Wednesday, July 17, 2013

Real median wages rose during the recession for even 4 of the 5 worst performing jobs

- by New Deal democrat

Even E.J.Dionne yesterday repeated the conventional - and incorrect - wisdom about real median wages:
Low- and middle-income workers took the biggest hit in the recession, as a report released recently by the National Employment Law Project showed. Real median hourly wages fell overall by 2.8 percent between 2009 and 2012, but by 5 percent or more in half of the top 10 low-wage occupations.
(my emphasis)

The data, from the National Employment Law Project, calculated that the five job categories that fared the worst in the period between 2009 and 2012 sustained real median wages losses of between -5.0% and -7.1% during that time.

But the truth is, even 4 of these 5 worst-faring job categories did not "take a hit in the recession." Here's how they fared during and after the recession. The first two columns show the change in real median wage during each time period, and the last column shows actual nominal wages:

Job 2007-09 2009-12 2007-12 Nominal
wage increase
+1.0% -7.1% +3.8%
Food prep
+1.2% -5.2% +6.3%
Home health
-1.1% -5.0% +4.1%
care aides
+0.3% -5.5% +5.0%
Maids and
+1.4% -5.0% +6.7%

I've replicated the NELP's methodology in the above table, and confirmed their specific point about real median wages falling for these jobs from 2009 through 2012.

But I'm harping on this because the impression left in all of these articles is that real wages fell during the recession and have continued to fall during the recovery. That isn't what happened. As the above table shows, all but one of even the worst-faring job categories experienced real median wage increases during the recession. That fact is testament to the power of the secular and dramatic rise in the price of gasoline before and at the outset of the recession, it's profound decline beginning in July 2008, and it's strong rebound since 2009.

Obviously we want real median wages to rise, and it is both a problem with sustaining the recovery, as well as the simple well-being of many millions of Americans, that they have stagnated. Part of the issue is that nominal wage increases, which averaged +2.6% a year even during the recession, have slowed to +1.6% a year in the three year period afterward. But what has made a +1.6% nominal increase a real median decrease, more than anything else, is the secular rise in the price of Oil. The simplistic conventional wisdom in analyses like that by E.J. Dionne miss this crucial policy point.