Where the Wages Are

by Don Boudreaux on October 12, 2009

in Data, Myths and Fallacies, Work

The comment below, from John Dewey on this post, deserves to be highlighted as a post of its own:

Harold Meyerson assertion about wages:

meyerson: “the vast majority of new jobs in recent decades has come in the service and retail sectors, which tend not to be as productive and don’t pay as well.”

… is wrong.

The truth? In most service sectors, wages exceed those of the manufacturing sector:

sector …………………………..median wage

information (incl telecom)………$23.10
government………………….….$20.86
educational services…………….$19.85
finance and insurance…………..$19.63
transportation/warehousing…….$18.39
construction…………………….$18.38
wholesale trade…………………$17.72
manufacturing…………………..$16.62
health care and social service…$15.65
retail trade………………………..$10.55
accomodation/food services…….$8.62

Source: BLS 2008 National Industry Survey

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{ 38 comments }

improbable October 12, 2009 at 10:13 pm

What does “most service sectors” mean? There are 3 service sectors below manufacturing, but how many above? It seems clear that education and finance are service sectors, while transport, construction and wholesale aren’t. Is information a service sector? Is government? I guess it would be useful to know the sizes of these sectors.

Another thing to consider is that the manufacturing jobs which do exist are high-wage because they are making the high-value things America can make competitively. When politicians talk of making more, they have in mind “bringing home” jobs from China, etc. And these would probably be ower-value, lower-skill, lower-wage jobs.

John Dewey October 12, 2009 at 11:05 pm

improbable: “What does ‘most service sectors’ mean? … It seems clear that education and finance are service sectors, while transport, construction and wholesale aren’t. “

I suppose one could eliminate transportation and wholesale trade from the service sector – but only by using the most narrow definition. Here’s the way the Bureau of Labor Statistics explains service sector:

“The service sector defined. The broadest definition of the service sector encompasses all industries except those in the goods-producing sector—agriculture, mining, construction, and manufacturing. Under this definition, services include transportation, communication, public utilities, wholesale and retail trade, finance, insurance, real estate, other personal and business services, and government. One variation on this definition of the service sector (or service-producing sector, as it is frequently called) excludes government activities at all levels. A third definition of the service sector is still narrower, including only private personal and business services and excluding transportation, communication, wholesale and retail trade, finance, insurance, and real estate. All three definitions will be referenced in the following discussion.”

That last definition is really far too narrow, IMO.

I was using the broadest definition in my comment. That’s the way I remember the term used in my macroeconomics class about 25 years ago.

Anonymous October 12, 2009 at 10:21 pm

unfortunately, it doesn’t seem at all clear that this deals with *growth* of jobs, as the meyerson quote seems to be addressing. As we know nothing about quantities or rates from these numbers, no true/false claims can be made. for instance, what if 60% of the growth has come in retail trade, which *is* below manufacturing, in terms of median wage (and, incidentally, why median? why not starting, if it’s new jobs we’re talking about)

anyway…while I could care less about where new job growth is coming from, as if it’s something that needs to be managed, I’m not sure how these data refute those who *are* worried about it.

David PInto October 12, 2009 at 11:10 pm

Why are government wages so high?

Anonymous October 12, 2009 at 11:26 pm

Limited upside requires above average day-to-day compensation. Plus, being exposed to the ire and opprobrium of the likes of me needs some increased pay. :)

Methinks October 13, 2009 at 12:00 am

The limited upside is surely compensated for by the extremely limited downside – and the fact that these are not people who can generally obtain employment with more upside.

Anonymous October 13, 2009 at 12:06 am

Touche.

Legislated wages, then, as opposed to market-determined? I’m not quite sure how gov wages are set, but I’m sure there’s some logrolling in there.

