Labor Line

September 2013___________________________________

Labor line has job news and commentary with a one stop short cut for America's job markets and job related data including the latest data from the Bureau of Labor Statistics.

This month's job and employment summary data are below. This month's inflation data is below.

The Establishment Job Report and Establishment Job Details for data released September 6, 2013.

American Job Market The Chronicle

Current Job and Employment Data

Jobs
Total Non-Farm Establishment Jobs up 169,000 to 136,133,000
Total Private Jobs up 152,000 to 114,302,000
Total Government Employment up 17,000 to 21,831,000

Employment Note
Civilian Non-Institutional Population up 203,000 to 245,959,000
Civilian Labor Force down 312,000 to 155,486,000
Employed down 115,000 to 144,170,000
Employed Men down 302,000 to 76,164,000
Employed Women up 186,000 to 68,005,000
Unemployed down 198,000 to 11,316,000
Not in the Labor Force up 516,000 to 90,473,000

Unemployment Rate down .1 percent at 7.3%, or 11,316/155,486
Labor Force Participation Rate down .2 percent at 63.2%, or 155,486 /245,959

Prices and inflation measured by the Consumer Price Index (CPI) for all Urban Consumers was down 1.69 percent for 2010.

The September CPI report for the 12 months ending with August 2013, shows the

CPI for All Items was up 1.5%
CPI for Food and Beverages was up 1.4%
CPI for Housing was up 2.2%
CPI for Apparel was up 1.8%
CPI for Transportation including gasoline was up 1.0%
CPI for Medical Care was up 2.3%
CPI for Recreation was up .4%
CPI for Education was up 3.6%
CPI for Communication was down .4%

This Month's Establishment Jobs Press Report

The October data report remains unpublished as of October 7. I am sorry about this. Below is the September Report and I will update as soon as data is published.

The Bureau of Labor Statistics published its September report of jobs in August. The labor force dropped by 312 thousand as a combination of a drop of 115 thousand employed and a decline of 198 thousand in the unemployed. The large percentage drop in the unemployed combined with a smaller percentage drop in the labor force to push the unemployment rate down .1 percent to 7.3 percent. Employment for women increased as employment for men decreased, both for the second month in a row. The participation rate dropped .2 percent to 63.2 percent, the lowest rate in two decades.

The seasonally adjusted total of establishment jobs was up 169 thousand for August. The increase was 134 thousand more private sector service jobs combined with an increase of 18 thousand goods production jobs and a drop of 2 thousand government service jobs.

August had a net gain of 18 thousand jobs in goods production. Manufacturing leads the way with 14 thousand new jobs, but it was a combination of 18.8 thousand new car jobs, a few small gains in durable goods and a net loss of 8 thousand jobs in nondurable goods, especially printing, chemicals, and plastics. Natural resources did better than usual but still only 4 thousand new jobs for a small sector of only 877 thousand total jobs. Construction stayed the same after last months decrease.

Government had a net decrease of 2 thousand jobs as a combination of declines in federal, state and local government, excluding education. Seasonally adjusted public school education was up a net 19 thousand jobs which was a combination of 20.1 thousand more local education and a drop of 1.1 thousand jobs in state education. Private school education jobs were up again with 5.3 thousand new jobs for August.

Trade, transportation and utility had the biggest job gains among services for August with 64 thousand new jobs. Retail trade had most of the gains, up 44 thousand jobs; wholesale trade was up with 8.4 thousand new jobs, more than last month. Transportation had a net gain of 12.0 thousand jobs with most of the gain in transit and ground passenger transportation that came after last months losses. Utilities had a small but unusual decline.

Health care recovered to a more typical monthly gain of 38 thousand new jobs after last month's tiny increase. Ambulatory care had most of the gain. The annual growth rate this month is 2.65 percent, a little above the long term 15 year growth rate of 2.35 percent. Health care needs to continue as a major supplier of jobs as there is no obvious replacement if it does not.

Professional and business services had another month of job gains, 23 thousand more jobs for August. Professional and technical services had a net of 10.9 thousand of the job gains in legal, accounting and computer design services. Administrative support added 13.4 thousand jobs, 13.1 thousand in temporary help services.

Leisure and hospitality had a typical increase of 27 thousand jobs with most of the gains at restaurants, 21.2 thousand new jobs, and another 5.7 thousand in accommodations. Performing arts, spectator sports, museums, amusements, gambling and recreation had a net gain of a 100 jobs.

Both information services and financial activities returned to their usual losses. August losses for information services were mostly in motion pictures and sound recordings with a net loss of 18 thousand jobs. August losses for financial activities were a net of 5 thousand jobs, mostly in real estate. Non profit organizations were down 2.3 thousand jobs.

The August gain of 169 thousand jobs brings another adequate increase in a sustained period of monthly increases. Most of the industry sectors returned to their normal role in monthly job reports: retail and wholesale trade, restaurants, health care and education to job gains, information services and financial activities to job losses. Manufacturing keeps adding some jobs, but not enough to be much help. The maximum of seasonally adjusted monthly employment came in January 2008 at just over 138 million jobs. If monthly increases of 169 thousand continue it will take 11 months to reach the former high.

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August Details

Non Farm Total +169
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments increased from July by 169 thousand jobs for an August total of 136,133 million. (Note 1 below) An increase of 169 thousand each month for the next 12 months represents an annual growth rate of 1.49%. The annual growth rate from a year ago beginning August 2012 was +1.65%; the average annual growth rate from 5 years ago beginning August 2008 was -.10%; from 15 years ago beginning August 1998 it was .49%. America needs growth around 1.5 percent a year to keep itself employed.

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Sector breakdown for 12 Sectors in 000's of jobs

1. Natural Resources +4
Natural Resources including logging and mining were up 4 thousand from July at 877 thousand jobs in August. An increase of 4 thousand jobs each month for the next 12 months would be an annual growth rate of +5.50 percent. Natural resource jobs are up 28 thousand for the 12 months just ended. Jobs in the 1990's totaled around 770 thousand. Job growth here will be small compared to America's job needs. This is the smallest of 12 major sectors of the economy with .6 percent of establishment jobs.

2. Construction +0
Construction jobs stayed the same at 5.798 million jobs in August. Construction jobs are up 168 thousand for the last 12 months. The growth rate for the last 5 years is -4.01%. Construction jobs rank 9th among the 12 sectors with 4.3 percent of non farm employment.

3. Manufacturing +14
Manufacturing jobs were up 14 thousand from July at 11.963 million in August. An increase of 14 thousand jobs each month for the next 12 months would be an annual growth rate of +1.41 percent. Manufacturing jobs were up for the last 12 months by 20 thousand. The growth rate for the last 5 years is -2.18%. In 1994, manufacturing ranked 2nd but now ranks 6th among 12 major sectors in the economy with 8.8 percent of establishment jobs.

4. Trade, Transportation & Utility +64
Trade, both wholesale and retail, transportation and utility employment was up by 64 thousand jobs from July to 26.037 million jobs in August. These jobs tend to increase at a slower rate than the total of non-farm jobs, but an increase of 64 thousand each month for the next 12 months would be an annual growth rate of +2.96 percent. Jobs are up by 517 thousand for the last 12 months. Growth rates for the last 5 years are -.16 percent. Jobs in these sectors rank first as the biggest sectors with combined employment of 19.0 percent of total establishment employment.

5. Information Services -18
Information Services employment was down by 18 thousand from July at 2.683 million jobs in August. A decrease of 18 thousand each month for the next 12 months would be an annual growth rate of -8.0 percent. (Note 2 below) Jobs are up by 1 thousand for the last 12 months. Monthly employment in information services gyrates and has been doing so for a number of years. Information jobs reached 3.7 million at the end of 2000, but started dropping, reaching 3 million by 2004 and further below 3 million by 2008. Information Services is a small sector ranking 11th of 12 with 2.0 percent of establishment jobs.

6. Financial Activities -5
Financial Activities were down 5 thousand jobs from July to 7.903 million in August. A decrease of 5 thousand each month for the next 12 months would be an annual growth rate of -.76 percent. Jobs are up 108 thousand for the last 12 months. (Note 3 below)This sector also includes real estate as well as real estate lending. Financial Services has been declining with negative annual growth rates, a 5 year growth rate of -.75 percent, and a 15 year growth rate of
+.26 percent. Financial activities rank 8 of 12 with 5.8 percent of establishment jobs.

7. Business & Professional Services +23
Business and Professional Service jobs went up 23 thousand from July to 18.608 million in August. An increase of 23 thousand each month for the next 12 months would be an annual growth rate of +1.49 percent. Jobs are up 614 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years was .99 percent. It ranks as 2nd among the 12 sectors. It was third in May 1993, when manufacturing was bigger and second rank now with 13.6 percent of establishment employment.

8. Education including public and private +24
Education jobs went up 24 thousand jobs from July at 13.538 million in July. These include public and private education. An increase of 24 thousand each month for the next 12 months would be an annual growth rate of +2.16 percent. Jobs are down 7 thousand for the last 12 months. (note 5) Most monthly educational employment goes up, but lately it is down. The 15 year growth rate equals 1.34 percent, faster than the national average. Education ranks 4th among 12 sectors with 10.0 percent of establishment jobs.

