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How shifting occupational composition has affected the real average wage
Rebecca Keller
Between November 2002 and May 2007, the cross-occupational average hourly wage in the United States increased by $2.46, from $17.10 to $19.56, or by about 14 percent, according to the Occupational Employment Statistics (OES) program. Adjusting the 2002 figure to May 2007 dollars1 shows the real average hourly wage increased from $19.48 to $19.56, approximately a .41-percent increase.
There have been numerous studies and programs devoted to understanding this recent slow growth in the Real Average Wage (RAW). Many studies attribute slow wage growth to the increasing cost of employee benefits and health insurance—a phenomenon that results in employees’ wages becoming a smaller part of their total compensation.2 Other studies have analyzed how wage growth relates to income or wage inequality.3 This article seeks to contribute towards an understanding of RAW growth by quantifying how changes in the occupational composition of U.S. employment have affected the average wage.
This article analyzes occupational wage and employment data from the OES program to understand how changes in occupations’ wages and changes in occupations’ levels of employment each have contributed to growth in the U.S. RAW. Overall wage growth could stem from increases in the mean wages of particular occupations, from a shift in employment towards occupations with higher wages, or from a combination of the two factors. This article’s analysis of OES data from November 2002 to May 2007 finds that a shift in employment towards lower paying occupations hindered U.S. RAW growth, that increases in the real mean wages of individual occupations was the only factor that caused growth in the U.S. RAW, and that most of the average wage growth was due to increases in the wages of the highest paying occupations. This analysis also finds a shift in employment towards the highest paying and lowest paying occupations and away from middle-paying occupations. This article will show which occupations experienced growth and which experienced decline in real mean wages or in share of employment, and how these changes influenced the U.S. RAW. It will also reveal patterns of lower and higher paying occupations and of education and training categories, and give a brief analysis of changes in the average wages of U.S. States.
This excerpt is from an article published in the June 2009 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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Footnotes
1 The adjustment for inflation was made using the BLS Consumer Price Index for Urban Wage Earners and Clerical Workers.
2 Katherine Baicker and Amitabh Chandra, “The Labor Market Effects Of Rising Health Insurance Premiums,” Journal of Labor Economics, July 2006, pp. 609–34.
3 John Jones, “What do OES data have to say about increasing wage inequality?” Monthly Labor Review, June 2009, pp. 39–49.
Occupational Employment Statistics
Sources of increasing inequality in wages and salaries, 1960-80.—Apr. 1989.
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