Friday, September 6, 2013

Growth in low paying jobs and wage deflation for low-income groups - a painful trend

A few weeks back the WSJ published a chart showing that growth in US payrolls has been dominated by low wage jobs (see chart). It's worth exploring the topic some more. Though not precise, one way to confirm this trend is to look at the "indexes of aggregate weekly hours and private payrolls by industry sector" from the U.S. Bureau of Labor Statistics (here). Over the past 5 years the indexes show non-supervisory hotel jobs for example outpacing the overall private payrolls growth. The higher paying construction and factory jobs on the other hand lag the overall index.

Source: US BLS

What's particularly worrying is that according to at least one study (here), it is the low wage workers who have experienced the highest wage deflation.

Source: National Employment Law Project

This combination of more payrolls in low paying sectors and higher wage deflation for many of those same employees is contributing to weakness in the overall US real wage growth (see discussion).
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