Personal Income Quality Improving?

EPI noted in a June research piece — reported Monday in the WSJ — that "job quality has begun to recover:"

"For the first time since the summer of 2001, the industries that traditionally offer higher-paying jobs (e.g., professional and technical services) are starting to grow faster than lower-wage industries (e.g., retail trade) as a share of all jobs in the labor market. This recently reversed trend suggests that the labor market is finally starting to add better quality jobs than it has in the past few years.

The chart below shows one way of measuring job quality: the percent difference in wages between the industries that are expanding and those that are contracting in terms of the share of total jobs.  In good times, the comparative wage differential is positive, as can be seen between 1996 and 2001 when the industries that were expanding paid better wages.  In the second quarter of 1998, for example, the industries that were seeing gains in job share paid about 30% more than the jobs in the lower-paid industries, which were contracting as a share of the total labor market. But during the recession of 2001, this measure of job quality fell precipitously and remained in the negative zone until the first quarter of 2005, at which point the trend finally reversed. By 2005, the economy‚Äôs expanding industries were paying about 3% more than its contracting ones."

click for larger chart:


If this holds up, it may be a positive development. It may also reflect a shift int he dynamics of the economy. What are the underlying causes of this move, and how may htey play out? I would also like to learn how this compares to prior cycles, in order to gage subsequent impact on the broader economy, as well as the markets.

What happens when these wage improvements occur? What sectors are the underlying sources? Its an interesting subject, worth exploring in greater detail.

More on this later


Job quality begins to recover
Elise Gould
EPI, June 29, 2005

Higher-Paid Jobs Rise at Faster Clip
Lower-Wage Sectors Trail For the First Time in Years, In Healthy Economic Sign
THE WALL STREET JOURNAL, July 12, 2005,,SB112113393532083042,00.html

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  1. wondering commented on Jul 13

    I only noticed 2 categories listed: sales and technical/professional. But there are quite a few more types. Certainly one which has been expanding is real estate. Jobs associated with this tend to pay well.

  2. Kevin H. Stecyk commented on Jul 14

    When I click on the above chart, rather than getting a larger chart I get gobblygook. This message is simply a heads up.

  3. Chad K commented on Jul 14

    This chart goes extremely well with the 5yr CPI graph below… Certainly it’s a wonderful explaination for it all.

    I can certainly agree with that chart. I’ve had sum total of 10% raise since Jul-2001… all of that coming by moving jobs and catching the yearly raise. Working for a highly-conservative bank meant no raises and some minor layoffs in the recession and post-recession periods.

    The word around from the group of us that left the bank in the past year is that the raises are getting nicer…. hearing friends now getting 6-9%… certainly respectable given the 4 years they went without.

  4. kharris commented on Jul 15


    A recent (WSJ?) piece on real estate agents reported that they earn less than the median income. There are lots of other jobs associated with real estate, but agents may not belong in that higher-tha-average class.

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