Wage deflation charts of the day

By Felix Salmon
July 9, 2013
a detailed look at what happened to wages during the recovery -- specifically, between 2009 and 2012.

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NELP, the National Employment Law Project, has taken a detailed look at what happened to wages during the recovery — specifically, between 2009 and 2012. They looked at the annual Occupational and Employment Statistics for three years — 2007, 2009 and 2012 — and created a list of wages for 785 different occupations. They then split those occupations into five quintiles, according to income; the lowest quintile made $9.49/hr, on average, last year, while the highest quintile averaged $40.23/hr.

But let’s not look at averages, let’s look at the actual disaggregated data. Here are some charts which Ben Walsh laboriously constructed, and which need a little bit of explanation. Each thin line is one occupation, with nominal wages rebased to 2007=100. As a result, these charts show increase in wages, rather than absolute wages: the lines which rise the most are the ones with the biggest pay raises, not the ones with the highest pay. (Although, as you’ll see, the two are highly correlated.)

The two green lines show inflation: the dark-green line is CPI, while the light-green line is CPI-U, the urban index used by NELP. As a result, all the jobs below the green lines saw real wage declines between 2007 and 2012, while all the jobs above the green lines saw real wage gains.

The charts are presented in order, with the 1st quintile — the lowest-earning occupations — first. You can see that while wages grew in both real and nominal terms between 2007 and 2009, there was a decided flattening off thereafter, and inflation started overtaking a lot of jobs from 2009 onwards. The actual figures: real wages grew 1.9% between 2007 and 2009, and then fell 2.8% between 2009 and 2012, which means that over the full five-year period they fell, overall, by 0.9%.

1stq.png

2ndq.png

3rdq.png

4thq.png

5thq.png

As you go down the charts, you can see that until you get to the fourth and fifth quintiles, most jobs fall below the green lines — which means that they’re seeing their real wages fall. You can also see the commodification of low-wage jobs in the the number of occupations in the bottom two quintiles: there are just 47 occupations in the bottom quintile, while there are 186 occupations in the top quintile. (Each quintile, of course, includes the same number of total workers.)

The big-picture lesson that NELP draws is that between 2009 and 2012, real median hourly wages fell by 2.8% — and that the poorer you were to start with, the more your wages fell. The top quintile didn’t do well: their wages dropped by 1.8%, in real terms. But the fourth quintile did particularly badly: its wages fell by 4.1%, on average. To take one example, occupation 39-5012 — that’s Hairdressers, Hairstylists, and Cosmetologists — was earning $12.00 an hour, in 2012 dollars, in 2009. But by 2012 they were earning just $10.91 per hour: a drop of more than 9%. Or look at occupation 51-6042 (“Shoe Machine Operators and Tenders”): that job saw wages fall 14%, in real terms, in just three years, with nominal wages falling from $12.69 to $11.69 per hour.

The charts show the large range of outcomes: some occupations are doing great. At the top end, the highest-paid profession on the list, Psychiatrists, went from earning $69.48 per hour in 2007, to $83.33 per hour in 2012. That’s a real increase of 8.3%. But overall, everybody is doing pretty badly. Here’s the NELP chart:

nelp.tiff

This chart shows where a lot of the current stock-market strength is coming from: capital is taking more than 100% of real productivity gains, with labor steadily losing out. This, I fear, is the New Normal: OK for investors, bad for workers.

Finally, just because I love it, here’s the list of people earning between $26 and $27 per hour, on average. Here Roof Bolters keep company with Social Workers, Librarians hang out with Foresters, and — of course — Public Relations Specialists linger near Writers and Authors. Luckily the Police and Sheriff’s Patrol Officers are there to keep the peace.

26.tiff

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Comments
9 comments so far

Wouldn’t there be a survivor bias here in the top quintiles?

That is, the bottom quintile would, I theorize, contain more jobs that can’t simply be eliminated – janitor, customer service, retail register operator, dishwasher – but whose wages, in boomtime, may have room for reduction. The top quintile would arguably have more jobs that can simply be eliminated – bizdev VP, credit analyst, commercial real estate broker, and so on.