9. Health Care +38
Health care jobs were up 38 thousand from July to 17.353 million in August. An increase of 38 thousand each month for the next 12 months would be an annual growth rate of +2.65 percent. Jobs are up 354 thousand for the last 12 months. (note 6) The current month was above long term trends and more than growth from a year ago when the annual growth rate was +2.08 percent. Health care has been growing at +2.35 percent annual growth rate for 15 years, a rate not quite double the national rate. Health care ranks 3rd of 12 with 12.7 percent of establishment jobs.

10. Leisure and hospitality +27
Leisure and hospitality jobs went up 27 thousand from July to 14.212 million in August. An increase of 27 thousand each month for the next 12 months would be an annual growth rate of +2.28 percent. Jobs are up 424 thousand for the last 12 months. (note 7) The 5 year growth rate is 1.14%. More than 80 percent of leisure and hospitality are accommodations and restaurants assuring that most of the new jobs are in restaurants. Leisure and hospitality ranks 4th of 12 with 10.4 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.

11. Other +0
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations stayed the same for July at 5.481 million in August. Jobs are up 45 thousand for the last 12 months. (note 8) Other services had -.11 percent growth for the last 5 years. These sectors rank 10th of 12 with 4.0 percent of total non-farm establishment jobs.

12. Government, excluding education -2
Government service employment went down 2 thousand from July to 11.678 million in August. A decrease of 2 thousand each month for the next 12 months would be an annual growth rate of -.15 percent. Jobs are down 66 thousand for the last 12 months. (note 9) Government jobs excluding education tend to increase slowly but surely with a 15 year growth rate of .35 percent. Government, excluding education, ranks 7th of 12 with 8.6 percent of total non-farm establishment jobs.


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Sector Notes___________________________

(1) The total cited above is non-farm establishment employment that counts jobs and not people. If one person has two jobs then two jobs are counted. It excludes agricultural employment and the self employed. Out of a total of people employed agricultural employment typically has about 1.5 percent, the self employed about 6.8 percent, the rest make up wage and salary employment. Jobs and people employed are close to the same, but not identical numbers because jobs are not the same as people employed: some hold two jobs. Remember all these totals are jobs. back

(2) Information Services is part of the new North American Industry Classification System(NAICS). It includes firms or establishments in publishing, motion picture & sound recording, broadcasting, Internet publishing and broadcasting, telecommunications, ISPs, web search portals, data processing, libraries, archives and a few others.back

(3) Financial Activities includes deposit and non-deposit credit firms, most of which are still known as banks, savings and loan and credit unions, but also real estate firms and general and commercial rental and leasing.back

(4) Business and Professional services includes the professional areas such as legal services, architecture, engineering, computing, advertising and supporting services including office services, facilities support, services to buildings, security services, employment agencies and so on.back

(5) Education includes private and public education. Therefore education job totals include public schools and colleges as well as private schools and colleges. back

(6) Health care includes ambulatory care, private hospitals, nursing and residential care, and social services including child care. back

(7) Leisure and hospitality has establishment with arts, entertainment and recreation which has performing arts, spectator sports, gambling, fitness centers and others, which are the leisure part. The hospitality part has accommodations, motels, hotels, RV parks, and full service and fast food restaurants. back

(8) Other is a smorgasbord of repair and maintenance services, especially car repair, personal services and non-profit services of organizations like foundations, social advocacy and civic groups, and business, professional, labor unions, political groups and political parties. back

(9) Government job totals include federal, state, and local government administrative work but without education jobs. back

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Notes

Jobs are not the same as employment because jobs are counted once but one person could have two jobs adding one to employment but two to jobs. Also the employment numbers include agricultural workers, the self employed, unpaid family workers, household workers and those on unpaid leave. Jobs are establishment jobs and non-other. back

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Read More

Mr. Boehner and the Debt Ceiling

The Congress has passed debt ceiling legislation for many years pandering to voters who worry debt is sin, or a symbol of excess, or brings economic collapse. As the economy grows debt grows creating a repeated cycle of debt ceiling votes. Taking a vote gives a minority of politicians an opportunity to make politically correct statements about the excesses of government and their noble efforts to limit the excess. Then the majority makes the only sensible decision and votes to raise the debt ceiling.

I have never heard a politician of either party try to explain the difference between Federal debt and all other types of debt, both public and private, even though at least some know the difference. Current threats to limit the debt and cause a default are not only irresponsible but unnecessary and put Mr. Boehner far out on a shaky limb.

Federal debt is unique among debt because the Federal government determines the money supply, always a human decision. In the United States money is nothing but a number held on double entry accounts. Coins and currency are assets to the non-banking public but a liability to the treasury and the Federal Reserve Bank. Personal and business bank accounts are assets to the banking public but liabilities to banks. Therefore, money is a non-interest bearing liability while federal debt is an interest bearing liability. In effect, money is non interest bear debt.

At any time and in any amount the U.S. Treasury and the Federal Reserve Bank can arrange to convert interest bearing debt to money, and allow payment of the government’s bills without default. They could pay off the entire federal debt in a day or two but they will not because it will increase inflation and their aim is to manage the economy in the best interests of everyone.

All previous presidents and the Congress have always played the debt ceiling game by the rules, which allowed everyone to max out on politics and then raise the ceiling. No one has questioned the authority of Congress to interfere with the constitutional requirement for the President to manage the government’s finances and pay the bills. The people who believe in debt ceilings want us to agree the Congress can pass legislation that prevents the President from doing duties spelled out in the constitution.

The President has whatever authority he needs to avoid default even if the Congress decides to be irresponsible and votes default. For Mr. Boehner to win the debt ceiling battle and push the government to default the President has to fail to do what he is able to do to stop it.

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A Walmart Minimum Wage for the District of Columbia

The District of Columbia City Council recently passed the Large Retailer Accountability Act that the mayor still needs to sign. Retailers, who are part of a larger company with revenue over $1 billion per year and occupy more than 75,000 feet of retail space, will be expected to pay all employees at least $12.50 an hour. In effect, the City Council has decided Walmart should be required to pay better wages than the $8.25 minimum wage everyone else is required to pay.

Economic conditions in retail for the District of Columbia suggest possible surprises for the City Council. As of 2012 the District has only 19 thousand jobs in retail or 2.5 percent of total employment where all other states have 11 to 12 percent. The District is underserved in retail and ripe for expansion.

Even though the minimum wage is $8.25 an hour there are no jobs in the District with a median wage as low as $8.25 an hour. Nor does the Bureau of Labor Statistics wage report for the District show 25th percentile or 10th percentile wages as low as $8.25 an hour for any of 512 occupations reported for Washington DC.

The new law applies to all occupations, but will effectively apply to the two occupations that dominate retail: retail salesperson and cashier. National staffing suggests 60 to 65 percent of the jobs in large retail stores are one of these two occupations. The District of Columbia is an expensive place to live and an expensive place to commute into from suburban locations, which helps explain why the median wage for retail salespersons is already well above the minimum wage at $11.21 an hour. The median wage for cashiers is $10.38 an hour.

If Walmart opens three, up to six, stores in the District as they suggest they might it will be a significant employer of retail salespersons and cashiers. As of 2012, only 6,200 work as retail salespersons in the District and 6,900 work as cashiers. Large general merchandise stores or department stores and super centers can be expected to employ 200 or more per store. Such a large share of new hires in retail suggests they will have to offer better wages for the help they need.

Wages in the larger metropolitan area that includes Virginia and Maryland suburbs are only slightly lower at $10.57 an hour for retail salespersons and $9.56 an hour for cashiers. Given the expense and difficulty to commute into the District there is no reason to think suburban sources of labor will be any cheaper to hire for District store locations.

New Walmart stores usually displace other local retail stores, but the retail sector is so small in the District there might be room for Walmart and existing stores. If market wages were below the $8.25 an hour there would be a different story, but the prevailing markets for wages suggests the retail sector including Walmart should expect to pay $12.50 an hour, or close to it, because of markets not legislation.

Since Walmart officials know prevailing wages their opposition and threats to abandon the District suggest they always oppose minimum wages as a political decision. Defenders of the $12.50 an hour cite the need for a living wage, but ignore market conditions as though they are irrelevant. So far the public discussion of the $12.50 Walmart wage minimum remains typical: all politics and public relations.

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Federal Taxes and Horizontal Equity

Taxes should be fair and horizontal equity defines one principle of tax fairness. It means economic equals should be taxed an equal amount. Horizontal equity applied to taxes on $50,000 of income assures all those who earn $50,000 of income pay the same tax.

Taxation that treats equals equally avoids giving preferences to different sources of income and avoids deductions and exclusions that do not apply equally to all. In practice, the characteristics that define equals vary some depending on personal opinion. For example, in federal taxation a disabled person over age 65 with $50,000 of income pays less tax than someone under age 65 without a disability. Some might ignore age and disability when they define economic equals; others might decide those differences justify unequal tax treatment.

