What we know about income inequaliy: America’s disappearing ‘middle-skill’ jobs and falling wages

Feb 12, 2014 19:30 UTC

There are a lot of things that “explain” inequality. Technology, finance, societal, and cultural changes have all played their part. In this series, Counterparties takes a look at the various things that correlate with rising income inequality in order to ascertain how we got to this economy and where we might go from here. For story tips/comments/complaints email us atCounterparties.Reuters@gmail.com.

America is losing middle class jobs — and middle class pay. Not only are “middle-skill” jobs disappearing as routine tasks become computerized (think everything people do in the television show “The Office”), but that job loss has contributed to stagnating wages, according to a recent paper by Michael Boehm of the University of Bonn.

This chart shows the changes in US employment shares by type of occupation since the end of the 1980s. The paper used two different measures, the National Longitudinal Survey of Youth (NLSY) and the comparable years and age group in the more standard Current Population Survey (CPS):

For this chart, the high-skill occupations comprise managerial, professional services, and technical occupations; middle-skill occupations are things like sales, office/administrative, and production occupations; and low-skill occupations include food, cleaning, and personal service occupations.

What Boehm found is that this erosion of middle-skill jobs is correlated with a similar erosion of middle-skill pay. This chart shows how wages were expected to grow back in 1980 (blue line), and how wages actually grew (red line):

Here’s what Boehm says this mean:

What emerges unambiguously from my work is that routinisation has not only replaced middle-skill workers’ jobs but also strongly decreased their relative wages. Policymakers who intend to counteract these developments may want to consider the supply side: if there are investments in education and training that help low and middle earners to catch up with high earners in terms of skills, this will also slow down or even reverse the increasing divergence of wages between those groups.

 

Previously in this series:

What we know about income inequality: Better marriages may mean more inequality

Is the US labor market doing better than we think?

Feb 4, 2014 17:22 UTC

What if the labor market America is actually much closer to a full recovery than we think? That’s the gist of a new post by Samuel Kapon and Joseph Tracy at the New York Federal Reserve. The authors examine the labor market’s employment-to-population ratio, which plummeted during the financial crisis and hasn’t recovered since, even as the economy has picked up steam.

Their general theory:  when corrected for the demographics of our aging workforce, the labor market looks a bit healthier than we previously thought. Here’s their chart:

Kapon and Tracy attempted to normalize the E/P ratio, adjusting for both cyclical employment trends and, crucially, for demographic trends like older people dropping out of the workforce. What they got was the blue line — which at the moment is pretty close to the actual E/P ratio (the red line).

Matthew Klein sees a few problems with the data, though. “The explanation ignores the actual data we have on employment by age group,” he writes, noting that aging alone can’t explain why America’s labor market has shrunk. Paul Krugman, too, is skeptical. He crunches the numbers on his own and finds that “around 40 percent of the decline is demographics, but the rest is cyclical, and that we’re still far below full employment.”

The state of America’s unions

Ben Walsh
Jan 24, 2014 19:16 UTC

The percentage of American workers in unions was constant at 11.3% from 2012 to 2013, new data from the Bureau of Labor Statistics show. In 1983, the first year the BLS started collecting this data,  that number was 20.1%.

The rate of unionization among public-sector workers is five times higher than for private-sector workers, at 35.3% and 6.7%, respectively. In terms of occupations, education, training, library, and law-enforcement/first-reponse workers have the highest unionzation rate at 35.3%. Farming, fishing, and forestry workers have the lowest unionization rates at just 2.1%. There’s also a very strong geographical split in unionization:

Here’s the BLS:

30 states and the District of Columbia had union membership rates below that of the U.S. average, 11.3 percent, while 20 states had higher rates. All states in the Middle Atlantic and Pacific divisions reported union membership rates above the national average, and all states in the East South Central and West South Central divisions had rates below it.

In just three states — New York, Alaska, and Hawaii — is union membership above 20%. Washington State just misses the cut at 18.9%. New York has the highest membership rate in the country at 24.4%.

from Equals:

The depressing reason women are gaining labor market share

Jan 17, 2014 17:06 UTC

The mancession continues. What seems like a step forward for women in the workplace is actually bad for both genders*.

Last week’s BLS data revealed that all of the job gains in the labor market in December went to women.

The term mancession seems to have been coined back in 2009. In a post dedicated to the topic at the time, Catherine Rampell wrote:

In the 2001 recession, men were also disproportionately affected by job losses and women gained a larger share of the labor force as a result. But in the post-recession boom years, men started to regain some of their lost ground. The same may happen in the coming months or years, if the job market starts to recover.

So far, men haven’t regained much of their lost ground. Here’s what the proportion of male (blue) and female (red-orange) workers has looked like over the last 45 years.

Here I zoomed in to only the last two recessions:

 

Women as a percentage of the workforce just barely declined post-recession. As a singular data point, that seems like something to celebrate. But what you see here is men getting hit really hard between 2006 and 2010 (that’s construction and manufacturing both shrinking). Women lost jobs, but fewer (that’s healthcare and education weathering the recession okay). Since 2010, neither group has really recovered. Worse, the little recovery there has been, especially for women, has been in low-wage industries.

Matt Yglesias takes a closer look at the mancession phenomenon, breaking the trend down by age group. Older workers of both genders, he finds, weathered the last few years fairly well. Younger workers are a different story, though. He writes, “the younger you look the more you see men's disemployment as a theme. For younger workers we really are slouching toward gender equity—we're just doing it more by men becoming worse off than by women becoming better off.”

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*I’m sticking to the gender binary here because BLS data does.

America’s mediocre labor market recovery, in charts

Oct 22, 2013 13:13 UTC

Economists expected a gain of 180,000 jobs in September, while today’s Commerce Department data showed a gain of just 148,000 jobs. Here’s today’s disappointing results in chart form:

 

And here’s a look at America’s labor force, which has been shrinking over the last few years:

 

The Economic Policy Institute has this look at exactly who is leaving the labor force for various reasons:

Calculated Risk has updated this stark visualization of America’s job market:

As the American Enterprise Institute’s Michael Strain noted, the 3-month moving average of job growth is looking quite ugly:

 

On a more hopeful note, Matt Phillips of Quartz has a good look at where job growth is happening:

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