by Matthew Donohue, USCM Intern
May 29, 2006

As Americans prepared to hit the highways over the Memorial Day weekend, a new U.S. Conference of Mayors report shows that rising gas prices are eroding recent increases in wages and salaries.

In the latest U.S. Metro Economies Report released May 26, over two million jobs were created in 2005, the best year for job growth since 2000. The report, which was prepared by Global Insight, Inc. for the U.S. Conference of Mayors and for its Council for the New American City, also found that wages and salaries increased significantly in 2005.

The average job in 2005 earned a salary of $43,500, a 4.6 percent increase over 2004. In real terms, after adjusted for inflation, wages increased by 1.7 percent in 2005, which is a dramatic increase from the years 2001-2003.

Despite the good news about increased wages and accelerated job growth, the report found that increased energy costs, such as the high cost of gasoline, has wiped out almost one-third of the last year’s earning gain.

In 2005, according to the report, U.S. households spent $287 billion on gasoline to fuel cars and trucks. This is a 25 percent increase from 2004, when U.S. households spent $230.4 billion on gas. Total energy related expenditures, which includes the cost of electricity, heating and natural gas, in 2005 represented 5.9 percent of consumer spending, a 20 percent increase from the year before.

“We have known for months that families have been feeling the pinch from the rising cost of gasoline. Now because of the latest Metro Economies Report, we see that the high cost of gasoline has significantly impacted people’s disposable income—despite recent wage gains. This is concrete proof that our nation needs a comprehensive energy policy that addresses these new economic realities,” said Conference President Long Beach Mayor Beverly O’Neill.

The report breaks down the impact of increased prices of gasoline on wage increases by city. For example, in 2005 the Atlanta metro area had an average wage increase of $1,740, but saw 45.6 percent of that gain eaten up by an average gasoline price increase of $792.90.

In the Miami metro area, the average wage gain in 2005 was $2,109, but gasoline price increases consumed 48.2 percent, or $1,016.10, of the wage increase. In Detroit, the average gasoline price increase was 41.7 percent of wage gains, $686 out of $1,646 wage gains.

The impact was greatest in Spokane (WA), where an increase of $549.70 in the price of gasoline ate up 78.2 percent of the area’s average wage increase of $761.

“We are pleased that wages are starting to rise, but we remain concerned that the high cost of gasoline is negating much of that growth. The gasoline squeeze is especially hard on families that have seen minimal wage increases over the last few years,” said Detroit Mayor Kwame Kilpatrick, Chair of the Conference’s Council for the New American City that issues the wage report.

The report also chronicled the wage gains of America’s cities. Among the nation’s 361 metros areas, Vero Beach (FL) topped the list of highest wage gains for 2005. In fact, seven Florida metros, including Gainesville and Pensacola, are among the top twenty metros in wage growth.

Furthermore, the South led all regions with a 1.5 percent annual real wage gain during the first half of the decade, while the Northeast, Midwest, and Pacific regions achieved gains of less than one percent.

Across the country, 180 metros topped the national average wage gain of 3.3 percent for the decade. The estimated average wage levels for 2005 across 361 metros range from $76,500 in San Jose (CA) to $26,800 in Logan (UT).

Twelve metros, including New York, Los Angeles, San Francisco, Boston and Washington, have annual wage levels in excess of $50,000. Twenty metros had 2005 average wages that fell short of $30,000.

The full report can be viewed on the Conference of Mayors website at usmayors.org.