Tuesday, November 20, 2007

Higher Paying Jobs Outnumber Lower Paying Jobs

Let's put the "hamburger-flipping jobs" myth to rest.

Lou Dobbs: Washington is beginning to make the connection between a record trade deficit and the loss of millions of American manufacturing jobs. Since July 2000, 2.7 million manufacturing jobs have been lost as the result of layoffs and outsourcing of work to cheap foreign labor markets.

WSJ: Many of today's most prominent politicians and pundits claim that the decline in the number of manufacturing jobs has led to the replacement of good middle-class jobs by low-skill, low-pay "hamburger-flipping" service jobs.

Cato Institute: The common story is that globalization has caused the loss of well-paying, mostly unionized, middle-class manufacturing jobs while the service economy creates mostly lower-paying jobs in food service or retail.

The chart above (click to enlarge) is from the Cato Institutes's study "Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers," and shows a pattern of job growth much different than the standard Lou Dobbs, political pundit's hamburger-flipping mythology. For example:

1. Although there was a decline of 3,332,000 manufacturing jobs from 1997-2007, there was an increase of 17,398,000 jobs in non-manufacturing industries, resulting in a net job increase of more than 14 million U.S. jobs during a period of increasing globalization, international trade liberalization, and outsourcing.

2. And what about the hamburger-flipping story? It's a myth. The 3.3 million manufacturing jobs that were lost paid an average of $17.12 per hour, but more than 11 million jobs were added to the U.S. economy in sectors that paid an average of $20.79 per hour, or 21.4% MORE than manufacturing.

3. Employment growth from 1997-2007 in just two separate sectors (4 million education and health services jobs, and 3.5 million professional and business services jobs) more than replaced all of the manufacturing jobs lost, and both sectors pay more than manufacturing.

4. Although it is true that 5.8 million new jobs were created in industries that pay less than manufacturing, the number of jobs in higher-paying sectors (11.59 million) outnumbers jobs in lower-paying sectors (5.8 million) by a factor of 2 to 1.


At 11/20/2007 9:56 AM, Anonymous Anonymous said...

Putting up the average wage in 2007 only is potentially grossly misleading if both wages and employment have fallen in the manufacturing sector (relative to other sectors). Anyone want to chase down the data at BLS?

At 11/20/2007 10:06 AM, Anonymous Anonymous said...

Don't have time to do the full analysis, but using the ECI/NAICS data at BLS (http://data.bls.gov/PDQ/outside.jsp?survey=ci), manufacturing sector wages and salaries have grown more slowly since 2001 (18.3%) than overall salaries (23.0%). Because I didn't have time to do this properly, note that the "overall" group actually has the manufacturing sector in it, so the real difference (manufacturing vs. all other sectors) is greater.

So, in 1997 wages, manufacturing was further up the list than it shows in 2007. Kind of misleading.

At 11/20/2007 1:26 PM, Anonymous Anonymous said...

The hourly wage rate is misleading. The pay check is weekly income (hours worked x wage rate). Manufacturing weekly income of $719 exceeds the weekly income for the categories of transportation & wholesale trade ($662), education and health ($591), financial activities ($707) and professional and business services ($703).

http://www.bls.gov/news.release/empsit.t16.htm BLS Table B-3

At 11/21/2007 5:23 AM, Anonymous Anonymous said...


So you're saying it's alright with you for employers to pay their employees less per hour and work them more hours each week - so long as the paycheck is higher?

At 11/21/2007 6:13 AM, Anonymous Anonymous said...

No, I'm saying that the hourly rate doesn't put bread on the table, but the weekly pay check does.

Bottom line, paragraph 4 in the blog post can be just as easily spun as follows:

4. Although it is true that 14.73 million new jobs were created in industries that pay less per week than manufacturing, the number of jobs in lower-paying sectors (14.73 million) outnumbers jobs in higher-paying sectors (2.18 million) by a factor of almost 7 to 1.

At 11/21/2007 6:45 AM, Blogger juandos said...

Is the compensation employees are getting include items like health and life insurance payments?

At 11/24/2007 1:36 PM, Anonymous Anonymous said...

I bet actual workers who are looking for jobs know the score better than a statistician.

Why are manufacturing jobs so desirable to men, compared to many others?

Open a manufacturing plant and see how many applications you'll get with a competitive wage.

In reality: manufacturing jobs tend to pay people by actual hours worked, other jobs require significantly more hours than are nominally paid for.

Benefits (quite significant) tend to be superior.

And then, requirements for (some forms) of education are lower, or they train you on the job.

This is an economically viable benefit.

Compare and contrast:

I now have a decent job in I guess "business professional services" (statistical modeling and programming); at almost age 40 I just make $100k for the first time in my life.

Now, let's subtract out the large costs I incurred by going to 4 years of Ivy league undergrad, 5 years of PhD grad school, 2.5 years of postdoc, and 10 years of relatively low paid academic research, with the last two years being 75% unfunded (i.e. financial unemployment).

Now I didn't want to work in manufacturing but 99.9% of people aren't going to have my interests.

At 11/02/2008 2:20 PM, Anonymous Anonymous said...

The problem with this article is
that the non manufacturing jobs
created (above $ 17.20/hr.) could
not be filled by the 3.3 million
individuals whom were displaced.
Why? because we have an "educational gap" problem.
You cannot allow the massive loss
of manufacturing jobs, before you can reduce the educational gap that
will make it possible for former
manufacturing workers to maintane
a comparable standard of living.
The current credit crisis and mortgage debacle is a direct result of households attempting to
maintain a standard of living that
is based on a strong manufacturing economy.

F. Jones


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