Introduction

During the late 1990s, when Alabama ’s economy produced good times for the state’s working people, public policymakers paid little attention to the economic problems of the state’s major industries and the effects of public policy on those industries.  Changes in state policy did not seem to be needed to keep unemployment low, wages rising, and jobs growing.  But in the wake of the recent recession and the current jobless recovery, there is room for state policy to play an important role in restoring prosperity. 

This report takes an in-depth look at the economic situation of Alabama ’s working people, its key industries and major regions, and the functioning of its state economic development policies.  It recommends public policies that can improve the competitiveness of the state’s key industries and regions and improve the economic well-being of its working people.  The report begins with a statistical portrait of Alabama ’s jobs and workers, both statewide and in the state’s four largest metropolitan areas.  Drawing on the results of interviews with employers and union leaders as well as on published sources, it then describes the economic problems facing the state’s key manufacturing industries, industries that are crucial to the prosperity of the state as a whole and especially to that of Alabama workers with little formal schooling.  The report then describes Alabama ’s economic development policies, illustrating the ways in which they fail to meet the needs of workers and employers in key manufacturing industries.  The report concludes with recommendations for improving state economic policy, especially economic development policy.

Alabama ’s Jobs and Workers

This section provides a statistical overview of the economic status of Alabama ’s working people.  It focuses on wages, wage inequality, employment, unemployment and workforce characteristics.  To put Alabama ’s current economic situation in perspective, the report compares today’s Alabama with Alabama at various times over the last two decades and it sometimes compares Alabama ’s economic performance with that of the entire nation and with that of surrounding states.  We rely mainly on data from the Bureau of Labor Statistics (BLS) and the Census Bureau, especially the joint BLS-Census Current Population Survey (CPS).  Throughout the report, dollar amounts are adjusted for inflation and expressed in 2001 dollars (i.e., the buying power of wages at 2001 prices) using the CPI-U-RS, a consumer price index developed by BLS.

Alabama workers made substantial gains during the late 1990s—in overall wages; low unemployment; narrowing wage gaps between high- and low-wage earners; and rapid wage growth for women, African Americans and workers without college degrees.  As Alabama and the nation entered the recession that began in March 2001, unemployment rose and African American workers’ wages fell, but other economic gains continued.  However, these gains were probably due in large measure to extremely tight labor markets, especially for low-wage workers.  Such tight labor markets are unusual even during periods of economic growth and probably did not continue as the recession deepened.  They are unlikely to persist during the slow, jobless economic recovery that the state and nation are now experiencing.  Moreover, Alabama has been losing jobs in manufacturing, a sector that has historically provided good jobs for workers without college degrees.  Wages in manufacturing have also grown slowly during the 1990s.  Without public policies and employer and union strategies to preserve high-wage jobs in manufacturing and other key industries, the gains made by Alabama ’s workers in the late 1990s may not continue and could even be reversed.

Alabama Wage Growth Remained Strong Even As Recession Began

The median wage—the wage that falls in the middle of those of all workers—is the best measure of the overall economic well-being of Alabama ’s workers.  (Half the state’s workers earn more than the median wage, while half earn less.)  By this measure, Alabama ’s workers became much better off during the late 1990s; the state’s median wage rose by more than 20 percent from 1995 through 2001, from $9.52 per hour to $11.50 per hour (table 1).  The wage growth of the late 1990s, which was probably due to an extremely tight labor market, more than made up for a decade and a half of declining wages during the 1980s and early 1990s.  Even as Alabama and the nation entered the recession in 2001, Alabama workers’ wages continued to grow relatively rapidly, rising by 5.8 percent from 2000 to 2001.

Wages in Alabama remain below wages nationwide.  The wage gap between Alabama and the nation as a whole was similar in 2001 to what it was in 1979.  In 1979, Alabama ’s median wage was about 91 percent of the U.S. median wage.  In 2001, the corresponding figure was about 92 percent.  Alabama ’s workers took bigger wage cuts in the 1980s and early 1990s than those in the United States as a whole, but they also received larger raises since 1995 than their U.S. counterparts.

Table 1.  Median Hourly Wages in Alabama and United States, 1979-2001 (2001 dollars)

Source: WAI analysis of CPS outgoing rotation groups.

Women’s Wages Grew Rapidly, Men’s Remained Below 1979 Level

The state’s recent strong wage growth is due mainly to extremely rapid increases in women’s wages (table 1).  Alabama women earned nearly 25 percent more per hour in 2001 than in 1995 and 7 percent more in 2001 than in 2000.  Men’s wages grew much more slowly than women’s.  Alabama men earned just over 12 percent more in 2001 than in 1995 and 3 percent more in 2001 than in 2000.  Men’s wages in 2001 were still about 2 percent below their 1979 level, while women’s were almost 30 percent above their 1979 level.

Alabama Wages Slipped from Highest to Second Highest in Region Since 1979

Alabama ’s workers have lost ground compared with those of neighboring states.  In 1979, Alabama ’s median wage was higher than that of any of its neighboring states (figure 1).  By 1989, though, it had slipped to third highest in its region, below the median wages in Georgia and Florida .  By 2001, Alabama had moved ahead of Florida but remained behind Georgia . 

Source: WAI analysis of CPS outgoing rotation groups.

Alabama ’s wage advantage over lower-wage neighboring states has also shrunk over the last two decades.  In 1979, Alabama ’s median wage was about 18 percent (or $1.60 per hour) higher than that of its lowest-wage neighbor, Mississippi .  By 1989, Alabama ’s wage advantage over Mississippi had shrunk to 15 percent ($1.30 per hour) and by 2001 it was down to only 8 percent (88 cents per hour). 

Wages Stagnate for African Americans, Reversing Late 1990s Trend

The recession that began in March 2001 reversed the late 1990s trend of wage growth for African American men and women in Alabama .  Black workers’ wages overall were unchanged from 2000 to 2001, while white workers received a 5.8 percent raise in that year (table 2).  Both black men and black women took wage cuts, with black women’s wages falling by a greater percentage than black men’s.  In contrast, both white men and white women received raises, and white women received a larger raise than white men. 

Table 2.  Median Hourly Wages in Alabama by Race and Sex, 1979-2001 (2001 dollars)