When a job with a given title is eliminated, it drops out of the wage reporting for that occupation, presumably, rather than reporting as $0 wage. The only people who continue to report their wages are those who were not laid off. And how many VPs of bizdev will tolerate wage cuts?

(If anything this cements your broader point of falling wages for labor vs growing returns for capital holders, btw. Just thought I’d bring it up.)

Posted by RyanTate | Report as abusive

One thing that is missing from this is that there is typically a general ascent from low paying jobs to higher paying ones, e.g. the part-time hamburger flipper graduates from school and gets a better job.

But these data do show that inequality is growing, as in order to improve your lot in life (or even stay even) you HAVE TO move up to a better job or you’ll fall behind.

Posted by wigwamca | Report as abusive

This pattern can also be seen, I believe, in Europe, particularly places like the UK and others where wages are significantly higher than in China and the developing world. Ed Milliband, leader of the Opposition Labour Party, coined the expression “the squeezed middle” to describe the phenomenon.

With free trade favouring the evening out of world wages, it looks like more of the same in the future with the West getting poorer and the East getting richer. So who in the West is benefitting from having pushed all this free trade? Clearly industrialists who enhance profits by making stuff in China; the managerial and executive classes who are monetarily incentivised to export jobs to low cost economies; and consumers (temporarily) who can buy cheaper products imported from the cheaper producers – until they have no jobs or insufficient income to pay for all the high-living and debt they take on, mortgaging their children’s futures for a newer, bigger, brighter TVs or cars before they have saved up for them.

And people have the gall to blame a Government which is actually trying to stimulate growth at home instead of in China against the tide of upper class greedypants stuffing their own pockets as the cookie jar empties.

Posted by FifthDecade | Report as abusive

“This chart shows where a lot of the current stock-market strength is coming from: capital is taking more than 100% of real productivity gains, with labor steadily losing out.”

Do these figures include benefits (and employer payroll taxes, though those rates haven’t changed much if any over this time period)? If so, the quoted argument is valid. If not, we also need to look at benefits, as productivity growth could have gone to capital or it could have gone to employee benefits.

Posted by realist50 | Report as abusive

I see this as something comparable to Dutch disease. In some areas, the US.is uniquely productive, and theres no reason why people creating great wealth shouldn’t enjoy most of it. In most areas the US has overly high costs relative to productivity, so the pressure on most wages is down, and most new jobs are low wage.

Posted by tom_the_bear | Report as abusive

I see this as something comparable to Dutch disease. In some areas, the US.is uniquely productive, and theres no reason why people creating great wealth shouldn’t enjoy most of it. In most areas the US has overly high costs relative to productivity, so the pressure on most wages is down, and most new jobs are low wage.

Posted by tom_the_bear | Report as abusive

The grouping by occupation then quintile and reporting as averages makes me very suspicious as to whether this data means what the advocates who compiled it imply it does.

Compositional issues like “Simpson’s Paradox” that could be at play.

But even as reported, these numbers don’t rule out the possibility that every single person surveyed may have had an increase in their wage, or have moved from unemployed (zero/uncounted income) to low-wage (but better than before) employment… while the occupational/quintile *averages* still decline.

In fact, such average-declines might even be a sign of a healthy recovery: lots of young, low-skilled, and career-switchers re-entering the (bottom wage rungs of) each occupational category, bringing down averages. (Also maybe: accelerated retirement or increased voluntary lesiure-taking by the top-wage-rungs, no longer holding on in panic.)

You’d have to compare to similar analyses in prior cycles, or zoom in on narrower age/occupational cohorts, to have a better picture.

Posted by gojomo | Report as abusive

Realist50–you make a good point, but one that is unlikely to show a gain in most workers’ favor. The press is not full of stories about employers becoming more generous with benefits. Certainly many companies have been trying to push more costs, esp. health care, onto the employee.

Posted by Moopheus | Report as abusive

Moopheus, the cost of benefits to employers is nonetheless increasing. Health insurance is through the roof the last few years.

Posted by TFF | Report as abusive
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