In spite of the difficulty of definition horizontal equity provides a useful guide to consider for tax legislation. It encourages voluntary tax compliance and promotes economic equality by preventing a favored group from making economic gains solely through tax advantages.

In 2003 Congress and the President introduced a new violation of horizontal equity in the federal personal income tax. After 2002 dividend income does not equal wage income for federal taxation. A single taxpayer in 2002 paid $7,767 of federal income tax whether the income was dividend income or wage income. In 2003 a single taxpayer paid $7,360 tax on $50,000 of wage income, but only $3,490 on $50,000 of dividend income. Wage earners paid more than twice as much tax for the same income.

The disadvantage of wage income over dividend income remained a little over double until 2008. In 2008 a single taxpayer paid $6,606.25 tax on $50,000 of wage income, but only $1,275 on $50,000 of dividend income. Wage earners paid more than five times the tax for the same income.

Adjustments in tax brackets, the standard deduction, and the personal exemption increased the disparity after 2008 until by 2012 wage earners paid more than eight times more tax on $50,000 income. In 2012, a single taxpayer paid $6,117.50 tax on $50,000 of wage income, but the personal income tax was only $750 as dividend income.

The disparity increases for a married couple filing jointly even though a married couple with $50,000 of wages or dividend income pays less tax than a single tax payer. In 2012 couples filing a joint return paid no tax on $50,000 of dividend income, but $3,705 on wage income. If both earn wage income of $50,000 they pay $12,185 in federal income tax, but $100,000 of dividend income pays only $1,470 of tax.

The burden of higher taxes on wages falls heavily on younger high school and college graduates since they are least likely to have had time or funds to invest in dividend earning stocks. The difference of the higher taxes on $50,000 of wages over dividends put into an Individual Retirement Account (IRA) to earn 3 percent annual interest between 2003 and 2012 comes to $53,804.01. For the struggling college graduate living at home it is the capitalized value of the tax system’s contribution to income inequality.

There are other violations of horizontal equity in federal taxation. The treatment of home ownership allows deductions for real estate taxes and home mortgage interest that assure unequal taxes for renters with the same income. Encouraging home ownership with tax deductions illustrates how Congress uses tax policy to encourage or reward activities that reflect America’s social and political values: home ownership is a good thing.

Taxing work at much higher rates than dividends and capital gains suggests a darker side of tax policy. A higher tax on wages discourages work at best, but suggests a declining respect for the wage earning working class. I do not expect an official press announcement to that effect, but as the ol’saw goes, actions speak louder than words.

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The Signal and the Noise

Nate Silver, The Signal and the Noise: Why So Many Predictions Fail And Some Don’t” (NY: Penguin Press, 2012), 454 pages.

Nate Silver gained national attention with a forecasting system he developed in 2003 called PECOTA. He used baseball data to forecast the performance of major league baseball players. It was very successful and the attention he got allowed him the time and money to expand his interests into other areas and write us a thoughtful and reflective book on forecasting.

The Signal and the Noise is a book for people who like data and the possibilities for using it in the latest information revolution brought on by cheap and powerful computers. In the Introduction Silver tells a precautionary tale from the first information revolution that came in 1440 with the printing press. Before the printing press knowledge was lost without some way to store it; after the printing press knowledge could be stored but ideas could also be circulated to make arguments to the masses and promote controversies like Martin Luther’s ninety-five theses. The printing and distribution of 300 thousand copies brought centuries of religious warfare.

Silver uses the introduction to make similar contrasts and set up a philosophy of forecasting. Forecasting implies planning with uncertainty that needs prudence, wisdom and industriousness along with a dose of humility. Silver thinks of forecasting as an on-going process of revision where the risk of failure is always present but the possibility of progress makes it worth the trouble.

The book has 13 chapters. The first chapter titled “A Catastrophic Failure of Prediction” describes what went wrong with the predictions for the recent stock market and housing bubbles. Then it is on to six more chapters on prediction for political polls, baseball, weather, earthquakes, economic forecasting and swine flu.

The topics all have a random and unpredictable element for something we would like to predict in advance. Silver gives readers some historical background, some basic theory or science where it’s relevant and then an assessment of the forecasting record: weather forecasting, better, earthquake forecasting, no progress, and so on. Each chapter suggests a common principle or two of success or failure that turns into a general theory and practice of forecasting by the end of the book.

Chapter 8 introduces Bayesian statistical inference in a descriptive form to be applied to six more topics of prediction: gambling, chess, poker, stock prices, greenhouse effects and terrorism. Bayesian inference is a branch of statistics that uses prior probability to make a new probability estimate, the posterior probability. Silver tries to convince readers to think of Bayes as a procedural method that combines new evidence with prior beliefs in a repeated process of revision.

Given the variety of topics from technology and the social and physical sciences readers will prefer some topics over others. I spent more time on the economics chapters. In Chapter 6 Silver does what forecasters hope no one will do: he goes back to check and compare old forecasts. Most are way off but being a labor forecaster I appreciate Silver’s precautions: correlation does not mean causation, explanatory variables change frequently, never throw out data, tell a story using credible economic reasoning.

I especially liked the comments he used of Jan Hatzius, chief economist at Goldman-Sachs. His correct forecast of the 2007 financial collapse resulted from looking at mortgage data and evaluating the size of the leveraged mortgage market and the risk of default from unqualified buyers. At page 196 Silver writes “Hatzius refers to this chain of cause and effect as a ‘story.’ It is a story about the economy – and although it might be a data-driven story, it is one grounded in the real world.”

Chapter 11 takes a close look at the age old question: Can you make money predicting stock prices? Those who believe in markets always answer no, but Silver uses the volumes of stock data to do a variety of fun experiments comparing strategies - buy and hold, manic momentum and a few more – before reaching that conclusion.

The Signal and the Noise is a very readable statistics book with good graphics, thorough documentation and source notes. I would never have predicted publication of a general audience book with so much detail but as I finished reading I decided the volume of data on the Internet promotes a wider interest along with wider access. The growing combination of access and interest make it a timely book that suggests a structure and philosophy for people who want to pursue their own interests and separate the signal from the noise.

Read More

Inflation and Wages for 2006 to 2012

News of college graduates struggling to pay student loans draws attention to wages. College graduates who cannot find jobs using their college degree skills add to the pool of labor looking for already low wage jobs, potentially lowering wages and buying power even more.

Wages need to keep up with inflation to assure Americans can buy what they produce and keep themselves employed. In practice comparing wages over time requires adjusting wages for inflation with the Consumer Price Index to compare buying power, or real wages. For example, the median wage of Accountants and Auditors was $55,650 in 2006, but to keep up with inflation and have the same buying power in 2012 median wages would have to be $62,188. Instead they were $63,550, a 2.19 percent increase in real wages over the six year period. Data are from the Bureau of Labor Statistics, Occupational Employment Survey, which reports wages for 22 occupational categories and 829 occupations. The self employed are not included here.

Accountants and auditors are the ideal because jobs are up; averaging a little over six thousand new jobs a year with wages up faster than inflation. The outcome for retail salesperson and cashier was the opposite: jobs and real wages declined. The median wage of retail salespersons was $19,760 in 2006, but to keep up with inflation the 2012 median wage needed to be $22,494. Instead it was $21,110, a 6.15 percent decrease in real wages.

The median wage of cashier was $16,810 in 2006, but to keep up with inflation in 2012 median wages needed to be $19,136. Instead they were $18,970, a .87 percent decrease in real wages. Retail salesperson remains America’s biggest occupation with 4.3 million jobs but jobs keep declining; cashier continues to be the second largest occupation with 3.3 million jobs, but also with declining employment.

Retail salesperson and cashier are two of 388 occupations I can find that did not keep up with inflation between 2006 and 2012. These 388 occupations employed 72.5 million in 2006, but only 69.4 million in 2012. Because total employment is down between 2006 and 2012 only a little over 61 million show higher real wages in 2012. I used 2006 as the last full year before the housing bubble and then the recession, but other years could show better or worse results compared to inflation.

The wage data applies to jobs at establishments at the time of the survey and not to people’s wages or income, which are part of another survey. Because jobs turnover, some of the people in low wage occupations in 2006 may well have moved into higher skilled and higher wage occupations by 2012. Therefore, the data allow conclusions about wage inequality but limited conclusions about income inequality.

The results and selected details outlined below suggest two broad statements about wages for the six year period. First, the highest wage occupations in 2006 in upper level management, most of finance and professional occupations have real wage gains by 2012, while the lowest wage occupations in 2006 were the most likely to have lower real wages in 2012. Second, the real wage gains of occupations with wage gains had modest gains, less than one percent a year in a majority of cases. In the United States, working for wages is a tough way to make a living.


Selected Details by Occupational Category-----------------------------

Managerial occupations and financial occupations had the ideal with more jobs and a composite of wages for both occupational categories showing individual occupations mostly keeping up with inflation or with a percent or two increase in real wages. There are exceptions. Managerial occupations had wage gains above inflation for 27 of 36 occupations. General operations managers, food service managers, accommodations managers and construction managers were exceptions. Financial occupations had real wage gains in 24 of 33 occupations. Exceptions included personal financial advisors and real estate appraisers, both down.

