Groups of Workers That Have Experienced the Largest Decline in Wage Growth

20 Feb. 2013 | Comments (0)

The Great Recession significantly increased the unemployment rate in the United States.  As a result, wage growth has slowed down since 2008. This blog describes how the trends in wage growth have changed since the recession. We analyze the Employment Cost Index, which is considered the best measure of compensation in the United States because it accounts for changes in the occupation and industry distribution of the work force. Click here for more analysis of the Employment Cost Index.

In Table One, we demonstrate the average annual growth rate in wages and salaries for selected groups of workers between 2001-2008 vs. 2008-2012. For the work force as a whole, between 2001-2008 wages and salaries grew by 2.9% on average.  After the recession, between 2008-2012, this rate declined to 1.6%.  One of the more interesting findings discovered in this study is that government workers suffered from a larger decline in their wage growth than private sector workers. In recent years, the fiscal crisis in state and local governments forced many of them to slow compensation growth.  

Table 1 - average annual growth rate in wages and salaries for selected groups of workers

 

Source: Bureau of Labor Statistics

In the private sector, unionized workers fared better than non-unionized workers. Between 2001-2008 (vs. 2008-2012), private sector unionized workers’ waged growth declined by only 0.7%. In contrast, there was a 1.4% decline for private sector, non-unionized workers. In the private sector, there is large variability in wage growth rates across industries. For example, in the transportation, warehousing, and utilities industries, the recession had almost no impact on wage growth. However, in credit intermediation and construction industries, wage growth shrank a great deal, as those were among the hardest-hit industries both during and after the recession. The accommodation and food service industries also experienced a large reduction in wage growth as many of the workers in these industries are relatively low-skilled and are in occupations that suffer from high unemployment rates. 

With the labor market starting to recover a little faster, there may be a light at the end of the tunnel in terms of wage growth. However, this light is not likely to appear in 2013, as the unemployment rate is still very high and employers are having difficulty maintaining their current profitability rates. 

 

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  • About the Author: Gad Levanon, Ph.D.

    Gad Levanon, Ph.D. Gad Levanon is director of macroeconomic research at The Conference Board, where he also leads the labor markets program. He also serves on The Demand Institute™ leadership team. Levanon create…

    Full Bio | More from Gad Levanon, Ph.D.

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