Friday, May 2, 2014

Is it really different this time? historical recoveries for low vs. high paid jobs

 - by New Deal democrat

In the last week there has been another spate of articles on the order of The low wage job explosion from CNN Money.  On Monday Prof. Mark Thoma picked up the issue.

There is no doubt that what the articles are saying about the post-recession jobs situation is correct.  Unfortunately, none of these articles compare this recovery with prior recoveries.  The question is, is this jobs recovery producing a different mix of jobs from earlier recoveries, or is it producing a similar mix, but taking a longer time to fully recover?  Put another way, is this jobs recovery different in kind, or just different in intensity compared with prior recoveries?

This is an issue I spent some time researching a while ago, but never wrote about.  Since I left a comment at Thoma's site earlier this week and got a plaudit from the well-known Anne in response, I thought I would repost the research I've done so far here.

Here's the hypothesis I am testing:  the typical pattern in recoveries is that low wage jobs recover faster than high wage jobs.  Thus, earlier in a recovery it will be the case that the economy seems to be producing only low wage jobs.  Since most post-World War 2 recoveries restored all jobs relatively quickly, the pattern was not long-lasting.  This recovery, however, is from a much deeper hole and is taking much longer, so the period in which it is producing mainly low wage jobs is taking longer and has been profoundly noticed.

If my hypothesis is correct, then as the unemployment rate drops, a bigger proportion of higher wage jobs ought to be created.  Dean Baker produced a graph earlier this week comparing the state by state unemployment rate with low wage food service jobs, that lends support to this proposition:

Notice that, the lower the unemployment rate, the lower the relative rate of low wage food service jobs.

So I examined two types of jobs: I compared recoveries in construction jobs (relatively high paying) with retail jobs (low paying), measuring how long it took for each to recover fully from their pre-recession highs for each recession since World War 2. Here's a chart of what I found:

constructionretaillag in
1953 11/19542/1955-3
1957 11/19641/19592
1970 4/1971 9/19707
1974 4/19788/197544
1981 12/19841/198323
1990 3/19962/199425
2008 n/an/an/a

With the exception of the recovery from the 2001 recession, in every recovery beginning with 1957, retail jobs fully recovered before construction jobs.  This supports my hypothesis.

In essence, I am going to extend the research by the National Employment Law Project, shown in the below graph, which compared only job recoveries from 2001 and 2008, to prior job recoveries.

In addition to retail, note that the two biggest categories of low paying jobs are food service and drinking places, and administrative and waste services.  Data for these two categories of jobs only goes back to the 1990's, so they are of very limited value for the comparisons I need to make. For the record, food service and drinking place jobs returned to their 1990's peak in December 2003 (3 months before construction jobs); waste services returned to their 1990's peak in September 2005 (18 months after construction). Food service has not regained its pre-Great Recession peak. Waste services exceeded its pre-Great Recession peak in November 2013.

In addition to government, I need to test the hypothesis against some of the other high paying private sector job categories besides construction. I imagine this will take a few weeks.  I'll post results as I get them, and we'll see if the hypothesis pans out.