Wednesday, May 11, 2011

Job Losses Classified by Weekly Earnings

Copyright, The New York Times Company

Ben Bernanke, the chairman of the Federal Reserve, said recently that people with less-than-average incomes bore the brunt of the recession’s job losses. Census Bureau data confirm Mr. Bernanke’s statement and show employment gains at the high end.

For the 12 months ended September 2008 — the month Lehman Brothers failed — employment in the United States was 146 million. Over the next 12 months, employment fell to 141 million.

The Census Bureau conducts a monthly survey of households and asks some of them what household members have been earning, if anything, on their jobs. I have used that data to investigate the types of jobs that were lost during the Great Recession and have classified the jobs by their weekly pay.

Among people who are working, the median weekly earnings are a bit more than $600 a week. That is, about half of working people earn less than $600, and about half earn more. So if Mr. Bernanke is correct, the bulk of the losses were of jobs paying less than $600 a week.

Chart 1 categorizes people by their weekly earnings –- people earning $1 to $100 a week are in the first group, those earning $101 to $200 a week in the second, and so on. Although the chart’s horizontal axis goes to $2,500, most workers are in the first seven categories.

The vertical axis measures the change, from the 12-month period ended September 2008 to the 12-month period ended September 2009, in the number of people (in millions) in the various categories. Because the zero earning category is excluded, the sum of all of the changes shown in the chart, plus a year’s adult population growth (about two million), is equal to the change in the number of people without paying jobs, a category that grew by six million.

(These totals do not agree exactly with the Census Bureau’s employment totals for technical reasons related to the lack of reliable earnings information from some respondents. For brevity, I make no distinction between “workers” and “jobs,” although some data shown in the chart include people earning money from more than one job during a week.)

The first two categories gained a bit, which probably reflects the surge in part-time employment during this period. But, over all, Mr. Bernanke was correct: an awful lot of jobs were lost in the $201-to-$600-a-week range. Essentially no jobs were lost in the combined $1,101+ categories.

Because less than a quarter of workers are earning $1,100 a week or more, it helps to examine those categories’ job losses in percentage terms, as in Chart 2.

For example, a value of 9 percent in Chart 2 for $2,101 to $2,200 means that 9 percent more people earned $2,101 to $2,200 a week in the 12 months after Lehman failed than earned that amount in the 12 previous months.

The percentage job losses tend to be less for the higher-paying jobs. All the categories above $2,000 a week actually gained jobs (although those types of jobs are relatively rare, the Census Bureau survey is large enough that it includes more than 12,000 people earning that amount over 24 months).

Economists have yet to examine the recession-era pay data thoroughly, but further study of the employment growth at the high end may someday help gauge the importance of unemployment insurance, “skill mismatch” and other factors that are said to have contributed to the employment downturn.

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