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Personal Income Quality Improving?

Posted By Barry Ritholtz On July 14, 2005 @ 6:45 am In Economy | Comments Disabled

EPI [1] noted in a June research piece — reported Monday in the WSJ [2] — that "job quality has begun to recover: [3]"

"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:

Epi_chart1_6001 [4]

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 [3]
Elise Gould
EPI, June 29, 2005

Higher-Paid Jobs Rise at Faster Clip [2]
Lower-Wage Sectors Trail For the First Time in Years, In Healthy Economic Sign

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URL to article: http://www.ritholtz.com/blog/2005/07/personal-income-quality-improving/

URLs in this post:

[1] EPI: http://www.epi.org/

[2] WSJ: http://online.wsj.com/article/0,,SB112113393532083042,00.html

[3] job quality has begun to recover:: http://www.epi.org/content.cfm/webfeatures_snapshots_20050629

[4] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/epi_chart1_6001.jpg

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