Where have all the Wages Gone?

Transcription

1 Where have all the Wages Gone? Jobs and Wages in 2006 Arindrajit Dube, PhD Dave Graham-Squire Center for Labor Research and Education (Institute of Industrial Relations) UC Berkeley August 29, 2006

2 Profits UP Wages DOWN Productivity growth is strong, and profits soaring Job growth has been moderate, and unemployment is low and falling BUT Real wages are falling in the, and barely keeping up with inflation in California Labor s share of GDP is lowest on record

3 Moderate Job Creation in and California California added 172,000 jobs between July 2005 and June added 1.7 million jobs in the same period. This represents a small decrease in growth since the last year. Jobs Added in Jobs Added in CA Job growth still not at the post-recession level California Sources: (1) Current Employment Statistics, measuring non-farm payroll employment

4 The Housing Boom in California is Deflating Bringing Down Job Growth The sharp drop in growth of Construction/Real Estate jobs (9.8% of all private sector jobs) contributed to the lower job additions in California. A Smaller drop in Constr./Real Estate jobs was found for U.S. overall Jan-02 May-02 Total Private Construction & Real Estate Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sources: (1) EDD Data 12 month growth

5 Unemployment Rate is Low and Falling The unemployment rate in both the United States and California declined to 4.8% in 2006, virtually matching the lowest level of unemployment in California in the last boom period (4.7% in February 2001). Unemployment Rate CA Sources: (1) Current Population Survey, adults (18-65 years of age)

6 But Real Wages are Falling in U.S., and Stagnant in California 4. In the U.S., real wages declined by 0.8% between 2005 and 2006, and are 0.7% lower in 2006 than in 2003 and 0.2% lower than in 2002, when the recovery began. 5. In California, real wages wage rose by 0.4% between 2005 and The average real wage is 0.2% lower in 2006 than in $21.00 $20.00 $19.00 $ % 2.0% 1.0% 0.0% CA % 1.9% 2.3% 2.7% 0.4% 2.0% 0.3% -0.1% 0.2% CA 0.4% -1.0% -0.7% -0.8% Notes: (1) Current Population Survey, all adults; the year 2005 means July 2004 June 2005, etc.

7 Yawning Gap between Productivity and Wages/Compensation Productivity (output per labor hour) grew by 2.7% between 2005 and 2006, and by a total of 12.3% since the recovery began in The gap between hourly productivity and hourly compensation is at an alltime high since Labor s share of GDP is at an all-time low since the same year. Sources: (1) BLS Data Real Hourly Wage Outpur per Hour Real Hourly Compensation Compensation Output/person

8 So Where is the Productivity Going? Pre-tax corporate profits rose by 12.5% after adjusting for inflation between 2004 and 2005 (latest year available), and by a total of 38.8% since % 15% 10% 5% 0% -5% -10% -8.4% 15.8% 13.5% 9.7% 9.2% 2.0% 2.3% 0.8% 0.0% % Real Profit (BEA) Real Wage & Salary (BEA)

9 Young Workers took the biggest Hit The worst showing for wages was for young workers under 30, who saw a total decline of 1.8% since 2003 in California, and 2.3% in U.S. overall. 0.50% 0.00% -0.50% -1.00% -1.50% -2.00% -2.50% 0.3% -0.2% -0.7% -0.5% -0.7% -0.7% -1.8% CA -2.3% Under to to 64 Total Notes: (1) Current Population Survey, all adults; the year 2005 means July 2004 June 2005, etc.

10 Wage Inequality is Growing Between 2003 and 2006, real wages for those in the bottom third of the U.S. workforce declined by a total of 2.4%, while wages of those in the top third posted a small gain of 0.1%. Those in the middle saw wages fall by 1.3%. In California, real wages declined by 1.2% for the bottom third and rose by 0.6% for the top third of the distribution in California, while the middle third experienced a 1.1% decline Bottom Third Middle Third Top Third Bottom Third Middle Third Top Third Notes: (1) Current Population Survey, all adults; the year 2005 means July 2004 June 2005, etc.

11 Wage Fall Sharper for Black/Latino Workers in California, and Males in the U.S. In the U.S., wage reduction was broad based, and only Asian-Americans posted wage gain. In California, Asian- Americans tended to do better, while Black and Latino workers posted the worst wage losses. Men did worse than women in wages. 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% 1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00% CA -0.5% 1.0% White 0.1% -2.1% African American -1.5%-1.6% 2.1% 5.1% -0.2% -0.7% Latino Other Total Sources: (1) Current Population Survey, Jan. through June of 2000 to 2005; (2) CPI-U national used to deflate nominal wages Job categories defined as combinations of 2-digit industry and 3 occupational categories. -1.3% 0.1% -0.2% -0.2% -0.2% -0.7% Male Female Total CA

12 Top 5 Contributors To Wage Changes in U.S. Within Effect Between Effect Total Effect Negative Contributors () Blue Collar Construction Workers -$ $ $0.048 Sales workers in Retail -$ $ $0.031 Blue Collar workers in Transportation & Warehousing -$0.024 $ $0.024 Service workers in Health Care Services -$ $ $0.019 Managerial workers in Non-Durable Manufacturing -$ $ $0.017 Positive Contributors () Managers in Transportation $0.018 $0.003 $0.021 Professional Workers in Arts & Entertainment $0.020 $0.000 $0.021 Managerial Workers in Education $0.012 $0.002 $0.014 Professional Workers in Health Care Services $0.012 $0.000 $0.012 Managerial Workers in Finance -$0.003 $0.014 $0.011 Sources: (1) Current Population Survey, Jan. through June of 2000 to 2005;

13 The 4 Key Questions I asked Last Year Will job growth increase enough to tighten the labor market and raise wages? ANSWER: NO Will California raise its minimum wage? ANSWER: YES Will higher-end service sector jobs pick up again? ANSWER: MIXED BUT TOO LITTLE TO HELP MUCH Will housing prices slow down, bringing down jobs and wages? ANSWER: UNFORTUNATELY, YES