Minnesota's wage gap narrows

The lowest paid workers in Minnesota have received the largest wage increases over the past three years amidst a shifting labor market.

Driving the news: Nearly nine out of 10 Minnesota workers now make more than $15 an hour, up from seven in 10 workers five years ago.

Why it matters: The data, recently published by the Minnesota Department of Employment and Economic Development, shows the wage gap in Minnesota narrowing as more low-paid workers rise into middle-income jobs.

• Minnesota now has the eighth highest average wages in the country, per DEED.

Yes, but: For many workers, the wage increases haven't kept up with inflation. Adjusted for inflation, average wages in Minnesota have dropped 1% between 2019 and 2022.

The good news: Workers on the lowest end of the pay spectrum have gotten heftier raises than higher paid workers, which is narrowing the income gap.

• DEED economist Mustapha Hammida told Axios that the wage gap was already narrowing before the pandemic, but narrowed even further in 2021 and 2022 as wages surged.

Zoom in: Construction and manufacturing workers have seen the biggest wage increases between 2019 and 2022. Their real wages actually increased at a higher rate than inflation.

• Construction companies were struggling with a shortage of workers even before the pandemic and have been under pressure to raise pay, said Oriane Casale, DEED's assistant director of labor market information. The industry has also been hit hard by retirements.

Meanwhile, hospitality and leisure workers also saw big wage gains (14%) over the past three years, though not quite enough to offset inflation. Wages adjusted for inflation in the sector were down 1% over the past three years, but Casale said real wages are actually up over the past two years.

• Financial services workers saw the biggest real wage declines as layoffs have taken the pressure off to firms to increase pay, Casale said. Wages in the industry have been flat over the past three years.

What's ahead: As inflation cools, Casale is watching to see how a potential recession in 2023 could affect wages in Minnesota, which has one of the tightest labor markets in the country.

Editor's note: This story has been corrected to state that the rate of Minnesota workers making more than $15 an hour has increased from seven (not three) in 10.