At least in terms of unemployment statistics, New England must be doing something right. By more than a full percentage point at the end of 2016, the six-state region had a jobless rate lower than broad swaths of the rest of the country, 3.6 percent, compared with up to 5.5 percent in Alabama, Kentucky, Mississippi and Tennessee. Even Rhode Island is doing better than the nation as a whole.
For years, one school of thought was that New England’s compensation costs, always among the highest in the nation, stunted job creation. But again, at least from the statistics, it would seem that having total compensation costs nearly 20 percent more than the next highest region, the western United States, has not had ill effects here.
But perhaps there is some grain of truth in the assumption about wages and job growth. In looking at the change in total compensation from quarter to quarter from 2006-2016 and comparing it with the change in the unemployment rate, something interesting turns up.
It seems that New England is an outlier through this turbulent period. It was the only region that showed a positive correlation between changes in the jobless rate and changes in compensation. In other words, when the unemployment rate went down, so did total compensation, although with a correlation coefficient of 0.095 the connection between the two statistics is slightly better than random.
But what does stand out, however, is the fact that for all other regions for which the same statistics are available, the correlation is negative, that is, when the jobless rate went down, wages went up. In fact, the negative correlation for Arkansas, Louisiana, Oklahoma and Texas of -0.185 shows a much stronger connection than what was happening in New England.
Of course, our corner of the nation still pays its workers more than anywhere else. But it would seem that to a slight degree, keeping those costs under control might yield even more jobs.
