May 25, 2011 — In the last several months, the U.S. economy has added several hundred thousand jobs, sparking optimism among some observers that the labor market has finally started to recover in earnest. There is substantial debate, however, over whether the jobs being added are “good jobs” — those that pay a high-wage and offer job security and benefits to workers — or “bad jobs,” which don’t. There is some, mostly anecdotal, data suggesting that the jobs being created in certain industries pay less than the pre-recession jobs, but, oddly, the federal government simply does not collect sufficiently robust information to determine how the wages and benefits of new hires differ from the wages of existing employees in the same occupation.
That basic lack of data has perplexed some labor economists and policy advocates, who see such information as a crucial part of understanding the current labor market. It is true that the information would not be definitive: the existence of a newly hired employee does not necessarily mean that a new job has been created, because “new hires” would show up regardless of whether the position was actually new (if an employer fires one employee and hires another for the same job — a process known as “churn” — the new employee is a new hire, but the job is not new). Nevertheless, being able to track the wages of new hires relative to existing workers would be a valuable contribution to an understanding of the pressures facing workers and the state of the labor market as a whole, several labor economists said.
“The difference in wages is an essential part of measuring our recovery,” said Mark Price, an economist at the Keystone Research Center, a Pennsylvania think tank that does research on the labor market. “More generally, if we expect our living standards to rise over time, it’s important that we know whether the new jobs being created are good jobs and whether large groups of new workers are seeing their wages decline. Right now, we don’t have enough data to see what’s going on in a comprehensive way.”
A curious gap
The lack of data on wages and job tenure at the occupational level is particularly striking in the context of the vast amount of data that the federal government does collect through various agencies and bureaus. The principal entity responsible for collecting data on the labor market is the Bureau of Labor Statistics (BLS), which is the information-gathering arm of the Department of Labor. Visitors to the BLS website can quickly become overwhelmed with the vast number of tables, surveys, data sets, and reports that are constantly released by the Bureau. The BLS gathers information on unemployment, inflation, mass layoffs, wages, benefits, demographics and more through a variety of surveys and studies. And in fact, the BLS collects data on occupational earnings in several different surveys, such as the Occupational Employment Survey (OES), a semi-annual survey of approximately 200,000 firms, and the smaller but more detailed National Compensation Survey (NCS), which also includes data on benefits.
A decline in the wages of new hires would likely show up eventually in the overall occupational average that is collected by these surveys, but economists at the BLS said that it could take years before such a drop would be reflected in the average wage across the occupation. Additionally, Price pointed out that if the overall average wage were to decline, there would be no way to tell whether it was declining for all workers — due to union concessions, for example — or if new employees were being hired at a lower wage.
But in order to determine whether wages for newly hired workers are rising or falling relative to existing workers at the occupational level, the BLS would have to collect information about job tenure — that is, the length of time a worker has been at a particular job. If that information were collected, economists said, it would be relatively easy to analyze whether the new jobs being created in specific occupations are paying less than the old or existing jobs.
The manufacturing sector, for example, has recently seen job growth, but — as has been widely noted using anecdotal and firm-specific evidence — many of the new jobs being created in manufacturing pay less than they used to. It is currently very difficult to analyze this phenomenon comprehensively, but if the BLS were to collect information on wages separated by job tenure and occupation, a much clearer picture would emerge both of where wages were falling and whose wages were falling.
“This data would be another piece of evidence to push us in the direction of, first, recognizing that there is a problem with declining wages, and second, of doing something about it,” Price said.
Several economists at the BLS also expressed interest in seeing data on occupational wages and job tenure and, in fact, Secretary of Labor Hilda L. Solis has labeled her vision for the Department “Good Jobs for Everyone.” As part of that vision, one of the Department’s strategies is to, “Produce timely and accurate data on the economic conditions of workers and their families.”
That vision raises an important question: how do you know if the economy is actually producing good jobs for everyone? Remapping Debate made several attempts to ask that question of the Department of Labor, but the Department did not respond.
A host of potential uses
If the data on the wages of new hires existed and were easily accessible, many labor economists said that there were a wide variety of useful applications for it, which could end up influencing policy decisions for the better.
John Schmitt, a senior economist at the Center for Economic and Policy Research, a beltway think tank, agreed. “In the best of all possible worlds our policy decisions would be informed by the data,” he said. “When we don’t have the data, we’re forced to make decisions on incomplete information, which often encourages decisions to be made based on political connections and in backroom deals.”
Andrew Sum, director of the Center for Labor Market Studies at Northeastern University, said that he would personally like to use data on the occupational wages of new hires to analyze structural employment, or unemployment that does not result from a low demand for labor, but from a disparity between the skills that workers have and the skills that are necessary for particular jobs. He explained that, despite assertions that much of the unemployment in the U.S. is structural in nature — which means it is very hard to correct — if it actually were structural, you would expect upward wage pressure in high-skill occupations, because employers would have to “bid” wages up to attract workers. Sum said that he had found little evidence of structural unemployment in the current labor market, but having wage data for new hires would give economists a clearer picture of how much unemployment is structural, and how much is not, which could drastically affect the policies that are put in place to put people back to work.
Robert Lerman, a labor economist at the Urban Institute, said that the data could also have implications for education and training. “If I knew that certain occupations were starting to pay more or less,” he said, “I would be interested in the interaction between that [phenomenon] and the educational status of workers taking those jobs. One key policy question is: what are we training people for?”
