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Wages have been a hot topic for many years in the United States. People all over the country have debated intensely about minimum wage, especially as the federal minimum remains at $7.25 per hour. But in certain states, the minimum is increasing at notable rates — especially in California, where a pending measure could bring it up to as much as $18 per hour.
The debate often includes the argument that small businesses cannot afford to pay as much as large businesses, and generally speaking, that seems to be a fair assessment. But how do generalizations like this stand up when data is broken down by state? We wanted to get a sense of the average wage paid by small, midsize, and large businesses across America, and we used U.S. Bureau of Labor Statistics (BLS) data to find out.
Many states have made great strides over the last few years in increasing their minimum wage to make the cost of living more affordable for their citizens. These efforts have become even more prominent recently, with states like Connecticut leading the way in gradually raising the minimum. This outlook was reflected in the results of our study, which showed Connecticut offering the highest average weekly wage for small-business employees in 2021.
Among employees of small businesses (having less than 100 workers), those living in Connecticut received the highest average weekly wage in 2021 ($1,405), followed by Massachusetts ($1,255), New York ($1,252), and New Jersey ($1,169). This makes sense, since all four of these states have seen minimum wage increases over the last couple years. The cost of living also undoubtedly plays a role.
On the flip side, the states with the lowest average weekly wage for small-business employees were Mississippi ($724), Montana ($808), Idaho ($810), and New Mexico ($818). Mississippi’s low ranking is likely due to the fact that it is currently the cheapest US state to live in.
Overall, our study found large businesses offered the highest average weekly wage ($1,638), followed by midsize businesses ($1,257) and small businesses ($1,006).
COVID-19 impacted both the job market and the workforce in ways that we probably won’t fully grasp for years to come. Record numbers of layoffs and furloughs dramatically plagued the country (and the world) for much of 2020, and the economy suffered greatly as a result. Another shift happened, however, as people started going back to work in 2021. Wage increases were offered across many industries as employers attempted to fill positions again, especially for lower-paying jobs, such as those in retail and food services.
We wanted to get a sense of which states and business sizes saw increases and decreases in wages from 2020 to 2021, and the results were pretty eye-opening.
Interestingly, and perhaps encouragingly, only four states saw a decrease in average wage: North Dakota (-1.9%), Wyoming (-1.7%), Oklahoma (-1.5%), and Alaska (-1.4%).
The states that had the largest increase in weekly wages were California (12.5%), New York (11.6%), Washington (9.6%), Maryland (8.7%), and Massachusetts (8.3%). All of these states have been gradually increasing their minimum wage and continue to push for higher wages. With the cost of living being higher in states like California and New York than they are in the states where there was a decrease in average wages, the wage differences certainly check out. Notably, the four states that saw a decrease in average wages will not raise their minimum wage in 2022.
All business sizes saw a percentage increase in average weekly wage in 2021, but small businesses had the largest (6.1%), followed by midsize businesses (3.6%) and large businesses (1.7%). Although many large businesses have increased wages in the last year, inflation has gotten to the point where some question whether large companies should be doing significantly more for their workers.
Wages vary across different industries, and while finance is often hailed as the highest-paying career path, our research reveals a different industry as the top choice based on average weekly wage.
Across all business sizes, employees who worked in the information industry were found to have the highest average weekly wage: $1,738 for small businesses, $2,259 for midsize businesses, and $3,493 for large businesses. The information sector is still growing considerably, and is projected to continue expanding over the next several years, so it remains a high-paying and financially rewarding career path. Finance came in right behind, paying only slightly less than information jobs across all categories. For small-business employees, professional and business services took third place with an average wage of $1,298 per week.
Of course, industries of all kinds saw major changes in 2020, and many had to pivot fundamentally as a result. The construction industry is renowned for the huge labor shortages it experienced due to the pandemic, which were as severe as they were prior to the pandemic when there was much more demand for construction labor. Wages rose in this industry throughout 2021.
Other industries saw an increase in average wages from 2020 to 2021, for a slew of reasons but largely as a response to huge shortages across the labor market. But which industries saw a major wage increase, and which saw the most significant decrease?
From 2020 to 2021, employees in information saw the biggest increase in average weekly wage overall. Those working for midsize (19.9%) and small businesses (15.6%) especially benefited. For small-business employees, the industries with the largest wage increase after information were finance, leisure and hospitality, and service provision.
Our study also found that for large-business employees, the natural resources and mining industry saw the biggest decrease in average weekly wage from 2020 to 2021. It’s possible the industry has seen a decrease due to COVID-related economic troubles.
The final section of our study asked how changes in the employment rate since the outbreak of the pandemic have impacted businesses of all sizes. As expected, results showed that there was a pretty significant decrease in employment among businesses of all sizes from 2020 to 2021.
From 2020 to 2021, midsize businesses saw the biggest decrease in employment rates, with an 8.5% dropoff. Small businesses fared slightly better but not by much (-5.7%), while large businesses saw a 5.2% decrease in employment.
Only two states saw a positive increase in small-business employment rates from 2020 to 2021: Idaho (2.0%) and Utah (1.6%). Hawaii saw the most significant decrease in employment (-13.5%). Hawaii, which has an economy based significantly on tourism, was hit hard by the pandemic but bounced back in 2021. That said, the job market struggled to catch up even as recently as the summer of 2021.
Final Thoughts
With many experts predicting that turnover will continue to be a major issue, especially in lower-wage industries, 2022 will likely be an interesting year for the labor market. Whether that will continue to translate into wage increases to incentivize workers remains to be seen, but there’s no doubt that businesses of all sizes had to make changes as a result of the pandemic. Small businesses especially have experienced significant challenges as a result of the economic impacts of the pandemic - throwing a spotlight on the importance of supporting these businesses as often as possible.
Skynova provides online software for small businesses to help with invoices, accounting, timesheets, and more. In addition, we like to write in-depth articles about various topics we, and hopefully our customers, find interesting. These generally have a business or workplace angle and often intersect with another area of society, e.g., business and technology, politics, sports, health. The articles are based on surveys, statistics and our own research, conducted to find novel insights or perspectives.
For this study, we conducted an analysis using wage and employment data from the U.S. Bureau of Labor and Statistics, Quarterly Census of Employment and Wages. Small, midsize, and large businesses were classified as follows:
Washington D.C. and Puerto Rico were not included in the geographic data. The median weekly wages by business size and industry were used to determine the highest and lowest wages per state/industry.
Are you a professional or job seeker looking to see which states and business sizes are currently offering the best wages? You’re more than welcome to share our study if you found it helpful. We just ask that you link back to this page and that your purposes are noncommercial.