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Snapshot for January 21, 2004.

Jobs shift from higher-paying to lower-paying industries

In 48 of the 50 states, jobs in higher-paying industries have given way to jobs in lower-paying industries since the recession ended in November 2001 (see map). Nationwide, industries that are gaining jobs relative to industries that are losing jobs pay 21% less annually.¹ For the 30 states that have lost jobs since the recession purportedly ended, this is the other shoe dropping—not only have jobs been lost, but in 29 of them the losses have been concentrated in higher paying sectors. And for 19 of the 20 states that have seen some small gain in jobs since the end of the recession, the jobs gained have been disproportionately in lower-paying sectors.

States with particularly worrisome job markets—where there have been substantial declines in the number of jobs and where the difference in wages between job-gaining and job-losing industries is particularly high—include:

• New Hampshire, which still has fewer jobs than when the recession ended, and where the wages in industries gaining jobs are 35% lower than wages in industries losing jobs.
• Delaware, which, likewise, has lost jobs since the recession ended and where job- gaining industries have wages 43% below those in job-losing industries.
• Colorado, which has lost almost 2% of its jobs since the end of the recession and where job-gaining industry wages are 35% below the wages in job-losing industries.
• West Virginia, which has lost 1.7% of its jobs since the end of the recession and where wages in job-gaining industries are 33% below wages in job-losing industries.

The shift in jobs from higher-paying industries to lower-paying industries has affected nearly every state. This dynamic has the potential to significantly slow the growth of living standards for working families.

Table: Average wages in growing and contracting industries, end of recession to November 2003

Methodology: Employment data come from the Bureau of Labor Statistics Payroll Survey; average wage data come from the BLS Covered Employment and Wages survey and are average wages for employees covered by the unemployment compensation program. We begin by calculating industry shares of employment and then take the difference in the shares over the period of interest (disaggregated to the level of 12-14 sectors, depending on the state). These changes are negative for industries contracting as a share of the total and visa-versa. We then create industry weights by taking each change as a share of the total change separately for contracting and expanding industries (thus, we have weights that sum to one for both groups). These weights are multiplied by average annual pay for the 12-14 industries in 2002. Note that we hold this wage vector constant so that the results are only affected by the shift in industry shares, not by wage changes.

1. Note that this is a larger shift than the 13% change that has been reported for hourly wages, suggesting that jobs are both shifting from higher hourly wage to lower hourly wage industries and from industries that employ workers for greater numbers of hours to industries that employ workers for fewer hours.

This week’s snapshot was written by EARN Director Michael Ettlinger and EPI economic analyst Jeff Chapman.