High-wage positions growing fastest
Trend considered good news – but not for all
For years after the Great Recession, the jobs recovery came with a caveat: The fastest employment gains by far were in low-wage industries such as retail and restaurants, which critics griped weren’t “good” jobs.
No longer.
Jobs in high-wage industries such as technology, professional services and energy have grown slightly faster than low-wage sectors over the past year or so, according to an analysis of Labor Department data by Moody’s Analytics. Meanwhile, middle-wage industries have closed the gap with low-paying sectors, though they trail high-wage fields.
The trend helps explain why annual U.S. wage growth reached a nine-year high of 2.9 percent in August. The widening share of higher-wage jobs is pushing up the national average, says Moody’s economist Adam Kamins.
From June 2017 to August 2018, the number of jobs in high-wage industries grew 2 percent, compared with 1.8 percent for both low and middle wage fields, the Moody’s data show. Lowwage sectors had led decidedly since 2010, in part because they required less risk-taking by recession scarred employers.
Moody’s broadly defines industries as low-wage if their average pay is below $35,000. Mid-wage is $35,000 to $65,000 and high wage is above $65,000.
The shift can at least partly be attributed to an economy that’s finally running on all cylinders and more evenly distributing payroll gains across sectors, says Moody’s economist Laura Ratz.
And it’s generally good for the economy. High paying positions generate more income that can be spent on goods and services. And each high wage job helps create two additional jobs, according to Moody’s. Think of the engineer who needs an assistant and buys a new house that employs construction workers. By contrast, it takes three low-wage jobs to help create an additional position.
“On net, it’s a positive,” Kamins says. High wage earners “have more to spend.”
At the same time, low-income Americans tend to spend a bigger portion of their paychecks, notes economist Heidi Schierholz of the left-leaning Economic Policy Institute.
The turnabout can be partly traced to the fortunes of certain industries, Kamins says. For example, the run-up in oil prices from below $30 a barrel in early 2016 to the current mid-$70 range has spawned a drilling bonanza, creating lots of high-paying roughneck and technical jobs. Employment in mining and logging has jumped 8.1 percent over the past year, Labor Department figures show.
Meanwhile, the explosion of smart phone apps and cloud-based services has helped spur more well-paying technology jobs. And the healthy oil, auto and housing industries have created high-end manufacturing jobs that rely on computers to help build complex machines.
The vibrant economy and housing market are also juicing demand for architects, engineers and advertising copywriters. Employment in professional and business services is up an average of about 2.5 percent annually so far this year compared with about 2.1 percent in 2017. “Because (economic) growth is strong… there’s more of a willingness (by employers) to take that plunge” and hire more expensive workers, Kamins says.
Bill Ravenscroft, senior vice president of staffing firm Adecco USA, says placements for high-wage accounting, finance and technology jobs have increased about 9 percent over the past 18 months. Lower-paid retail, callcenter and manufacturing placements have been flat.
“We have a greater challenge finding skilled candidates,” he says.
Across the U.S., low-wage jobs are still growing solidly. But retail employment gains have been slowed by the shift from brick-and-mortar stores to e-commerce. And job growth for lower-paid hotel, restaurant and health care workers is returning to normal after several years of outsize gains, Kamins says. The pace of job growth in these sectors also may have slowed because the 3.7 unemployment rate, a nearly 50-year low, is making it harder for businesses to find qualified job candidates.