Economic Impact: Some signs emerging for growth in midwage jobs

Posted on August 11, 2014 by Chris Chmura

A lot has been made about the hollowing out of America, also called “job polarization” by economists.

Since the recovery began, job growth has been lagging in midwage occupations. The greatest increase has been in lower-wage occupations, such as jobs in retail and food services.

Growing income inequality is a concern if the reduction in midwage jobs is part of a long-term trend as opposed to the temporary effects of recessions.

In fact, the last three recessions were associated with a “jobless recovery,” where output grew for several quarters while employment growth remained lethargic.

A 2012 study by Nir Jaimovich and Henry Siu for the National Bureau of Economic Research, using data since 1970, showed that job polarization mainly occurs during economic downturns and is not a gradual phenomenon that takes place over the long run.

Moreover, the jobs that are lost to technological advancements and more liberal trading policies are often middle-wage jobs that focus on routine tasks.

Are midwage jobs growing now that we are in the fifth year of the expansion?

Twenty-two percent of U.S. jobs created in 2012-13 were midwage jobs, according to the latest data from 2013 figures by the Bureau of Labor Statistics. (Midwage jobs are occupations with median hourly wages from $13.84 to $21.13, or the equivalent of annual income of $28,510 to $43,950.)

A much higher percentage of jobs created during the same period came from lower-wage positions (42 percent) and from higher-wage occupations (35 percent).

Overall, midwage jobs accounted for 27 percent of the workforce, compared with 38 percent for lower-wage jobs and 35 percent for higher-wage jobs.

The mix was even worse in Virginia. The state also had 22 percent of jobs created over the same period in midwage positions, but 58 percent were lower-wage occupations and 21 percent were higher-wage ones.

The substandard trend in Virginia is probably a result of federal government cuts that are impacting the economy.

In this sense, Virginia’s economy is undergoing a restructuring similar to a business cycle downturn that is dampening growth in middle-wage jobs in industry sectors such as construction and professional services.

A different trend is emerging in the Richmond area, where employment in midwage jobs is growing faster than the nation. Midwage jobs made up 41 percent of all jobs created in 2012-13, compared with 49 percent for lower-wage positions and 10 percent for higher-wage ones.

Although the latest occupation data through 2013 is not showing a lot of support in the nation or state that midwage jobs are returning, national industry employment from the Bureau of Labor Statistics through this June is showing some promising signs.

Employment in construction, which has many midwage occupations, is up 3 percent from a year ago, and residential builders have expanded their payroll by 8 percent over the same period.

Employment also has grown 1 percent over the same period in manufacturing, which also has many midwage occupations.

The more recent industry data show signs of hope for midwage jobs.

This blog reflects Chmura staff assessments and opinions with the information available at the time the blog was written.