Are Jobs Getting Worse? The Evolving Distribution of Wages and Job Compositionover the 2001 to 2004 period


This study uses household survey data through August of 2004 (most recent available at the time of writing) to evaluate changes in the average wage, distribution of wages, and differences in the composition of growing and shrinking jobs. This study adds to the state of knowledge about the present recovery by virtue of (1) using up-to-date wage and employment data; (2) using a more informative classification of “jobs” through 440 detailed industry and occupational categories; and (3) producing more reliable findings through analyzing the entire distributions of job composition and wages, instead of just providing averages.

The key findings are:

  1. Wage growth was tepid immediately after the recession (i.e., 2002 and 2003) and turned negative over 2004. Adjusted for inflation, the average wage grew at 0.06% and 0.6% annually over 2002 and 2003, respectively. During the current year, the real wage fell by an annualized 0.42%. Overall, since the 4th quarter of 2000, the real wage has grown at an annual average rate of 0.9%, but this was driven primarily by a 3.4% growth during 2001.
  2. Wages throughout the distribution today stand lower than where they were during the 4th quarter of 2001, when the recession ended and the recovery began. However, the hardest hit have been workers at the bottom half of the labor market. During the recovery period, those earning at the 10th percentile saw their wage fall by an annual average of 1.4%; the median wage remained completely static; and those earning at the 90th percentile saw an annual growth of 0.1%. Analysis of the current year, the recovery period, and the full period of the study consistently reveal declining wages at the bottom end of the labor market, and a growing gap between the top and the bottom.
  3. Types of jobs that were shrinking paid 10% to 12% more than jobs that were growing throughout the 2001 to 2004 period. This wage gap between growing and disappearing jobs has been stable over the recovery, and this year stood at $1.90/hr (or 11.5%).
  4. Growing jobs were relatively more concentrated in the lowest part of the distribution (under $12/hr) as compared to shrinking jobs throughout 2001 to 2004. The analysis of the entire distribution shows that the modal (or most prevalent) growing jobs paid around $9/hr, and were typically composed of service occupations in health services and hospitality industries. The modal shrinking jobs paid between $12 and $15/hr and were typically represented by production workers in electronics and machinery manufacturing, as well as administrative workers in industries such as telecommunications, or professional and technical services.
  5. Jobs paying at the bottom third of the distribution saw a surge in net employment growth throughout 2001 to 2004. Although there has been an upturn in middle range jobs during the current year, this has largely come at the expense of jobs paying at the top third. Looking either at the recovery period or this year alone, job growth at the bottom third outpaced growth in the middle by 2-to-1. Meanwhile, growth at the top third stagnated over the recovery period generally and actually shrank during 2004.