WASHINGTON – One of the economy’s bright spots is the job market – and it may be even brighter than it seems. Not only are there more jobs (1.3 million so far in 2016), but they may be better-paying, according to a new analysis by economists at the Federal Reserve Bank of New York. The Fed economists report that middle-wage workers – earning roughly $30,000 to $60,000 – represent the fastest growing segment of the labor market. By contrast, earlier in the recovery, low-wage and high-wage jobs dominated employment increases.
The labor market was supposedly becoming economically “polarized,” just as society was becoming politically polarized. Now, the new analysis suggests that the labor-market polarization “may have peaked, and middle-wage jobs could be ready for a renaissance,” as my Washington Post colleague Ylan Q. Mui wrote in a blog post on the New York Fed study.
The New York Fed study revealed that although middle-wage occupations represent about half of all jobs – teachers, factory workers, truck drivers, construction workers – they accounted for only 22 percent of new jobs between 2010 and 2013. Lower-wage occupations – earning $30,000 or less as fast-food workers, sales clerks, janitors – accounted for 40 percent of new jobs, well above their 30 percent share of existing employment. And high-paying occupations – with median wages of $60,000 or more, earned by doctors, lawyers, managers and engineers – represented 38 percent of new jobs, despite being only 20 percent of existing jobs.
Between 2013 and 2015, this pattern reversed, say the New York Fed economists. In these years, middle-wage jobs accounted for 43 percent of expanded employment, lower-wage occupations for 30 percent, and high-wage occupations for 28 percent.
Just what caused the shift is unclear. Economist Harry Holzer of Georgetown University attributes much of the change to the business cycle: “In the early years, there was a lot of uncertainty. Business leaders didn’t know whether the recovery would continue. Many resisted assuming the added costs of more expensive employees.” Construction also recovered slowly, he said, frustrating middle-wage job growth in that sector.
With the recovery now in its eighth year, confidence and hiring have strengthened, he said. Between 2013 and 2015, blue-collar jobs rose sharply. Employment increased 400,000 in construction, 300,000 in manufacturing, 500,000 in transportation (mainly truck drivers) and 250,000 in installation and repair (of, say, air conditioning systems).
It’s unclear whether these gains are temporary or whether they signal a decisive turn in job creation. If permanent, said The New York Times, “it may soon be time to retire a familiar criticism of the long but lackluster economic rebound … [that it has promoted] the hollowing out of the American middle class.”
What’s happening, Holzer said, is that middle-wage jobs have become split. There’s what he calls “the old middle” of factory workers, construction workers and the rest. These jobs are declining over time. But there’s a “new middle” that’s growing rapidly and includes positions such as health care technicians, high-tech maintenance workers, paralegals and store managers. These jobs require more formal education than “old middle” jobs. The question, Holzer said, is whether the country can remake its education system to provide the skills that the economy now demands.
Robert Samuelson’s column is distributed by The Washington Post Writers Group.