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Earnings and employment trends in the 1990s
March, 2000, Vol. 123, No. 3
Randy E. Ilg and Steven E. Haugen
Earnings have long been considered an important measure of one’s economic well-being, and it is widely accepted that increased earnings over time result in improved livin g standards. In the United States, real earnings rose sharply for several decades after World War II, but the trend slowed abruptly during the 1970s. Although the picture during the 1980s and much of the 1990s is less clear because of different patterns among the major earnings meas-ures, it is safe to say that there was comparatively little real wage growth during that period.1 In recent years, however, workers’ real earnings have been on the rise.
The stagnation in real earnings for much of the 1990s stands in marked contrast to the considerable growth in employment during that decade. As of December 1999, the end of the period examined in this article, the current economic expansion had lasted almost 9 years.2 During that period, total employment, as measured by the Current Population Survey (CPS), grew by more than 16½ million.3
Previous research, using data from the CPS, showed that employment growth during the first half of the 1990s was concentrated in both relatively higher paying and relatively lower paying job categories, with a decline in the number of jobs paying midlevel wages.4 That same research supported the notion that there was a trend toward "polarization" in employment growth. However, it did not examine the earnings trends in the fields associated with those categories, nor did it address whether the marked employment growth in some of the categories was accompanied by wage gains. The analysis presented herein extends the earlier work by examining the changes in both employment and earnings for all wage and salary workers over the 1989–99 period.5 Specifically, the analysis addresses the following questions: What has been the relationship between the change in employment and the change in real median weekly earnings? In particular, how have earnings changed in those job categories that posted the largest increases in employment? In addition, what happened to earnings dispersion during the 1990s, especially within the high-, middle-, and low-paying job categories?
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1 For an analysis of trends in various wage series from the Current Population Survey, the National Income and Product Accounts, and the Current Employment Statistics survey, see Katharine G. Abraham, James R. Spletzer, and Jay C. Stewart, "Why Do Different Wage Series Tell Different Stories?" American Economics Association Papers and Proceedings, May 1999, pp. 34–39.
2 The official end of the last recession, as determined by the National Bureau of Economic Research (NBER), was March 1991. Under NBER’s method for determining the length of an expansion or recession, the economic trough, in March 1991, would be counted as the first month in the current economic expansion. The economic peak (when it occurs) would be counted as the first month in the subsequent economic recession. The longest expansion on record, 106 months, occurred during the 1960s. As of December 1999, the current economic expansion also appears to have lasted 106 months.
3 The CPS is a nationwide sample survey of approximately 50,000 households conducted for the Bureau of Labor Statistics by the Bureau of the Census. The CPS provides information about the employment status and demographic and socioeconomic characteristics of the civilian noninstitutional population aged 16 and older. The major gauge of employment growth is the Current Employment Statistics (CES) program, a BLS survey of more than 400,000 business establishments. However, this survey does not supply data on the occupational characteristics of employment, an essential feature of the research presented in this article. From March 1992 to December 1999, a period of sustained job growth following the 1990–91 recession, the ces survey showed a job gain of about 22 million, well above the 16½ million indicated by the CPS. (Both estimates are based on changes in seasonally adjusted data). Numerous conceptual and methodological differences between the two surveys could account for these differences in measured employment growth. For a recent study of this issue, see Mark Schweitzer and Jennifer Ransom, "Measuring Total Employment: Are a Few Million Workers Important?" Economic Commentary (Federal Reserve Bank of Cleveland, June 1999).
4 See Randy E. Ilg, "The nature of employment growth, 1989–95," Monthly Labor Review, June 1996, pp. 29–36.
5 Employment and earnings data analyzed in this article are based on the Outgoing Rotation Group files from the CPS. Median weekly earnings for all wage and salary workers, both full and part time, are analyzed, unless otherwise noted. Self-employed workers are excluded, regardless of whether their businesses are incorporated. (Earlier research by Ilg, cited in note 4, analyzed total employment, including the self-employed.) The year 1989 was chosen as the beginning year for the analysis presented herein because labor market activity at the end of the 1980s resembled that of the late 1990s and also because 1989 was sufficiently removed from the influence of the recession that started in mid-1990.
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