Friday, November 7, 2014

Job And Wage Growth Study By Cleveland Federal Reserve Bank

This study by the Cleveland Federal Reserve Bank examines job and wage growth in the US before and after the the onset of the Great Recession.  The transition from a manufacturing economy which accounted for 37% of the jobs at the end of WW ll, to a services economy in which only 10% of the jobs are in manufacturing, has affected wage growth.  Prior to the recession wage growth was similar across the job sectors.  Following the recession, the fastest growth of jobs has been in the services sector.  Wage growth in the services sector has fallen below its average prior to the recession, and it is well below the rate of wage growth in the slower growing sectors of the economy.

It may seem counter intuitive that the fastest growing sector of the economy has experienced the slowest growth in wages.  That is explained by the high level of skill diversity in the services sector.  Much of the job growth has been in low skill services which pay low wages.  It would appear that structural changes in sector growth in the US economy may account for the low rate of wage growth following the Great Recession.  In addition to slow growth in higher wage manufacturing jobs, there has been slow growth in government and other service sectors which pay higher wages.

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