Anonymous October 12, 2009 at 11:32 pm

I’m sure your question is rhetorical, but I’ll give Yasafi’s answer:Because government workers are noble souls, and their only ambition is to serve. Everyone knows that there is no comparison between the saintly people at the USPS, or the DMV and the drones working at any privately-owned, greed-mongering, eeevil corporation. Government workers are the most courteous, conscientious workers in the history of work, and if anything, should be paid double. Where would we be without the enveloping cocoon of safety that can only be provided by Government? Now, the real answer: Because the unions that represent government workers own a considerable stake in the Dimocrat Party.

Methinks October 12, 2009 at 11:59 pm

Are you sure that’s YASAFI you’re quoting? Aside from the content, it doesn’t read like it was written by a drunk chimpanzee.

When you don’t have to worry about profits and losses, you can pay people whatever you can forcibly extract from the productive. Government isn’t constrained by failure.

Anonymous October 13, 2009 at 1:08 am

I knew it was too good when I used there and their correctly! :-D

Justin P October 13, 2009 at 1:49 am

You mean our Government isn’t efficient? OMG someone should tell the news media, if you listen to them, you’d think the Government was the model of efficiency.
/snark

Anonymous October 13, 2009 at 12:18 am

In 1997 the BLS reported that Manufacturing had the HIGHEST weekly wages. This was followed by Finance, Insurance and Real Estate (one category and Services (?). It seems that a lot of good manufacturing jobs have been lost to bring down the wages so dramatically. In fact 5.5 million manufacturing have been lost since 1999. Some of these losses have been by productity gains but on the other hand the economy has grown a lot. The link to the report is here: http://www.bls.gov/opub/ted/1999/Feb/wk1/art04.htmMr. Meyerson is right about the loss of good paying jobs and in startling numbers. The good paying jobs are mostly gone now but a decade ago manufacturing was on top. We are certainly smug in our high government wage economy now.

John Dewey October 13, 2009 at 12:14 pm

The report you linked to does not show that the manufacturing sector had the highest wages overall in 1997. Rather, it shows that the manufacturing sector had more industries with wages at least twice the overall average. That statistic is really meaningless. The BLS data referred to uses the Standard Industrial Classification to separate the manufacturing sector into many more industries than it does finance or information/telecom or any of the other higher paying industries.

You are correct that many high paying manufacturing jobs have been eliminated over the past few decades. but you are misinterpreting the report to which you linked in stating that “a decade ago manufacturing was on top.”

If you can find identical reports from 1997/1998 and 2008, then prehaps we can resolve the question you raise.

Anonymous October 13, 2009 at 12:51 pm

The BLS data referred to uses the Standard Industrial Classification to separate the manufacturing sector into many more industries than it does finance or information/telecom or any of the other higher paying industries.

Right. Isn’t that what you’ve done above by listing many separate “service sector” categories while listing a single median wage for all of “manufacturing”? I agree that Seekingexports’ finding isn’t very meaningful, but how meaningful is yours?

John Dewey October 13, 2009 at 2:58 pm

The BLS reports wages grouped in the large sectors I have shown. I have been unable to find median wages for all the sectors grouped under the service sector umbrella. But i see no reason why that renders my data any less meaningful.

I reported the sectors having employee counts which are of similar scale:

manufacturing ……… 13.6 million
finance/insurance …… 5.9 million
educational services .. 12.7 mmillion
health care/social ….. 16.5 million
government ………….. 9.7 million
transportation ……….. 5.3 million
information …………… 3.0 million
wholesale trade …….. 6.0 million
construction ………… 7.5 million
retail trade ………….. 15.6 million

It is meaningful to compare industry data representing populations of the same scale. The sectors will never be exactly the same size, but all are large enough that medians are meaningful when compared with one another.

On the other hand, the SIC categorization analysis referenced by Seekingexports includes “industries’ as small as Fur Goods (770 workers), Luggage (9,610 workers), and Cigars (3.020 workers). It also includes such service industries as telecommunications (1,108,000 workers), elementary/secondary schools (7,567,490 workers), and hospitals (4,986,550 workers). The “analysis” referenced by Seekingexports counts each one of those industries, whether 700 workers or 7 million workers, as single number. Manufacturing appears to be better-paying only because it has many small “industries” with high wages which are given equal weight as a giant industry such as hospitals. That’s one reason why the analysis is meaningless.