Professional occupations did well compared to inflation, although generally a modest 1 to 3 percent increase in real wages for computing and mathematics occupations. Computer programmers are an exception, down slightly. Real wages were down for architects and landscape architects and up for 16 of 18 engineering specialties. Both lawyers and paralegals show a 2.5 to 4 percent decline in real wages. More jobs in legal services and lower real wages suggest the supply is out running demand in law.

Education, training and library occupations had job growth and higher real wages for 46 of 65 occupations in education, training and library. College teaching had higher real wages with some exceptions for professors of education, foreign languages, agricultural and biological sciences. Graduate assistants also had falling real wages. Teaching positions in the public schools had job losses in these years but real wages were up 1 to 3 percent for both elementary and secondary teaching with exceptions in some vocational and special education positions. Librarian lost jobs and buying power to inflation.

Health care occupations had job growth and 45 of 60 occupations with higher real wages. Licensed physicians, pharmacists, therapists, technicians and technologists did well against inflation but there are notable exceptions. Median wages for chiropractors, podiatrists, optometrists, opticians and dentists did not keep up with inflation. Dentists in general practice have high wages, but to keep up with inflation their median wage would need to be $150,421 in 2012. Instead it was $145,240, a -3.44 percent decrease in real wages for the six years. Dental hygienist also lost buying power to inflation.

Registered nurses have 2.6 million jobs, the most in health care and the fifth largest United States occupation. Median wages kept up with inflation, but just barely, rising by .41 percent to $65,470 in 2012. Health care aides and assistants lost buying power even though they are already low paid occupations. For example, nurses aides needed a 2012 wage of $25,248 to keep up with inflation, but it was $24,420, a 3.28 percent decline from 2006.

Home health aides, medical assistants, occupational therapy aides, physical therapy aides, pharmacy aides also lost buying power. The low paid health care occupations have declining real wages and increasing employment suggesting a large increase in the supply of people flooding into low wage jobs because they can not find anything else.

Protective service occupations, food preparation and serving related occupations, personal care and service occupations had more jobs in 2012 than 2006, but 16 of 22 occupations in protective services had lower real wages. Occupations as firefighters, correctional officers and jailors, bailiffs, detectives and security guards along with their supervisory staff had falling real wages. Security guards have over a million jobs, but median wages needed to be$24,508 in 2012 to keep with inflation. Instead they were $23,970, a 2.2 percent decrease in real wages.

Food preparation and serving related occupations had a mix where 10 of 18 occupations with higher real wages along with more jobs. Fast food cooks had the lowest median wage of $15,410 in 2006. Their wages were up more than inflation but they remain the lowest paid job in food services with 2012 median wages of only $18,410. All other categories of restaurant, cafeteria, and even private household cooks have declining real wages. Median wages for waiters, waitresses and combined food preparation and serving workers did better, up more than inflation by 2 to 9 percent, but still only in the low twenties for wages.

Personal care and service occupations had more jobs but lost buying power to inflation in 21 of 33 occupations. Non-farm animal caretakers – typically dog walking services, ushers, lobby attendants, ticket takers, amusement park and recreation workers, barbers and hairdressers, child care workers, personal care aides, recreation workers, and residential advisors had combined 2012 employment of almost 3 million jobs and all with declining real wages.

There were eight more occupational categories with declining employment and generally declining real wages.

Building and grounds cleaning and maintenance occupations had declining real wages in 8 of 10 occupations; janitors and cleaners, maids and housekeeping cleaners, landscaping and grounds maintenance and their supervisory staff among them. Janitors and cleaners have over 2 million jobs, but needed median wages at least $22,687 to keep up with inflation by 2012. Instead they were $22,320, a 1.62 percent decline.

Sales occupations had 17 of 22 occupations with declining real wages including salespersons and cashiers previously mentioned and parts salespersons, advertising, insurance, securities, commodities, and financial services sales agents, real estate brokers and agents and telemarketers.

Office and Administrative support occupations had a few bright spots, but 29 of 55 occupations had declining real wages. Financial support occupations like bookkeeping, accounting, and auditing clerks fared the best with 1 to 2 percent gains in real wages. However, communications operators for directory assistance, long distance, call center and answering services have lower real wages and lower dollar wages. Customer service representatives have over two million jobs, but their 2006 median wage of $28,330 needed to be $32,249 in 2012 to keep up with inflation. Instead it was $30,580, a 5.18 percent decrease in real wages. Receptionists, legal secretaries, desktop publishers, and a selection of shipping, receiving and order clerks had falling real wages between 2006 and 2012.

Farming, fishing, and forestry occupations had fewer jobs and declining real wages in 7 of 14 occupations. Farm workers and crop, nursery and greenhouse laborers were all jobs with declining real wages along with most of logging operations jobs.

Construction occupations did badly with 29 of 59 occupations losing buying to inflation and all the skilled trades like masons, carpenters, drywall installers showing lower real wages and some also lower dollar wages.

Repair and installation occupations had 2 to 6 percent real declines for 33 of 52 individual occupations including automotive and vehicle repair occupations, home appliance repair, telecommunications repair and a few more.

Production occupations had declining employment and 61 of 115 occupations had lower real wages. Team assemblers have 1.2 million jobs, the biggest production occupation. Median wages kept up with inflation, but just barely, rising by .38 percent to $27,640 in 2012. Otherwise assembly and fabrication occupations like electrical and electronic assemblers, engine and machine assemblers had declining real wages from 2006 to 2012.

Other production occupations with declining real wages were in metal and plastic work for jobs as machinists, tool and die makers, machine operators for cutting, grinding, drilling, and buffing; in food processing for jobs as bakers, meat, poultry, and fish cutters and trimmers, slaughterers and meat packers; in apparel and finishing jobs as sewers, upholstery and textile machine operators.

Transportation and moving occupations had declining employment and 28 of 52 occupations with falling real wages. Hand laborers and freight, stock, and material movers have almost 2.4 million jobs, but their 2006 median wage of $21,220 needed to be $24,156 in 2012 to keep up with inflation. Instead it was $23,890, a 1.1 percent decrease in real wages.

Airline pilots and flight attendants, traffic controllers, locomotive engineers, most railroad jobs, and many driving jobs including heavy and tractor trailer drivers, industrial truck and tractor operators and school bus drivers had declining real wages. Pilots, copilots, and flight engineers had median wages of $141,090 in 2006, but to keep up with inflation and have the same buying power in 2012 median wages would have to be $160,200. Instead they were $114,200, a 28.90 percent decrease.

Flight attendants had median wages of $53,780 in 2006, but to keep up with inflation and have the same buying power in 2012 median wages would have to be $61,220. Instead they were $37,240, a 39.17 percent decrease, the biggest decrease I can find among United States occupations.

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Computer Support Specialists

Computer Support Specialists have two occupations

Standard Occupational Classification #15-1151 Computer User Support Specialists
Standard Occupational Classification #15-1152 Computer Network Support Specialists

SOC Definition for #15-1151-- Provide technical assistance to computer users. Answer questions or resolve computer problems for clients in person, or via telephone or electronically. May provide assistance concerning the use of computer hardware and software, including printing, installation, word processing, electronic mail, and operating systems.

Examples of other common names in use -- Computer Customer Support Specialist, Help Desk Representative, Help Desk Specialist, Desktop Support Specialist, End-User Support Specialist, Help Desk Analyst, Help Desk Technician, PC Support Specialist.

SOC Definition for #15-1152-- Analyze, test, troubleshoot, and evaluate existing network systems, such as local area network (LAN), wide area network (WAN), and Internet systems or a segment of a network system. Perform network maintenance to ensure networks operate correctly with minimal interruption.

Examples of other common names in use -- Network Diagnostic Support Specialist, Network Support Technician, Network Technician; excludes Network and Computer Systems Administrators #15-1142 and Computer Network Architects #15-1143.

National 2012 employment as Computer User Support Specialists was 525,630 and for Computer Network Support Specialists were 167,980 for a combined total 693,610. Both jobs were reported together as a combination in the years from 2000 to 2011. The combined category had growth of 14 thousand new jobs a year since 2000 at growth rates well above the national average. The Bureau of Labor Statistics is forecasting modest job growth of 11 thousand per year through 2020 for the combined category.

Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for Computer User and Network Specialists have been around 26.9 per year in recent years.

The recently updated BLS Education and Training Classification assignments for network and user support specialists list some college training in computer sciences without necessarily have a degree as the entry level education minimum. However, percentages from survey data are published for the network and user support occupations showing an educational distribution where 29 percent have some college, but no degree, and almost 41 percent have an associate’s degree, or baccalaureate degree and 8 percent above the BA. Previous experience is considered unnecessary, but moderate on-the-job training is expected to be necessary for new hires.

Computer User Support Specialists

Computer User Support Specialists have at least some employment in almost every industry, but a dozen selected industries have almost 60 percent of the jobs. Computer design and related activities has almost 20 percent, 103 thousand jobs. Education, including colleges, has another 12.5 percent, a little over 65 thousand jobs. Software publishers and data processing employ 6.5 percent, or 34 thousand jobs. Management of Companies have 28 thousand jobs, combined employment services and business support services another 28 thousand, and Federal, state and local governments 23.6 thousand.