Lerman said that, while the government should be trying to raise wages in all industries and occupations, policy-makers should also be tailoring education and training policy to prepare workers for higher wage jobs and attempting to increase the high-wage employment opportunities for workers without a college degree.
Additionally, Lerman pointed out that finer detail on how wages are rising or falling would be useful to the Federal Reserve as it is setting monetary policy. “You would have a better indication about where there’s flexibility in the labor market and where there is inflationary wage pressures,” he said. “I would think that’s something the Fed would be interested in.”
Heidi Shierholz, an economist at the Economic Policy Institute, said that she would be interested to see the occupational wage data in relation to other data on unionization rates. “Unionization has been clearly shown to increase wages,” she said. “Whenever I see wages falling, I think about what policies would make it easier for workers who want to be in a union to join a union.” Having data on the wages of new hires in specific occupation would allow state, local and federal governments to more effectively craft those policies, she said.
And Mark Perry, an economist at the American Enterprise Institute, said that having such data would shed more light on the competitiveness of American industry. “When we see employment rising, how do we know whether that’s because we’re really becoming more competitive or because wages are falling?” he asked.
But it is not just policy-makers, economists and think tanks that could benefit from having data on the wages of new hires. Karen Kosanovich, an economist with the Current Population Survey program at the BLS, said that she fields several calls a week from workers who want to know what the starting wage is in an occupation where they are seeking a job.
“We get a lot of calls from individuals who are making decisions about what they should be making,” she said. “I can tell them the average wage, but if they want to know the starting wage, I can’t produce that for them.”
Obstacles “more institutional than practical”
There are some practical obstacles to obtaining data on the wages of new hires at the occupational level, but economists agree that the BLS could collect that information in several different ways. The most practical vehicle, according to Kosanovich, would likely be the Current Population Survey (CPS), which is a monthly survey of households on a range of topics.
The CPS currently asks about job tenure in a biennial supplemental survey usually conducted in January. And though some industry-wide information on the wages of new hires can be gleaned from these data, Kosanovich explained that the survey size is too small to provide accurate information at the level of detailed occupations. To address that problem, questions about job tenure would need to be asked more often, or asked of more households, or both.
And according to George Long, a BLS economist with the National Compensation Survey, the obstacles to collecting the data are “more institutional than practical.”
“If we don’t provide certain information,” Long said, “it is because Congress has decided that it does not need that information on a regular basis.” Moreover, Long explained, every change that the BLS makes to its surveys must first be cleared with the Office of Management and Budget (OMB) as part of a 1980 law called the Paperwork Reduction Act. “The OMB is particularly concerned with ‘respondent burden,’” Long said. “They really don’t want us to ask more questions than we are required to by law.”
Additionally, gathering and processing more information costs money, and funding has been an increasingly serious issue for the BLS since the recession. Long said that the Bureau has been forced to make some hard decisions about the data it already collects. For example, the Bureau’s 2012 budget called for the elimination of the International Labor Comparisons Program, which collects data on the labor markets of other countries and adjusts them to common framework so that they can be compared to data gathered domestically.
“We’re also victims of the budget-cutting mania,” Long said. “I think our priority right now is to try to keep doing the surveys that we’re doing, not so much to expand.”
Why not recommend gathering more data?
The BLS can, however, make recommendations and requests on data collection to the OMB, the General Accounting Office, and directly to Congress, and normally does so by publishing a recommendation in the Federal Register. There is then a comment period of 60 days. If a change would require additional funding from Congress, the Department of Labor can include the request in its proposed annual budget, said Jacob Galley, another BLS economist.
The Department of Labor did not respond to a question from Remapping Debate about why data on occupational wages for new hires was not seen as meriting a request for funding, and a representative of the BLS said that he would not be able to address questions about why the Bureau had not recommended gathering additional wage data for new hires by press time.
Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers University, said that in the specific case of these data, it made little sense not to request additional funding.
“In the absence of this information, both policy makers and individuals are making decisions that cost billions and billions of dollars without the data that would inform those decisions,” he said. “It’s important to remember that, in the scheme of things, collecting this data would not cost a lot of money. It would well pay off, both in savings from increasing the effectiveness of programs, and in the functioning of the economy as a whole.
“This would not be a hard case to make,” he added. “If [the BLS is] not making this case, they should be.”
Not perfect, but a lot better
Economists stressed that there was no single question that would provide a perfectly clear picture of the labor market, and a question about the wages of new hires would have its limitations, as well. For one, although occupational data provides a much finer level of detail than broad classifications by industry, there is still some variation in the earnings of new hires within the same occupation, depending on factors like education and experience. In addition, the wage data gathered on new hires would only be able to be compared directly to the average previous wage of all workers in an occupation, not the average for the subset of workers who had lost their jobs in the recession.
Nevertheless, most economists agreed that it is very important to know whether the jobs currently being created are paying less, and that in order to answer that question obtaining data on the wages of new hires is key.
“This looks like the most lopsided recovery in American history,” said Andrew Sum of Northeastern University. In that context, a targeted response is required, he continued, making it crucial to know which occupations are paying less to new workers. Sum said that the lack of relevant data on the labor market made it easier for policy-makers to ignore issues like unemployment and wage decline.
In general, economists stressed that the more information that can be gathered, the stronger the likelihood of making effective public policy. “We are very far from spending all of the money that would be socially useful in gathering information about the labor market,” said John Schmitt of the Center for Economic and Policy Research.
When asked whether that fact should be seen as reflective of our policy priorities, Schmitt said, “That question is above my pay grade.”