Anonymous October 14, 2009 at 1:10 am

The analysis is broken down by many SIC classifications and I have not been able to find employment levels for the 14 high wage manufacturig industiries cited. Your example of comparing cigar workers and telecommunications is not genuine until you can cite the size of the 14 industries in the 1997 analysis. The analysis is not meaningless because it shows that manufacturing could offer the highest paying wages and thus are ferociously pursued by other economies for their wage earners.

Seth October 13, 2009 at 12:53 am

Forgive me if this shows my economics ignorance, but it seems that if Meyerson’s assertion were true, then our real GDP per capita would be in declien and we wouldn’t be able to afford the foreign goods to run our trade deficits.

Anonymous October 13, 2009 at 1:12 am

DEBT!

Seth October 13, 2009 at 3:53 am
Anonymous October 13, 2009 at 1:22 am

Meyerson could be totally off base about the last decade, but these figures don’t tell us so. Doesn’t the BLS collect statistics on the wage distribution, so we can see whether more workers are earning lower wages, regardless of these categories?

John Dewey October 13, 2009 at 12:17 pm

Well, martin, why don’t you do some leg work for us and educate us?

Meyerson is the one who is touting the supremacy of the manufacturing sector, rather than looking at overall wage distributions. That’s why I responded with sector level data. Meyerson stated that the service and retail sectors “do not pay as well”. The data I provided shows that he is mistaken.

Anonymous October 13, 2009 at 1:04 pm

I have no horse in the “services” vs. “manufacturing” race. I don’t care who wins. I’ve browsed the BLS site and haven’t found data directly addressing the issue, but I’ve seen other data suggesting that state sector wages have risen much faster than private sector wages for decades

Education services are obviously closely linked to the state sector, and trillion dollar bailouts in a single year indicate how closely the FIRE sector (Finance, Insurance, Real Estate) is now linked to the state.

Meanwhile, the state sector itself is deep in the red and running deficits that boggle the mind by any historical measure. You need some deeply rose colored glasses to filter out all of that red. What happens to those top “service sectors” when the red money pump suddenly stops? What happens to the real value of other wages when it doesn’t?

John Dewey October 13, 2009 at 3:08 pm

Martin, the data I presented was from May, 2008. The trillion dollar bailouts had not occurred. There was very little close linkage between Finance industry and government. But even if there was, so what? With only a few exceptions, finance, real estate, and insurance workers are not employees of the state. Except at the very highest levels, their wages – certainly the median wages of that industry – are not determined by the state. So why would i need to “filter out” that red?

In any case, none of what happens in 2009 has any bearing on the argument presented by Meyerson. He claimed that service sector jobs do not pay as well as manufacturing jobs. The evidence says otherwise. Meyerson said nothing about filtering out government influenced jobs.

I could ask you the same question, Martin, about manufacturing jobs. What happens to manufacturing wages when government red ink causes a cutback in defense jobs at Lockheed Martin, Northrup Grumman, Raytheon, General Dynamics, and United Technologies.

Anonymous October 13, 2009 at 8:27 pm

I find it hard to believe that no linkage exists one year and a trillion bucks flows the next. I’ve read here for months that the state was all over the mortgage business long before 2008. The Secretary of the Treasury and Bailer in Chief was formerly the chief executive of Goldman Sachs.If the entire sector is propped up heavily by red money, the median wage figure is much like the median wage in state services. It doesn’t reflect a market demand for the services. It reflects the will of central authorities.I don’t care about “manufacturing” jobs. Your figures show that only 13 million jobs fit this description. I’m not Meyerson’s cheerleader here, but his larger point involves the wages of jobs created on the margin. I have three children only a few years from entering the labor force. I’d like to know what careful measurements show on that score.You can ask me any question you like, but I’m not Mr. Manufacturing here. Government red ink doesn’t cause cutbacks at Lockheed Martin and the rest. Government red ink causes growth there. Less red ink causes the cutbacks. It causes cutbacks in the “service sector” as well. That’s the point.

