Lower-Wage Workers in Ohio Have Seen Strong Wage Gains Since 2019

Ohioans at the 10th percentile of the wage distribution earned about $12 per hour in 2019 and $13.50 per hour in 2023. This represents an annual wage increase of 3.2 percent, as shown in Figure 2a. Notably, these increases are after adjusting for inflation.⁸ By contrast, real wage growth for Ohioans with wages at the 90th percentile during this period was less than 1 percent (0.8 percent) on an average annual basis. Ohioans with wages at other points in the distribution also saw weaker real wage growth between 2019 and 2023 than those at the 10th percentile but stronger growth than those at the 90th percentile. Ohioans at the 30th, 50th, and 70th percentiles of the wage distribution saw average annual real wage gains of around 1.5 percent⁹ during this period (Figure 2a).

These developments run counter to the pattern that prevailed prior to the pandemic, both in Ohio and nationally. Between 2015 and 2019, real wage gains in Ohio at the 10th percentile of the wage distribution were slightly weaker than at the 90th percentile, although average annual increases in both cases were around 1.5 percent (Figure 2b).

Real wage gains in Ohio at the 10th percentile of the wage distribution were also noticeably weaker than at the 30th and 50th percentiles. Finally, real wage gains in Ohio at the 10th percentile of the wage distribution were substantially weaker between 2015 and 2019—the final four years of the longest economic expansion in US history—than during 2019 to 2023, which included the pandemic and an associated economic contraction.¹⁰ The patterns during these two periods for the United States broadly mirror those for Ohio.

What might account for the changing fortunes of lower-wage workers? One possible factor is the increase in minimum wages across states in recent years. Indeed, Ohio’s statutory minimum wage rose from $8.55 in 2019 to $10.10 by 2023, an increase in nominal terms of more than 18 percent. That compares to a far more modest increase of about 5.5 percent between 2015 and 2019 (from $8.10 to $8.55).¹¹ But an analysis of changes in wages across states suggests that wage growth for those at the 10th percentile of the distribution was about as strong in states that did not change their minimum wage during this period as it was in states that did. This suggests that something other than minimum-wage changes explained why lower-wage workers received a boost.¹² One study concludes that an abrupt tightening in labor market conditions during the pandemic shifted more market power to workers, particularly lower-wage workers, who consequently became more willing to switch employers, leading to an increase in these workers’ wages.¹³

Whatever the explanation, recent wage growth differences between the top and bottom quantiles have noticeably reduced wage inequality in Ohio and nationwide. One common way researchers attempt to quantify this inequality is through the 90/10 ratio, the ratio of wages at the 90th percentile to those at the 10th percentile. In Ohio, this wage inequality measure is the lowest it has been in more than 20 years (Figure 3).

As of 2023, this ratio was 3.9 for Ohio, meaning that wages at the 90th percentile were almost four times higher than those at the 10th percentile. By contrast, this ratio was roughly 4.5 for Ohio in 2020, its peak during 2000 to 2023 (Figure 3). Nationally, the 90/10 ratio has tended to be higher than it has been in Ohio, though the measure for the United States has also drifted down since 2020.

In Ohio, the stronger increases in real wages since 2020 for those at the bottom of the wage distribution have meant that these workers have actually seen stronger cumulative real wage gains than those in the middle (50th percentile) or at the top (90th percentile) since 2000. As of 2020, cumulative real wage gains through the preceding two decades for those at the 10th, 50th, and 90th percentiles were 11, 8, and 21 percent, respectively, consistent, as noted above, with stronger increases in real wages for workers at the top of the distribution (Figure 4a). However, by 2023, cumulative real wage gains since 2000 had amounted to about 27, 8, and 20 percent, respectively, for those at the 10th, 50th, and 90th percentiles, a surprising and largely unanticipated development. While the pattern nationally is a little less dramatic (Figure 4b), cumulative wage gains since 2000 for those at the 10th and 90th percentiles have nearly converged at around 27 percent after being almost 10 percentage points higher for higher-wage workers in 2020.¹⁴

Conclusion

Whether these recent developments are durable or whether we will see a reversion to the patterns that predated the pandemic remains to be seen. The pandemic caused both temporary disruptions to the economy and changes that are likely to be longer-lasting, for example, a greater share of workers who work from home at least some of the time. But whatever lies ahead, the last few years have clearly brought consequential changes to the US labor market, which have at least temporarily disrupted what had been growing wage inequality through the preceding decades. In Ohio, that has resulted in the lowest wage inequality in more than two decades, with lower-wage workers seeing real wage gains in recent years that were about twice as fast as those that preceded the pandemic and notably stronger gains than for others throughout the wage distribution.