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Published in Finance

Reporter’s Notebook: West Michigan balances lagging wages with regional amenities

BY Sunday, January 16, 2022 06:00pm

If it’s money that matters most when people look for work or to relocate for a new job, then West Michigan may be at a disadvantage in competing for the coveted talent needed to drive economic growth.

Or perhaps the region’s cost of living, high quality of life and abundant natural resources represent an advantage in attracting and retaining talent that can help to overcome any wage disparity.

The question about compensation and all of the other intangibles that West Michigan offers arises out of an assertion that Don Grimes, a regional economic specialist at the University of Michigan, made when presenting a 2022 regional outlook during an event hosted by The Right Place Inc.

In his presentation, Grimes noted that West Michigan wages lag the state average. Data that Grimes cited put the average real wage in an eight-county region at about $54,000, which compares to more than $58,000 statewide.

That difference comes despite West Michigan closing the gap beginning in 2007 on annual real income growth to the same rate as the entire state, Grimes said.

“Your income is doing great. There’s one problem,” he said. “Your wages lag behind the state, although they have tended to close (the gap) over the last few years, and if there’s one area of concern I have for the Grand Rapids region, it’s that you need to have jobs that pay more.”

Grimes later explained that lagging compensation rates in West Michigan are “a pretty broad-based problem. It’s pretty much across the board.”

For example, technology and computer services wages comparatively “are notably low” in West Michigan, he said. Jobs in computer programming and software pay an average of $94,000 in West Michigan compared to a statewide average of $104,000 a year in the same fields, and $131,000 across the U.S.

The comparatively lower wages for tech workers pose a problem both for the region and the state in attracting coveted tech talent, Grimes said.

“This is a problem not just in Western Michigan, but in Michigan overall. We pay too little, and that’s going to be a problem” for companies across all sectors trying to hire tech workers, he said. “They’re going to have to up their game and go to $130,000, maybe, or more to attract these workers from elsewhere in the country.”

Amid an acute talent shortage that existed well before the COVID-19 pandemic and which has worsened across all sectors in the “Great Resignation,” employers in the region have been upping their compensation levels.

MiBiz reported in December that West Michigan employers competing for talent in a tight labor market gave larger pay raises in 2021 than in previous years, according to an annual wage and salary survey.

Pay rates increased 4.4 percent on average among the 293 West Michigan employers responding to the 2021 survey conducted by The Employers’ Association. That’s a higher rate than the organization’s annual survey found for years and is more than double the increases from last year when 251 employers’ pay raises averaged 2 percent.

The Right Place President and CEO Randy Thelen says wage growth “is a core objective” for the economic development organization. In supporting job growth, The Right Place aims to work with companies on projects that provide jobs paying at least $26.35 an hour. The Right Place of late has exceeded that goal, supporting projects where employers pay “just north” of $27 an hour on average.

“It is something we watch pretty carefully. We have to move our wages up,” Thelen said. “When we talk about quality of life — our parks systems, our outdoor recreation, our downtown environment — all of those things are great, but you need income to be able to enjoy it.”

In a subsequent conversation with MiBiz, Thelen did differ with Grimes in one area. He said that the University of Michigan economist’s perspective did not consider the favorable cost of living in West Michigan.

“If you go across the country, wages are higher in New York City than anywhere else. There’s a correlation there that (Grimes) didn’t fully incorporate into his analysis,” Thelen said. “That said, with remote work, there are signs of a balancing or leveling out of wages for knowledge workers nationwide. There will be some competitive pressure on wages that maybe we haven’t seen for some time.”

Grimes does acknowledge that money is, in fact, not the only factor in attracting talent to a region.

Grand Rapids’ parks, “tremendous” downtown, “good” quality of life, and its proximity to Lake Michigan are all lures that can attract talent, he said.

“The one advantage that the Grand Rapids area has is the great amenities,” Grimes said. “You have an attractive place where people want to live.”

Now all that West Michigan employers have to do is find that delicate balance between proper pay and all of the other intangibles that West Michigan offers.

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