Business & Economy

Salaries are rising: The average worker in LA made $62,000 last year


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Los Angeles workers are making more money.

That's according to a new report from the Los Angeles Chamber of Commerce. The group crunched data from the state's Employment Development Department and found that wages in the city rose by an average of 4 percent in 2016 (by comparison, wages grew by about 1 percent in 2015, and 2 percent in 2014.)

The findings were presented to the L.A. City Council last week as part of the Chamber's annual status report on the local economy. Among the toplines: Los Angeles workers earned an average of $62,000 in 2016, up from $55,000 in 2014. 

So what's driving the increase in pay?

Not enough workers

Economist Chris Thornberg of Beacon Economics told the council that, despite what voters often heard in the last presidential election campaign, the country's unemployment rate is so low that the U.S. is now at "full employment." That means there are enough job openings available to satisfy the number of active job seekers. The number of so-called "discouraged workers" who have left the job market has also dipped.

In Los Angeles, the unemployment rate is at 4.4 percent, which also constitutes full employment, Thornberg said.

With so few people looking for jobs, employers must now compete with other companies for the most qualified workers. Many are offering higher wages to entice job candidates. They're also giving their existing employees raises to keep them happy.

"Many parts of the United States are seeing these tight labor markets, and people who didn’t have an economic opportunity two or three years ago are now having economic opportunities available to them," Thornberg said, adding that low, middle and high earners are all seeing wage increases.

Not enough housing

It's no secret that there isn't enough housing supply in the Los Angeles area. The low vacancy rate has driven up rents, leading more middle-income and low-income workers to move, especially in the coastal areas, which are the most expensive.

"You talk to anybody who runs any kind of service company, and they’ll tell you, 'I can’t find workers,'" said Thornberg.

That migration has exacerbated the labor shortage, forcing more companies to offer high pay.

A higher minimum wage

In 2015, the L.A. City Council voted to gradually begin increasing the city's minimum wage beginning in July of 2016, when it hit $10.50. 

That could be part of the reason the city saw a 4 percent rise in wages in 2016, while wages in L.A. county rose by just 2.7 percent.

But Thornberg said he believes the labor shortage is by far the bigger reason for the increase in average salaries, since wages are rising across the U.S. "in places that have and do not have the [higher] minimum wage [laws]."

Thornberg predicted the labor shortage will persist in the future and become worse if the Trump administration cracks down further on unauthorized workers, a move he said would hinder local companies' ability to grow.

The silver lining, he said, is that it would force employers to pay their low-wage workers more.

"The minimum wage might become irrelevant because the sheer labor shortage by itself might push wages above that limit," he said.