The Quality of New Jobs From the 1990s Through June 2004

Publication Date: September 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

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Abstract:

The course of interest in labor market issues thus far in the current decade is much like the path followed through the mid-1990s. The focus was on people's job prospects for at least a year after the 1990-1991 and 2001 recessions ended as the unemployment rate kept rising and employment kept falling. Once the labor market rebounded, attention switched to the kind of jobs being created: were the new jobs good (high paying) or bad (low paying)?

Data are not available on wages paid specifically for newly created jobs. The quality of job creation was initially approached by examining the industries or occupations in which employment had grown after dividing them into low paying and high paying groups. Studies that took an industry approach found most new jobs added during the 1990s were low wage, while those that took an occupation approach found most new jobs added were high wage. A limitation of the approaches is the level of aggregation: although the service-producing sector has been characterized as low paying, for example, it actually is comprised of industries that pay comparatively well and comparatively poorly; similarly, industries are staffed by workers in many different occupations offering a wide range of earnings. Absent both industry and occupation detail, it cannot be determined whether the jobs being created are relatively high paid (e.g., physicians), relatively low paid (e.g., nursing aides), or across-the-board within an industry (e.g., hospitals). To capture these outcomes, the U.S. Bureau of Labor Statistics developed a matrix of occupationindustry job categories (e.g., managers in manufacturing) which were then divided into high, middle, and low earnings employment groups. Based on this approach, new job growth occurred at opposite ends of the pay spectrum during the 1990s, but the rate of job creation was greater in the highest compared to the lowest wage group.

The application of this approach to more recent data is problematic because there are large occupation-industry categories, which account for a large share of net job growth since 2000, lying near the earnings boundaries that separate lower from higher paying jobs. Nevertheless, following this approach, Factcheck.org found that employment rose in high paying jobs and fell in low paying jobs while BusinessWeek found that employment rose in low paying jobs but rose almost twice as much in high paying jobs. A problem with these studies is that a job that pays slightly more than the median wage is treated the same as a job that pays significantly more. One study that avoided this problem estimated that the wage in expanding industries was 13% lower than in contracting industries as a share of employment. Most analyses of the new job quality issue looked at industry data only, and a few, at occupation data only. As mentioned above, these categories are too broad to give very meaningful results.

Attempts to answer the new job quality question with one "overall" result may oversimplify. A look at the fastest growing and declining occupation/industry categories reveals that there is job growth and decline across the earnings spectrum. In any case, new job quality affects only a small subset of the labor market and may not offer much illumination on broader labor market issues, such as compensation growth, unemployment, and earnings inequality. This report will not be updated.