One thing we might not have anticipated in the pandemic year is a record-setting boost in the state’s average annual wage. Yet, the state Employment Security Department reports that 2020 saw the state’s average wage climb by more than 10%, to $76,741. It may seem counterintuitive, but as the ESD reports, the increase reflects the pandemic’s effect on the labor force.
Washington’s average annual wage grew by 10.1 percent in 2020 to $76,741, according to the state Employment Security Department—representing the largest percentage increase in the average annual wage year over year on record.
The average annual wage is calculated only using wages from those in the workforce that are covered by unemployment insurance. The average weekly wage rose from $1,340 in 2019 to $1,475 in 2020.
Here’s how pandemic’s effect on employment fits into the equation.
The increase was driven by a 4.9 percent decrease in covered employment and a 4.7 percent increase in total earnings, which grew by nearly $10.9 billion in 2020. Overall, the average number of workers in Washington covered by unemployment insurance decreased by just over 164,161 workers in 2020.
The higher than normal increase in reported average wages can be attributed to the fact that thousands of lower-paid workers lost their jobs during the pandemic and higher-paid workers remained employed. While it is common for the average wage to rise during recessions, since lower wage workers are more likely to be laid off than higher paid ones, the shift during the pandemic recession was much more dramatic than during the Great Recession.
Much more in the ESD release. Notably, the increase in the annual average wage will also mean an increase in unemployment benefits and taxes.
The average annual wage is used to calculate unemployment benefits for jobless workers and Paid Family and Medical Leave benefits. The minimum weekly unemployment benefit, calculated at 20 percent of the average weekly wage, will increase by $94 to $295, for new claims opened on or after July 4th. At the same time, the maximum weekly benefit, which is the greater of $496 or 63 percent of the average weekly wage, will increase by $85 to $929.
In addition to unemployment and Paid Leave benefits, the average annual wage is used in computing employers’ unemployment taxes. Beginning in 2022, employers will pay unemployment taxes on the first $62,500 paid to each employee—up from $56,500 in 2021.
The wage, ESD notes, will also be used in calculating workers’ compensation benefits.