How much of this employment do free consumers demand, and how much is bleeding edge, borrow and spend, tax and spend or print and spend?

Anonymous October 13, 2009 at 2:08 am

If you look at an updated and respected World atlas today, the entirety of the U.S. is colored in “Service Industry”. So, This is what I see above:

People working in retail, food service, health care and social service are providing these services to those in education, finance and government. In other words, has our comparative advantage moved to restaurants, insurance and financial packages, education, and communications? In these fields I personally cannot find real value through innovation, technological advancement, or entrepreneurial success. The average wage of the government sector is higher than every other sector except information. Isn’t the government sector financed by all of the other sectors? Someone please clear this up for me…

John Dewey October 13, 2009 at 12:32 pm

Akalish21: “In these fields I personally cannot find real value through innovation, technological advancement, or entrepreneurial success.”

Why not? Is it because your definitions of innovation, technological advancement, and entreprenuership are very narrow? Consider this: when an education company such as University of Phoenix started using internet capabilities in a new and different way, that was innovative. When banks started to use data mining tools to uncover zip codes and even zip plus 4 codes with the highest potential for profitable credit card promotions, that was innovative.

Gil October 13, 2009 at 4:22 am

How is Harold Meyerson assertion wrong? John Dewey’s graph shows retail wages are indeed lower paid than manufacturing wages. The graph merely the median wage for each sector but doesn’t give any indication as to whether each sector is growing or diminishing. (And of course the top three out of four or closely related to the government.)

John Dewey October 13, 2009 at 12:47 pm

Gil: “How is Harold Meyerson assertion wrong?”

Harold Meyerson said that retail AND SERVICE sector jobs do not pay as well as manufacturing jobs. He was correct about retail, He was wrong about the service sector.

Gil: “of course the top three out of four or closely related to the government.”

Excuse me? What do you mean by “related to the government”? At the time this survey was completed, “the government” did not control either the information/telecomn sector or the finance/insurance sector.

If you wish to eliminate jobs that are “related to the government”, we would need to also eliminate the large number of defense industry firms in the manufacturing sector. If we removed firms such as Lockheed Martin, Northrup Grumman, Raytheon, General Dynamics, and United Technologies – and all their highly paid scientists, engineers, and technicians – manufacturing sector wages would be significantly lower.

stilettoheels October 13, 2009 at 3:19 pm

Dewey, don’t get your nuts in a knot.

The BLS records both occupational and industry wages. The monthly industry wages are posted here and the annual occupation wages are posted here.

If the empirical truth be told, you are positing medianoccupational wages and Meyerson is positing mean industry wages.

It’s not a dead heat.

Of the 14 industry wage categories, manufacturing ranks 9th on a mean hourly basis but 7th on a weekly paycheque basis; of the 22 occupational wage categories, manufacturing ranks 3rd.

If only the truth be told.

John Dewey October 13, 2009 at 3:35 pm

I’m going to give you the benefit of the doubt and assume I do not know which data you are referring to. I see nothing at the links you provided which would allow on to determine that manufacturing ranks 7th or 9th among the industry wage categories. I likewise cannot find anything at the links you provided showing manufacturing as an occupational group. Please enlighten me with actual data from the tables you are using.

stilettoheels October 13, 2009 at 4:53 pm

Let me be crystal clear. I’m not ceding to you any benefit of doubt. Let’s deal with your poorly informed analysis of your unlinked data, the subject matter of this blogpost.

The first category in Table 3. Hourly median wage rates by industry and occupational group, May 2008, is management. The median hourly wage of manufacturing managers is $48.41. Of the 19 occupational categories, this cohort ranks 6th. When it comes to the computer and mathematical sciences grouping, manufacturing ranks 1st. Why don’t you look up where manufacturing ranks by the lowest occupational grouping?