The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by 2080.

The 2012 entry wage for the national market in the 10th percentile for Computer User Support Specialists is reported as $27,620 in 2012. The 25th percentile wage equals $35,790. The median wage is $46,240, the 75th percentile wage equals $60,400 and the 90th percentile wage is $77,430.

For the 103,820 Computer User Support Specialists in Computer Design and Related Services the 2012 10th percentile entry wage is $27,230. The 25th percentile wage equals $35,290. The median wage is $46,690, the 75th percentile wage equals $62,630 and the 90th percentile wage is $83,030.

Computer Network Support Specialists

Computer Network Support Specialists also have some employment in almost every industry but a dozen industries have a little over 60 percent of the jobs. Computer design and related activities has almost 21 percent, or 34.7 thousand jobs. Software publishers, communications carriers and data processing have another 13.2 percent, or 22.3 thousand jobs. Education, including colleges, employ 11 thousand; government another 11 thousand; Management of Companies 9.6 thousand jobs. About 5,000 are employed through employment agencies.

The entry wage for the national market in the 10th percentile for Computer Network Support Specialists is reported as $34,930 in 2012. The 25th percentile wage equals $44,530. The median wage is $59,090, the 75th percentile wage equals $76,450 and the 90th percentile wage is $96,850.

For the 34,700 Computer Network Support Specialists in Computer Design and Related Services the 2012 10th percentile entry wage is $34,140. The 25th percentile wage equals $44,960. The median wage is $60,050, the 75th percentile wage equals $79,890 and the 90th percentile wage is $101,170.

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A Shortage of Manufacturing Skills?

President Carter’s domestic policy advisor, Stuart Eizenstat, and Robert Lerman, an Urban Institute Fellow, claim there is a skills gap in manufacturing that threatens America’s manufacturing comeback. [“Bring back the apprentice”, Washington Post, May 5, 2013, and republished on yahoo] Readers are asked to accept a citation from an unnamed survey that claims 600,000 jobs go unfilled because the skills gap is real and America needs an apprenticeship program. They worry “We are at risk of squandering this historic opportunity – mainly because firms interested in investing in the United States are finding too few workers with the skills needed . . .”

Really?

American manufacturing dropped 2.2 million jobs in the recession months from January 2008 until February 2010. Every single manufacturing sub-sector lost jobs. Since February 2010 the manufacturing recovery is confined to primary and fabricated metals, manufacturing for machinery, and transportation equipment but nothing else. All other sub-sectors combined had a net loss of jobs as small job gains in a few sub-sectors were not enough to offset losses in others. From February 2012 to the end of last year manufacturing is up only 491 thousand jobs, less than a quarter of the recessionary losses. With 2.2 million jobs lost in the recession and 491 thousand new jobs in the recovery, the difference suggests a surplus of production workers available for hire, not a shortage.

The Bureau of Labor Statistics lists just four occupations in primary and fabricated metals, machinery and transportation equipment manufacturing that require 12 months or more of on-the-job training: machinist, metal and plastic model makers, metal and plastic pattern makers, and tool and die makers.

Machinists were reported to have 388 thousand jobs as of 2012, but there were 419 thousand machinist jobs in 2008. The authors cite “a dearth of machinists” when 31 thousand machinists laid off in the recession appear available to hire now: a surplus not a shortage.

Model makers had 5,700 jobs in 2012; pattern makers 4,130 jobs. In 2008 there were almost 9,000 jobs as model makers; over 6,000 pattern makers. These are small niche jobs but recessionary layoffs suggest a surplus available to hire, not shortage.

Tool and die makers were reported with 76 thousand jobs as of 2012, but there were almost 86 thousand in 2008. Tool and die maker jobs are up from 70 thousand in 2011, but the increase disguises a long term decline. There were 100 thousand tool and die maker jobs in 2005 and 131 thousand in 2000. Bureau of Labor Statistics reported jobs suggest a surplus of tool and die makers, not a shortage.

The four occupations above that need long term on-the-job training are among 26 production occupations the Bureau of Labor Statistics includes in a category called metal and plastic workers. In 2008, 2.15 million had jobs in these 26 occupations; only 1.84 million in 2012. These 26 occupations require no more than a high school degree as defined and published in the Bureau of Labor Statistics education and training classification. An apprenticeship requirement is defined in the training classification but not necessary for any of the 26 occupations.

The other 22 metal and plastic work occupations require no more than moderate-on-the-training defined as “competency in an occupation that can be acquired during 1 to 12 months of combined on-the-job experience and informal training. The 22 include welders, cutters, solderers, and brazers, and computer numerically controlled machine tool programmers the authors cite as needing an apprentice program.

Assemblers and fabricators are another major category of production worker with 10 occupations and 1.98 million jobs in 2008 but only 1.72 million jobs in 2012. That leaves 260,000 available to hire, another surplus. None of these ten occupations require long term on-the-job training: six need moderate term on-the-job training, four need only short term on-the-job training defined as a month or less of combined on-the-job experience and informal training.

Eizenstat and Lerman make no use of Bureau of Labor Statistics data to support their claims because the data shows a surplus with no need for apprenticeship programs. When a business complains about a shortage of labor, they mean a shortage at the low wage they expect to offer. Instead of bidding up the wage to get the help they want, business moves to far off places like Bangladesh, and then finds a willing or gullible economist to blame the unemployed, who would have a job if they just had the right skills.

Alan Greenspan, the former Fed chair, perfected the “Get some training” propaganda in his capital hill testimony. He was calm and self assured when he placed the blame for unemployment on the unemployed. These guys like drama: “squandering this historic opportunity.” Oh Please! Where is Oprah when we need her?

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Executive Administrative Assistants

Executive Secretaries and Executive Administrative Assistants

Standard Occupational Classification #43-6011 Executive Secretaries and Executive Administrative Assistants

SOC Definition--Provide high-level administrative support by conducting research, preparing statistical reports, handling information requests, and performing clerical functions such as preparing correspondence, receiving visitors, arranging conference calls, and scheduling meetings. May also train and supervise lower-level clerical staff.

Examples of other common names in use—Executive Assistant, Administrative Assistant

Executive Secretaries and Executive Administrative Assistants excludes jobs as
43-6012 Legal secretaries, as 43-6013 medical secretaries and as 43-6014 other types of secretaries such as alumni secretary, department secretary, office secretary, personal secretary, school secretary, real estate assistant.

Executive secretaries and executive administrative assistants are sprinkled through almost every sector and sub-sector of the economy. They typically account for only a half percent or less of firm staffing, but selected service sectors are as high six and seven percent. Securities, commodity contracts, and other financial investments establishments have an average of 5.5 to 7 percent staffing of executive secretaries and executive administrative assistants. Various real estate specialty service firms, grant making and giving services, social advocacy organizations, business, professional, labor, political, and similar organizations all have 4 to 6 percent staffing with executive secretaries and executive administrative assistants.

National employment as executive secretaries and executive administrative assistants dropped to 803,040 in 2012. Jobs are down from 1.37 million since 2000 in a steady decline, but job totals for medical secretaries and secretaries except executive, legal and medical are up enough to maintain employment totals for the combined category. The job total for all secretarial and administrative assistant categories continues to hold at 3.6 to 3.7 million in the national market since 2000. The Bureau of Labor Statistics is forecasting modest job growth of 15.6 thousand per year in spite of the decade long decline.

The recently updated BLS Education and Training Classification assignments for Executive Secretaries and Executive Administrative Assistants list high school diploma or equivalent as the entry level education minimum. However, percentages from survey data are published for the executive secretary and executive administrative assistant occupation. Results show an educational distribution where 35 percent have some college, but no degree, and almost 30 percent have an associate’s degree, or baccalaureate degree and a few percent above the BA. Many executive assistants need computer skills beyond word processing that add to necessary education and enhance employability. In general on-the-job training is expected to be minimal for this occupation; applicants need to bring the skills and experience to the job.

Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for Executive Secretaries and Executive Administrative Assistants are expected to average around 32,180 per year in the years up to 2020..

The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by

The entry wage for the national market in the 10th percentile for Executive Secretaries and Executive Administrative Assistants is reported as $31,310 in 2012. The 25th percentile wage equals $38,030. The median wage is $47,500, the 75th percentile wage equals $60,130 and the 90th percentile wage is $73,530. Yearly reported wage increases are keeping up with inflation across the whole salary distribution with a small increase in buying power over the last decade.

There are 27,380 Executive Secretaries and Executive Administrative Assistants jobs in the Washington Metropolitan area for 2012. The entry wage for the Washington Metropolitan market in the 10th percentile for Executive Secretaries and Executive Administrative Assistants is reported as $36,640 in 2012. The 25th percentile wage equals $43,790. The median wage is $55,420, the 75th percentile wage equals $69,460 and the 90th percentile wage is $83,360. Legal secretaries earn more; medical and other secretaries earn less than executive secretaries and executive administrative assistants in the Washington metropolitan area.

