their expected inflated wage by 76.1%. I’m not surprised by this finding because the tobacco industry, centered in this area, pays attorneys handsomely to defeat the lawsuits of smokers. Another example that makes a lot of sense is the 360 concierges who work in the Las Vegas–Paradise, NV, area, where they earned an average of $34,900, or 35.3% above the expected inflated wage. I’m sure they do a brisk business helping hotel guests obtain tickets to the glitzy shows that are the specialty of that city. And, speaking of shows, it’s no surprise that the 510 costume attendants who work in the New York–Northern New Jersey–Long Island, NY-NJ-PA, area earned an outstanding wage, $57,230, which was 75.3% above their expected inflated wage. My understanding is that those who work for Broadway shows and dance companies are all members of the United Scenic Artists union, in contrast to those in Las Vegas, who came in second with only 24.0% above the expected inflated wage.
The metro area that had the highest wage premium for the largest number of occupations was McAllen-Edinburg-Mission, TX. Ironically, this is the very same metro area that was the lowest in the 50 states for wages overall. One explanation for this seeming paradox is that there may be a floor for the earnings of workers in some occupations. The workers are conscious of national averages and will not accept truly low wages, even though the low wages would be commensurate with the general wage trends of the region. For example, according to my formula, chief executives in that area would be expected to earn about $100,500 per year, appropriately below the national average of $158,560. Nevertheless, they averaged $146,380. Some of these executives may have relocated from higher-wage areas and could not stomach a severe cut in pay. Others who came up through the ranks locally may have foreseen problems with a low-earnings history if they should ever relocate elsewhere and thus may have demanded a higher wage than the trends of the McAllen area would indicate.
But there’s one additional reason, which may help to account for the large number of health-care occupations in the list of McAllen outliers: This metro area also has the distinction of having some of the highest health-care costs in the nation. Those costs are high in absolute dollars, not just relative to the local wages: Medicare expenditures in 2006 came to $15,000 per person enrolled, almost twice the national average. Only Miami, which has much higher costs of living, spends more per capita on health care. According to an excellent article that has become required reading at the White House ("The Cost Conundrum," by Atul Gawande), health-care expenses run so high in McAllen mainly because doctors prescribe excessive referrals and tests, many of which go to businesses that they own.
Something similar to the McAllen phenomenon seems to be happening in Lubbock, Texas, which is another low-wage area (its average wage was 77.3% of the national average). It’s also home to Texas Tech University, and several postsecondary teaching occupations in Lubbock turned up as outliers. Again, it seems likely that these college faculty expected their earnings to be commensurate with the earnings of their peers in higher-wage areas—or with their previous earnings in higher-wage areas.
You may be wondering if I found any instances of outliers in high-wage areas. Yes, I did. As an experiment, I set a cutoff for the metro areas of 20% inflation above the national wage and looked for occupations that received levels of pay that were inflated still higher. Massage therapists turned up in Anchorage (22.6% local inflation factor, but a 137.3% wage premium). Also in Anchorage: legislators (59.0% premium), construction laborers (46.1%), and cement masons and concrete finishers (43.7%). In my home metro area, Trenton-Ewing, NJ (34.9% inflation factor), I found that electricians had a 46.1% wage premium, which is why I’m likely to try my own hand at my next wiring project. Real estate sales agents here had a 33.5% wage premium, but I expect that the recent dip in home prices will have changed that ratio by the time the next set of earnings figures is published
That’s also why I’ll probably still be living here.