Middle wage jobs return to the economy

Editor’s note: In May, we published a report noting that more jobs were added to Washington’s economy than were lost during the recession. We received a comment on our Facebook page asking about the quality of those jobs. It’s a good question. We passed it to ESD labor economist Paul Turek and asked him to review the data. You might be surprised by what he found…

A question of quality

Each month, the Employment Security Department releases a state employment report compiled in cooperation with the U.S. Bureau of Labor Statistics. The report discloses the number of jobs the state economy generated during the previous month, as well as the unemployment rate. However, the jobs number says little about the quality of jobs that get filled.

“Quality” is a relative term, but often can be measured against certain standards. Regarding jobs, for instance, a higher quality job might be one that pays more,is full-time, and carries benefits.

As the state began recovering jobs lost to the recession, economists commonly thought that the labor market was generating low-paying jobs and relatively few high-paying ones. The low-paying jobs also were viewed as having fewer hours and fewer benefits. To determine if these presumptions are true, I separated 54 industry classes by which state employment is tracked, and ranked them according to the average hourly wage paid in each industry in February 2010, the low point of state employment. I separated the industries into five quintiles (see chart below) and calculated employment changes within each quintile at the beginning (orange) and at the end (blue) of the jobs recovery period.

Click to enlarge the chart of job growth by income level.

Click to enlarge the chart of job growth by income level.

The data show that early in the recovery, the degree of job creation in higher-wage industries was almost as prevalent as in lower-wage industries. What had been slow to recover had been middle-wage jobs, principally those in construction and manufacturing-based industries that were most affected by the recession. This phenomenon has been referred to as “job polarization,” since job gains occur at both “poles,” but not in the middle.

As more jobs continued to be added, the most recent evidence shows that middle-wage jobs are growing as well, and that job growth across wage levels is becoming more broad-based. The greater range of employment opportunities has the labor market close to returning to normal and potentially  pulling more people back into the workforce. This trend also is helping to reduce the number of long-term unemployed, although the number today is still historically high. The real turning point should come when we begin to see wages start to grow as businesses increasingly compete for workers. Right now, we appear to be on that path.

Paul Turek is Employment Security’s statewide labor economist.

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