There are 9,740 Executive Secretaries and Executive Administrative Assistants jobs in the Washington DC for 2012. The entry wage for the Washington DC market in the 10th percentile for Executive Secretaries and Executive Administrative Assistants is reported as $34,180 in 2012. The 25th percentile wage equals $41,100. The median wage is $51,470, the 75th percentile wage equals $66,970 and the 90th percentile wage is $84,440. Legal secretaries earn more; medical and other secretaries earn less than executive secretaries and executive administrative assistants in Washington DC.

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The $9.00 an hour minimum

The Obama Administration recently proposed an increase in the minimum wage to $9.00 an hour. The current minimum continues at $7.25 an hour where it has been since July 24th 2009, the date of the last of three planned increases passed by Congress. The proposed increase is a little over 24 percent over the three years from 2009 to 2012, more than inflation but still hardly a self supporting wage.

At $9.00 an hour per full time employee the increase converts $3,640 [$1.75 x 2,080] of profit to cost per full time minimum wage employee. To employers of low wage jobs like ushers, lobby attendants, ticket takers, shampooers, or child care workers higher wage costs bring pressure to experiment with higher prices, and fewer work hours or jobs. Raising prices might raise revenue and restore profits as long as sales don’t fall by much. Otherwise cutting jobs or hours in response to a higher minimum wage should help restore profits.

Since everyone agrees higher wages do pressure employers to cut work hours or jobs for employees paid below the minimum wage that part makes for easy agreement. However, it represents a small part of the minimum wage debate, unless economists and their business clients expect job losers to disappear, never to work again.

In their book Minimum Wages economists David Neumark and William L. Wascher write on page 116, “. . . as we emphasized earlier in this chapter the potential for minimum wage increases to affect wages higher in the wage distribution is also important in assessing the effects of minimum wage policy.” (1)

When the minimum wage jumped by $2.10 an hour from 2006 to 2009, jobs as fast food cooks dropped from 612 thousand to 539 thousand. (2) During the same period there were other jobs as cashiers, retail salespersons, rental and counter clerks and others with wage ranges above the minimum. An increase in applications for these other jobs quite likely holds down wages as economists like to predict from any increase in supply, but in wage ranges above the minimum. As people find other jobs in other industries and occupations the higher minimum wage can work to increase employment at higher wages.

In spite of their conclusions, Neumark and Wascher “. . . find it very difficult to see good economic rationale for continuing to seek a higher minimum wage.” In this they are like all economists who have been reciting conclusions like that for decades. Telling people they are worse off with a higher wage makes it necessary to quickly convince the public that jobs will be lost.

Neumark and Wascher and other economists try to convince people by theorizing in the specialized terminology of the economics fraternity. At page 254 they write “In the model, an increase in the nominal wage that raises the wage rate of unskilled labor not only induces substitution of skilled for unskilled labor, it also leads to substitution of unionized skilled labor for non-unionized skilled labor because the union sector expands and the nonunion sector contracts.” Their predictions come without mention of occupations like cashier, clerk or fast food cook and lead to conclusions applied to generic markets of products and jobs. The authors might recognize the millions of opportunities to move from low wage to higher wage employment by looking at wage distributions by occupation reported by the U. S. Bureau of Labor Statistics in their Occupational Employment Survey.

Business predictably opposes a higher minimum wage year after year. For individual business a higher minimum wage always converts profits to costs, even though the economy needs people with income to put back in the spending stream. Economists repeatedly offer theoretical support as though they are paid spokesmen or women.

Telling people they are better off with lower wages remains a tough sell among wage earners. The continued popularity of a higher minimum wage suggests there are many that work for wages who understand employers and employees have opposite economic interests. Employees outnumber employers by enough to expect a raise, but politics is a messy business. Will Congress go with the numbers?

[1] David Neumark and William L. Wascher, Minimum Wages, (Cambridge, MA: The MIT Press, 2008), 295 pages.

[2] U. S. Bureau of Labor Statistics, Occupational Employment Survey

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Minimum Wages - A Review

David Neumark and William L. Wascher, Minimum Wages, (Cambridge, MA: The MIT Press, 2008), 295 pages.

The two economist authors wrote Minimum Wages for economists; that is except for a couple of sentences in the last chapter. The title of the last chapter, Summary and Conclusions, signals politicians and business types to the pages where they will find the conclusions they want to hear: “Based on the evidence from our nearly two decades of research on minimum wages . . . we find it very difficult to see good economic rationale for continuing to seek a higher minimum wage.”

Chapter two has the history and law of minimum wages and there are chapters describing changes on employment, wage distribution, income distribution, prices, profits and training incentives. A political economy of minimum wages chapter precedes the summary.

Chapter three has 70 pages reviewing 43 studies of the minimum wage effects of a higher minimum wage on employment. The summary reviews come after a section titled the neoclassical model where the authors narrate a description of the “textbook” neoclassical model in its “simplest” form. It assumes competition for labor and product markets, one type of labor, output produced with a mix of capital and labor, and minimum wage coverage for all. A minimum wage above the market wage creates two causes for declining employment. First, it raises establishment costs and market prices that cause falling product demand and ultimately falling employment. Second it raises wages leading to a substitution of capital for labor.

Paragraphs that begin with extensions of the model add or change selected assumptions. In one extension, minimum wages can be covered or uncovered. In a second, labor can be skilled or unskilled. In the first extension the authors assert “. . . the uncovered sector may provide alternative opportunities to workers who cannot finds jobs in the covered sector and thus can potentially mitigate the overall employment losses associated with the minimum wage.”

In the second extension the authors assert “. . . the neoclassical model’s prediction of a reduction in labor demand applies unambiguously only to less-skilled workers whose wages are directly raised by the minimum wage. The effects on other workers depend on the nature of the production process and, indeed, the minimum wage can generally be expected to lead to an increase in the employment of slightly higher-skilled workers who are good substitutes for minimum wage workers.”

To employers of dishwashers, ushers, lobby attendants, ticket takers, shampooers, and child care workers higher wage costs reduce profits pressuring employers to experiment with higher prices, and fewer work hours or jobs. Raising prices might raise revenue and restore profits as long as sales don’t fall by much. Otherwise cutting jobs or hours in response to a higher minimum wage should help restore profits. Since everyone agrees higher wages do pressure employers to cut work hours or jobs for sub-minimum wage employees that part makes for easy agreement. However, it represents a small part of minimum wage policy, unless the authors expect job losers to disappear, never to work again.

The authors do worry about what else happens after low wage employees lose their jobs. Repeatedly they pose different options with new assumptions and another chain of deductive model building. On page 50 they write under an assumption of partial minimum wage coverage “. . . the minimum wage raises the supply of labor to the uncovered sector, which lowers the wage and increases employment in that sector, thus offsetting some of the job loss in the covered sector.” Again in similar fashion on page 116, “. . . as we emphasized earlier in this chapter the potential for minimum wage increases to affect wages higher in the wage distribution is also important in assessing the effects of minimum wage policy.”

Both of these citations from the authors contradict their conclusion that a higher minimum wage necessarily harms employment. They agree if people lose their minimum wage job they do not disappear, but begin looking for other jobs in other occupations with wages higher in the wage distribution. Forced to leave a sub-minimum wage job the newly unemployed increase the supply of labor in other occupations where they moderate higher wages and add to employment. The authors might recognize the millions of opportunities to move from low wage to higher wage employment by looking at wage distributions by occupation reported by the U. S. Bureau of Labor Statistics in their Occupational Employment Survey.

Obsessive model building quickly turns the book into a tedious slog through neoclassical constructs in the specialized terminology of the economics fraternity. The authors use characterizations for model building like covered and uncovered, skilled and unskilled, union and non-union without mention of occupations like lawyer, engineer, clerk or cashier.

Many times the authors describe models that bring a “substitution of skilled for unskilled labor,” and vice versa. At page 254 readers find “In the model, an increase in the nominal wage that raises the wage rate of unskilled labor not only induces substitution of skilled for unskilled labor, it also leads to substitution of unionized skilled labor for non-unionized skilled labor because the union sector expands and the nonunion sector contracts.” Most people think of lawyers and engineers as skilled labor and clerks and cashiers as unskilled labor but not substitutes. Substitutes have characteristics similar enough to be interchangeable, but the authors repeatedly treat substitutes as different enough to be in separate markets.

A succession of models and assertions lead to conclusions of up, down, higher, lower applied to generic markets of products and jobs. The authors report regression estimates with tables of numerical coefficients, but these estimates came from aggregated data of many occupations and markets. Aggregated data doesn’t tell us what happens to fast food cooks after a minimum wage increase.

When the minimum wage jumped by $2.10 an hour from 2006 to 2009, jobs as fast food cooks dropped from 612 thousand to 539 thousand. During the same period there were jobs as cashiers, retail salespersons, rental and counter clerks and others with wage ranges above the minimum. An increase in applications for these other jobs quite likely holds down wages as economists like to predict from any increase in supply, but quite possibly in wage ranges above the minimum. A higher minimum wage might work out to higher employment, higher wages and lower wage inequality.

