Tuesday, September 15, 2015

Wage Stagnation in America

A recent report from the National Employment Law Project may help us to better understand why many Americans feel like they simply cannot get ahead.  While headline employment statistics like the unemployment rate, the number of new jobless claims and the number of job openings suggest that the economy has healed since the end of the Great Recession, there is an underlying aspect of the "work-a-day" world that has a significant impact on working Americans, particularly those working in low-wage occupations.

The authors of the report looked at data from the Occupational Employment Statistics series which allowed them to examine wages across 785 occupations, providing them with a very complete picture of what has happened to wages since 2009.  From this data, they were able to calculate the percentage change in real (i.e. corrected for inflation) median hourly wages from 2009 until 2014 which were then grouped into quintiles (five groupings representing 20 percent each).  Now, let's look at their findings.

Here is a graphic showing the five wage groupings and what has happened to real hourly wages over the period between 2009 and 2014 along with the overall picture:

Averaged across all 785 occupations, the real median hourly wage declined by 4 percent over the six year period.  It is also quite clear that those who worked in low- and medium-wage occupations experienced greater declines in their real hourly wages than their higher paid counterparts.  Real wages for those earning in the lowest bracket who earned between $8.84 and $10.97 per hour declined by 5.7 percent over the six year period to 2014, the highest of any of the five quintiles.  In comparison, real wages for those earning in the highest bracket who earned between $31.82 and $87.36 per hour declined by only 2.6 percent over the period between 2009 and 2014

Let's look at the occupations that are found in the lowest quintile, how many thousands of Americans are employed in these occupations, their median hourly wage in 2014 and the change in median wage over the six year period between 2009 and 2014:

The largest group in the lowest earning quintile are those workers in the retail sales sector; the 4.56 million Americans who work in this sector had a median hourly wage of $10.28 in 2014 and saw their real wages shrink by 5.0 percent between 2009 and 2014.  The group that saw the largest decline in real wages of 8.9 percent are the 1.1 million Americans who are cooks in restaurants who had a median hourly wage of $10.80 in 2014.  To put this decline in real wages into perspective, a full-time restaurant cook experienced an income loss equivalent to $2185 over the years between 2009 and 2014 for an average annual decline of $437 or about what an average household with comparable earnings would spend on food over a two month period.

Interestingly, the study found that five of the ten occupations that show the most potential for additional employment growth between 2012 and 2022 are in the bottom wage quintile as shown on this table:

This relationship shows that, while there will be employment growth in these sectors, occupations including personal care aides, retail salespersons, home health aides, food preparation and serving and janitors and cleaners, the jobs will still be very low paying choices.  The economic security of American workers in these jobs will remain woefully inadequate.

While the Federal Reserve has "dumped" trillions of dollars into the system to kickstart the economy since the Great Recession took hold in early 2008, this study shows us that the "money" has done nothing to improvement the long-run trend in wage stagnation in America, a situation that is leading to growing income inequality.  What is of particular concern is the fact that the occupations that are expected to be job creators in the next decade are those that are both poorly paid and subject to the negative impact of inflation.   


  1. A big problem with jobs is the more they pay the greater the incentive becomes to find a way to make them more efficient and reduce the number of workers preforming them. Unemployment is a world wide problem. In developed countries it appears to be structural and caused by a lack of demand. Bad tax policies and government interference in the economy often favoring large businesses have added to the problem.

    Unemployment tears at the fabric of society as many of the unemployed become disheartened. Overtime their skills tend to become "rusty" and obsolete. This often leads to problems with debt and homelessness that can cause the unemployed to fall into the vicious circle of poverty. This means that when the economy recovers these individuals may not fit the job vacancies that are created. My concern is the cultural damage this reeks.


  2. Something that is left out and has a direct impact on consumption is actual after tax take home pay. Taxes have been rising far faster than the rate of inflation. Property, alcohol, cigarette, sales and gasoline. Education too has been climbing at a steeper rate than inflation. So simply juxtaposing wages against measured CPi leaves out a great deal of downward pressure on consumption.