Jobs and Wages in California over the 2000-2005 Period

This study uses household survey data and payroll data through June of 2005 to evaluate changes in employment, wages and composition of jobs in California.

The key findings are:

  1. Employment grew in California, but the labor market remains slack. California added 300,000 jobs between June 2004 and June 2005, a marked uptick from the previous two years. But 2% fewer working-age Californians were employed in the first half of 2005 as compared to the first half of 2001, showing remaining slackness in the job market. In the United States as a whole, the sizeable job growth notwithstanding, there is a 2% gap in the employment rate as well.
  2. In California, real wages grew until 2003, but have fallen since. Adjusted for inflation, the average wage fell by 0.7% between the first halves of 2004 and 2005. This decline comes on top of a 0.5% decline between the first halves of 2003 and 2004. Wages also fell in the United States as a whole by 0.5% between first halves of 2004 and 2005.
  3. Increases in the California minimum wage in 2001 and 2002 helped low-end workers, but those gains are being eroded by inflation. The bottom third of the U.S. workforce experienced wage declines for three years in a row. In contrast, the bottom third in California saw an increase in purchasing power between 2001 and 2003. However, these gains were partly lost over the past two years as the state minimum wage has stayed at $6.75 per hour despite inflation.
  4. In California, real wages within job categories declined between the first halves of 2003 and 2005. The ongoing slack in the labor market—as evidenced by a low employment-to-population rate for working-age adults—means employers face little incentive to raise pay.
  5. Job categories that were growing between 2004 and 2005 paid $2.50 less in California than ones that were shrinking. California saw growth in higher-wage jobs and a reduction in low-paying jobs early in the recovery from 2002-2004. But those trends have been reversed in the past year, with a net growth of service and sales jobs in the food service, retail and accommodation industries that pay under $12 an hour combined with a net loss of higher-paying professional and managerial jobs in high-end business services.
  6. The housing boom has played a crucial role in this recovery—a cause for concern. Net new jobs in construction and real estate accounted for 21% of all jobs added by California’s growing job categories in the past three years, but just 14% throughout the country. Growth in construction and real estate was particularly important for middle-paying jobs in California, accounting for 31% of added jobs in this category. Both jobs and wages could face problems if there are significant price corrections in California’s housing market.