In the policy chapter the authors suggest some special interest groups support a higher wage because it helps them. Others who support raising the minimum wage are confused or uninformed; not clued into the power of neoclassical market forecasts. Economists have been reciting these conclusions for decades, but if you are a stickler for details and want to know how to support that view, you will not find it in this book. If you always want to oppose a higher minimum wage, do as the authors do, say it’s a bad thing that hurts employment.

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Some Flaws in Health Care

Recently the Obama Administration announced the time has arrived to appoint health care experts to an Independent Payment Advisory Board as part of its duties under the Affordable Care Act. The legislation gives the advisory board authority to change Medicare reimbursements for doctors and determine new ways to deliver quality health care. The flaws in health care go much deeper than reimbursements.

One of the flaws the advisory board cannot address with reimbursements comes because physician services operate as a separate component of the health care industry. Some of America’s physicians work as salaried employees. However, Bureau of Labor Statistics reports almost 67 percent of physicians practice medicine at over 306 thousand offices of physicians, not including 123 thousand offices of dentists, and still more offices of chiropractors, podiatrists, and a few others. These offices function as independent small businesses where physicians double as doctors and entrepreneurs in a physician services industry.

Combining business and medicine not only diverts physician time and energy away from medicine, it generates many small establishments that need a steady volume of patients to cover overhead expenses for office space, equipment and supplies, to minimize costs and to keep their business financially solvent.

A separate and decentralized physician services industry negotiates billions of transactions, first to provide necessary services, and then to collect payment from patient health care plans. Patients have no incentive, or ability, to be consumers when patient charges will be small co-pays or deductibles. Physician entrepreneurs avoid quoting prices when so many payments come from billed charges to a health plan rather than patients. Physicians decide necessary services and patients generally go along, but suspicion runs high that questionable tests and procedures might be ordered to maintain steady revenues into the firm.

The 306 thousand offices of physicians had employment of 2.3 million in 2011 with almost 820 thousand jobs in office and administrative support. The 820 thousand are more office and administrative support jobs than those reported for the entire hospital industry that has 5.7 million jobs; the 820 thousand are more the 4 times the office and administrative support jobs for the entire nursing and residential health care industry that has 3.1 million jobs.

Offices of physicians have 35 percent of staffing in office and administration support occupations, higher than any other sector or sub sector in health care. By comparison, outpatient care centers have 18.8 percent in office staff. With 2.3 million jobs spread among 306 thousand offices the average office has 7 or 8 staff including physicians. Out of 534.6 thousand physicians working in the health care industry 355 thousand work in offices of physicians suggesting the typical office has a doctor and 6 or 7 support staff. Staffing data implies a sub sector bloated with office staff, much of it underutilized.

Physicians services and all the other disparate sectors could be merged into regional or metropolitan health care providers like we organize school districts. Combining the offices of physicians and dentists with medical laboratories, imaging centers, blood banks, dialysis centers, urgent care clinics, hospitals and other services would eliminate billions of unnecessary transactions between bureaucratic offices of strategizing adversaries.

Regional health care helps squeeze bloated overhead office staff and allows health care providers to concentrate on combining necessary services to fully utilize equipment and personal to minimize costs. Regional health care with salaried physicians and staff available to discuss medical options with other salaried physicians and staff helps reduce the incentive to over prescribe tests or treatment and makes second and third opinions readily available. Regional health care has the potential to introduce a measure of choice like public school choice as long as residents can compare annual or monthly premiums, co-pays and deductibles with neighboring districts.

Solving America’s health care problems will require significant changes in health care delivery such as medical school tuition at public expense, converting doctors to salaried employment and expanding regional health care into HMO style delivery systems. But if the appointed advisory board members are really experts, they will know how hard and how frustrating the job will be.

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Unemployment Benefits in North Carolina

A Washington Post article [N.C. looks to cut jobless benefits, WP, 2/13/13] describes cuts in unemployment benefits as a drastic proposal from North Carolina lawmakers. Under the new plan benefits would drop from 26 weeks to 20 and the maximum benefits from $535 a week to $350.

The governor believes they have little choice, they have a budget crisis, but the quotations from business supporters give another reason: cuts are needed to improve the economic climate and rebuild unemployment insurance funds. Lew Ebert, the president of the North Carolina Chamber of Commerce told journalist Michael Fletcher “Everywhere I travel, there are companies that have jobs and want to hire, but I hear two things: people don’t have the skills, or that it is tough to compete with $500 plus per week in benefits.”

Unemployment benefits are always competition for employers while the unemployed receive benefits. Therefore the duration and amount of the benefits reflect a states political attitude and policy toward cheap labor. If benefits are $535 per week for 26 weeks then the unemployed have incentive to stay on unemployment for wages under $13.37 an hour and for the whole 26 weeks. They will be unlikely to become a part of the labor force until after 26 weeks unless an offer comes above $13.37, assuming a 40 hour week. If the benefits are $350 per week for 20 weeks then the unemployed have incentive to stay on unemployment but only for wages under $8.75 an hour for 20 weeks.

By lowering the benefits North Carolina will, as they intend to do, increase the supply of cheap labor. However, $350 is the maximum when few make the maximum. Benefits are always scaled back for filers who had lower wages than those eligible for the maximum. The article cites $296 a week as the average benefit, which is $7.40 an hour. The Bureau of Labor Statistics reports the median wage for cashiers was $8.80 an hour in 2011. At $7.40 an hour we can be sure the Chamber of Commerce has jobs as their president told the Washington Post, but only if the Legislature will help them to hire at lower wages.

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The End of Men and the Rise of Women

Hanna Rosin, The End of Men and the Rise of Women, (NY: Riverhead Books, 2012), 271 pages, $27.95

Think of The End of Men and the Rise of Women as a labor economics book with a narrow focus on gender and jobs. Rosin compares men and women as job seekers and job holders after 40 years of feminism and a decline of gender discrimination.

The book opens with an introductory chapter that defines plastic women and cardboard men. A plastic women is the stay at home mom of the 1950’s transformed into an assertive college educated women who keeps her old role as mother and homemaker while succeeding in a career and taking over the role of breadwinner. Cardboard man hopes he can hold on to the past. He wants to keep defining manliness from work and the role of breadwinner even though manliness defined that way only matter in the major league team sports. These become the stock characters to compare and contrast with the people and families we meet in narrative material divided into seven chapters and a brief conclusion.

In the chapter, Hearts of Steel, we meet young single women experimenting in a hook up sub-culture and what can happen to sexual roles in college and work when women compete for jobs and status formerly reserved for men.

The next chapter, Seesaw Marriage, explores old and new gender roles in marriage and family with more varied material than other chapters. There is discussion of gender in old and new television shows, the literary work of Sylvia Plath, Philip Roth, and the Richard Yates novel Revolutionary Road set in boring suburbia with a settled husband and a frustrated but adventurous wife. Of course it ends badly, but that’s the point.

Rosin also cites a sociology study from the 1930’s titled the Unemployed Man and his Family, an era when the men were either providers or failures. A few quotes come from the interviews with 59 depression era families. One wife said “What a woman wants in a husband is a good steady worker who will support the family.” When the interviewer asked how she felt about her husband’s unemployment she said “Certainly I lost my love for him.” Her husband accepted that he was a “fallen idol.”

Seesaw Marriage includes a mix of interviews with contemporary couples. David and his live in girlfriend Clare have degrees and jobs but David feels discomfort with the dads he sees at the playground. “Yeah it haunts me. It doesn’t matter how Brooklyn-progressive we are we still think he’s pitifully emasculated. I’m progressive and enlightened, and on an ideological political level. I believe in that guy. I want that guy to exist. I just don’t want to be that guy.”

Rosin finally asks David: Why? He says “It’s certainly not resentment.”

“And it’s not really confusion.”

“I don’t think I could categorize my feelings about my situation as either positive or negative.”

Then “It’s because our team is losing. All the things we need to be good at to thrive in the world we imagine existing ten or twenty or even fifty years from now are things that my female friends and competitors are better at than me. Than us. And I am loath to tell that to someone who is going to put it in print, but it’s true.”

The remaining chapters focus mostly on women, their career ambitions, how they cope with the responsibilities they are taking on, and how they deal with the men in their lives. We go to Alexander City, Alabama where many wives took over the bread winner role after Russell Athletic Ware Inc. closed up and left the country. The chapter titled Pharm Girls highlights the lives of some of the 64 percent of women earning pharmacy degrees. In Degrees of Difference we learn men make up a minority of college graduates while women pursue degree skills with a determined and single minded purpose.

Women wrestle with the trade offs of career and family in the last two chapters. A woman in a white house job got a call from her boss about 8:00 PM. He demanded to know why she was home and not at work. “I’m putting my children to bed.” He wanted to know if it was some sort of emergency. These last two chapters review the feelings of women confronted with those tradeoffs: American women in one chapter, South Korean women in the other.

The book reads easily as journalism with interviews and elements of academic research that includes citations of data and from previous work in books and journals. Except for a chapter on women and crime the narrative does not stray into other areas or topics. Some of the women interviewed for the book sound wistful and sentimental more than angry or resentful, but all sound determined to press on. I do not recall anyone looking backward.

