Job quality begins to recover

Snapshot for June 29, 2005.

Job quality begins to recover

For the first time since the summer of 2001, the industries that traditionally offer higher-paying jobs (e.g., professional and technical services) are starting to grow faster than lower-wage industries (e.g., retail trade) as a share of all jobs in the labor market. This recently reversed trend suggests that the labor market is finally starting to add better quality jobs than it has in the past few years. 

The chart below shows one way of measuring job quality: the percent difference in wages between the industries that are expanding and those that are contracting in terms of the share of total jobs.  In good times, the comparative wage differential is positive, as can be seen between 1996 and 2001 when the industries that were expanding paid better wages.  In the second quarter of 1998, for example, the industries that were seeing gains in job share paid about 30% more than the jobs in the lower-paid industries, which were contracting as a share of the total labor market. But during the recession of 2001, this measure of job quality fell precipitously and remained in the negative zone until the first quarter of 2005, at which point the trend finally reversed. By 2005, the economy’s expanding industries were paying about 3% more than its contracting ones.

While this recent shift in the composition of employment has been positive, especially when compared to earlier in the recovery, a much larger determinant of wage growth is the wage trend within  industries.  Over the past year, wages have generally lagged inflation. So while the labor market's employment composition has improved, many workers are still making less than they were a year ago in real terms because their wage growth simply hasn’t kept pace with inflation.

Today's Snapshot was written by EPI economist  Elise Gould.

Check out the archive for past Economic Snapshots.