You see, Dewey, Meyerson might be an idiot journalist loaded for bear with a bb gun, but you are the town idiot carrying a kalashnikov without the ability to shoot straight. You are full of shite.

Brad Spangler October 13, 2009 at 3:03 pm

Well, first, government is not a service…

John Dewey October 13, 2009 at 3:44 pm

I don’t think everyone agrees with your assertion. As I showed before, acording to the BLS:

“The broadest definition of the service sector encompasses all industries except those in the goods-producing sector—agriculture, mining, construction, and manufacturing. Under this definition, services include transportation, communication, public utilities, wholesale and retail trade, finance, insurance, real estate, other personal and business services, and government.”

Methinks October 13, 2009 at 5:45 pm

You perhaps define “service” too narrowly as a good thing. The government robs you regularly, thus it provides you the service of relieving you of the tiresome burden of deciding how to spend your money.

John Dewey October 13, 2009 at 6:21 pm

Here’s three service sectors I forgot to include in my original post:Professional, Scientific, and Technical ServicesEmployment – 7,747,850Median wage – $25.41Real Estate and Rental and LeasingEmployment – 2,137,390Median wage – $14.42Management of Companies and EnterprisesEmployment – 1,916,450Median wage – $25.01For those who are counting, that’s 2 more sectors – sectors as defined by BLS – which pay significantly more than manufacturing and 1 sector which pays slightly less.

John Dewey October 13, 2009 at 6:02 pm

I usually do not respond to commentors who insult me as you have done. But I do not remember a comment from you before, so I’m willing to continue for one more exchange. If you wish to carry on any discussion with me, please be a little more polite.

This is the statement I asked you to explain:

“of the 22 occupational wage categories, manufacturing ranks 3rd.”

Can you show me the data you used to derive this ranking?

I understand that manufacturing managers earn more than finance and insurance managers. But that really doesn’t tell us anything about whether manufacturing employees overall earn more than finance and insurance employees overall, does it? If the manufacturing workforce is composed of primarily production workers, the wages of its managers and its computer programmers are not that relevant. Likewise, if finance and insurance have very few production workers, the wages of that industry’s production workers are also not very relevant. So I guess I do not understand how Table 3 you linked to shows much about the issue of this post: whether the manufacturing sector pays more than service sectors such as finance, transportation, information, and wholesale trade.

stilettoheels October 13, 2009 at 7:37 pm

please be a little more polite

I am not polite to condescending pricks jerking off in their virtual closets. You were incapable of linking to Table 3 (your thesis and the subject matter of this blogpost), other than a cut and paste (minimum wage) job. I linked to Table B-3 and Table 3 in the BLS arsenal of data and you are, thus far, incapable of analyzing same.

Dewey, you are so dense that you inadvertently verified Meyerson’s case with a set of data that he didn’t know even existed. In other words, when the BLS groups by industry, manufacturing is so-so, but it is not the case when the BLS groups by occupation. Sheesh, be quiet, don’t let it out in the mainstream media!

As you were incapable of responsiveness to the question (Why don’t you look up where manufacturing wages rank by the lowest occupational grouping?), I will answer it for you: FOOD PREPARATION.

So be it; don’t worry, if this blogpost is an indicia, I don’t plan to be back here very much, if at all. There ain’t much commentariat knowledge to ingest on this blog.

John Dewey October 13, 2009 at 9:19 pm

martinbrock: “Government red ink doesn’t cause cutbacks at Lockheed Martin and the rest.”

I think government red ink did cause such cutbacks in the 1990′s. Defense spending was reduced after the Cold War ended as part of the overall plan to reduce government deficits.

I believe government red ink – and the interest on government borrowing – will force Congress to make spending cuts in the very near future. Absent some rallying event such as 9/11, I expect defense to absorb a significant portion of those spending cuts.

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