Reading through the narrative I gradually decided the book is an invitation to think about gender roles in a service economy. The author ends the interview of David without comment, which I took as a hint to her own opinion, but the book primarily describes the declining condition of men and personal feelings of women without the heavy hand of instruction. Near the end Rosin tells readers she would not cook dinner while her husband drinks beer, but that is about it for advice.

There was a time when families depended on the physical strengths and skills of the mister, which helped define their masculinity. Those days are over but competition for money and status on the job was always a wearing and destructive substitute. The End of Men and the Rise of Women makes that much clear, but no answers on gender roles. Possibly real men drink beer before they cook dinner, but I’m not sure. You’ll have to think it over.

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Virginia Money

In the Chicken Little folk tale, Chicken Little becomes hysterical along with friends Henny Penny, Lucky Ducky, and Foxey Loxey when they all agree the sky is falling. In Virginia, delegate Robert G. Marshall believes the Federal Reserve Bank will bring financial hysteria with hyper inflation like Germany after WWI. He wants to protect Virginians by having a new Virginia currency. [Virginia-only currency one step closer to reality” 2/6/13] He got the Virginia legislature to allocate $17,440 to study a metallic-based currency for Virginia. He was quoted to say “This is a serious study about a serious topic. We’re not completely powerless.”

As every good capitalist knows the value of money is determined by the supply of it relative to its demand for needed transactions. Obsessive worriers like Delegate Marshall think money has to be a supply of something they can pick up and store: commodity money. In this worry Delegate Marshall acts like everyone else: the worriers all want their metallic base to be gold.

To protect themselves from inflation and rising prices with a metallic-based currency, Virginians will need to be able to exchange their inflation devalued currency for gold at a fixed price. If Delegate Marshall could exchange a unit of Virginia currency for an ounce of gold at a known price he would have gold that might hold its value, or rise in value, to protect from the rising price of cars, clothes and corn flakes that devalues his currency.

If Delegate Marshall was a little more curious he would ask himself how the Virginia treasurer happens to have an inventory of gold ready to exchange with a line up of worried citizens. If Delegate Marshall would ask himself how Virginia could remain ready to exchange gold at a fixed price if the market price of gold goes up, he might notice a problem with a metallic standard. After all gold is a commodity like cars, clothes and corn flakes, all subject to rising prices.

If the market price of gold starts to rise there might be someone who would show up at the Virginia treasury to exchange their currency for an ounce of gold to resell it for a profit at the higher market price. The line might be long and drain the gold out of the Virginia treasury ending the metallic-based standard.

I wonder why Delegate Marshall wants to worry so much about something that is not happening. Inflation rates are low, generally below two percent where they have been for over a decade. I wonder why Delegate Marshall wants to worry about the Federal Reserve Bank when it bailed out the rogues and scoundrels who engineered the financial collapse of 2008. I am certain though this piece qualifies as a study of the metallic based standard, which is why I expect to receive that $17,440. My bill will be in the mail shortly.

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A 2013 Job Review

The Bureau of Labor Statistics published its January report showing a seasonally adjusted December increase of 155 thousand jobs. The increase for the 12 months ending December 2012 is 1.836 million jobs, a respectable, but hardly spectacular increase for the year. The job totals for 2012 will be subject to review and possible revision next month, but the end of the year totals gives an opportunity to make an assessment of job growth for the future.

During the recession jobs declined 8.78 million from January 2008 until February of 2010. After the turnaround beginning March 2010 jobs are up 4.78 million to just over 134 million for December 2012. If we have 26 months in a row with 155 thousand new jobs, America will have just over 138 million jobs, which will bring jobs in March 2015 up to jobs in January 2008.

Through the recession months government employment and the share of government employment in total employment continued to rise while manufacturing employment and the share of manufacturing employment in total employment continued to fall. Manufacturing had its highest employment in 1979 followed by nearly unbroken decline until the end of February 2010.

After March 2010 when jobs started to recover manufacturing and government service reversed their long term employment trends. Government including education lost 546 thousand jobs while manufacturing gained 526 thousand. In 2012 manufacturing gained 180 thousand jobs while government lost 68 thousand jobs.

The unexpected increase in manufacturing helped provide a higher job total for the year ending December 2012. The increase in manufacturing gives a reason to be optimistic for 2013, but unfortunately much of the other 2012 gains came in service sectors that also did much better than their long term trends. For example, wholesale and retail trade added 260 thousand jobs for the 12 months ending December 2012, but their average annual increase for the last 22 years including 2012 is 94 thousand. The last 12 years including 2012 did not have job gains, but losses that averaged 65.1 thousand a year.

Trade uses computing technology that holds down job growth, but other service sectors like finance, insurance and real estate also have long term trends with slow growth as a result of computing technology. In the process of recovery from the 2008 recession all of them did much better in 2012 than their long term growth rates. Finance, insurance and real estate gained thousand 80 thousand more jobs than their long term trends would suggest.

If all sectors of the economy in goods production, private service providing industries, and government return to growth at their long term trends then 2013 job growth will have only 1.475 million more jobs, 360 thousand below the gains for 2012. It will be a slow year for jobs if that happens.

If manufacturing repeats last year’s gain and adds 180 thousand jobs and government does not decline further, while the rest of goods production and service industries grow at their long term trend then 2013 with have 1.691 million more jobs; better but still 144 thousand jobs below the 2012 gains.

Health care has been a mainstay of job growth for two decades, but last year’s increase of 391 thousand new jobs was below long term trends. Health care will add 477 thousand new jobs by December 2013 if health care industry jobs grow at their 1990 to 2012 growth rate of 2.78 percent. Lately though, health care has slowed down and last year jobs were up only 2.15 percent for the year. The time to assume health care will contribute the largest share of replacement jobs may be coming to an end. Other sectors like manufacturing and professional services will need to play a bigger role in job growth if America can meet the job needs of the future.

The recent decision on federal taxes that was part of the fiscal cliff negotiations will not help job growth. The two percent reduction in social security taxes ends. Social security taxes go up 2 percent, but the new rate schedule for the personal income tax does not reduce rates enough for a reduction in combined federal taxes. Based on the tax rate changes published in the Washington Post wage earners earning up to $60,000 will pay as much as $1,000 more in 2013 than they did in 2012.

The fiscal cliff solution makes another year with 1.836 million new jobs a doubtful forecast. Americans will need more buying power to keep the job mill going another year. To match last year’s performance for 2013 will be problematic without a continuing recovery in manufacturing, and without an unexpected boost from another service sector or sectors. Expect less.

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Taxes and Entitlements

During the Presidential campaign candidate Romney had a speech secretly recorded where he told listeners that he could not expect to get votes from the 47 percent of tax payers who do not pay federal income taxes. In the speech Romney characterized that group of income-tax-free Americans as being “dependent on the government” and feeling “entitled to health care, to food, to housing, to you-name-it.”

Americans have often worried about people who do not support themselves working. Back in the great depression after unemployment peaked at 25 percent President Franklin Roosevelt said in a speech of October 1934, “Continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. . . . We must preserve not only the bodies of the unemployed from destitution but also their self-respect, their self-reliance and courage and determination. . . . The Federal Government must quit this business of relief.” [quoted from The Crisis of the Old Order, 1919-1933, Arthur Schlesinger, 1957, p 267-268]

It sounds to me like Mr. Roosevelt worried that Americans getting governmental assistance would become dependent on the government whereas Mr. Romney worries that Americans getting governmental assistance are already dependent on the government. Otherwise they sound like identical statements reflecting the cultural notion that work is uplifting and makes us free and independent.

Mr. Romney’s statements generated many comments. I am sure I read only a fraction of them but most of the comments I read assumed the 47 percent of filers who pay no income tax are low paid or unemployed people of modest means. Other comments discussed the matter in general terms without actually going to last year’s tax Form 1040 and doing some calculations.

When I did that I found a single person with one $3,700 exemption and a $5,800 standard deduction could earn up to $9,500 in 2011 with no income tax liability. A married couple with no children, two exemptions totaling $7,400 and an $11,600 standard deduction could have $19,000 of untaxed income. If the $9,500 or $19,000 earned was wage income then both single people and married couples would owe social security taxes.

I am not sure what share of the 47 percent include people with wages too low to tax, but many with higher incomes pay no tax because dividends and capital gains get special tax treatment not available to wage earners. In 2011 income composed of dividends and capital gains up to $88,000 for a married couple pay no federal tax at all assuming those who file take the standard deduction. For those who have itemized deductions above $11,600 untaxed dividends and capital gain can range much higher.

The exact same income earned as wages would pay $9,500 of personal income tax and $4,972 of payroll tax for a total tax of $14,472 and the payroll tax is 2 percent less than normal. Any combination of income with wages, dividends and capital gains pays less tax than the same income earned as wages.

Government programs that aide the poor and the poorly paid are now almost universally referred to as entitlements in the popular media and by politicians, but always in negative terms, as something to get rid of, or cut back. Get a job; work and be independent that is the message from Mr. Roosevelt to Mr. Romney. It might work better if wage earners were entitled to equal treatment in taxation.

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