Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, November 6, 1994 TAG: 9411040044
SECTION: BUSINESS PAGE: F-4 EDITION: METRO
SOURCE: SYLVIA NASAR THE NEW YORK TIMES
DATELINE: LENGTH: Long
No doubt, many Americans are losing ground economically. But in fact most of the 5.5 million jobs the economy has added in the last 21/2 years are in occupations that pay more, not less, than the average, which is now about $15.50 an hour.
This year alone, 72 percent of the 2.5 million new jobs have been for managers, from the chief executive to the branch sales manager, and for professionals, from surgeons and nurses to software programmers, accountants and high school teachers. And despite its reputation for low wages, the service sector is adding most of the higher-wage jobs.
As a result, average hourly pay for all employees, adjusted for inflation, is slowly rising, government data show, not falling as so many politicians and commentators have been saying. Average hourly compensation, which includes health benefits, paid vacations, pensions and other benefits, is also rising, adjusted for inflation.
Indeed, average hourly pay has risen 2.5 percent in the early 1990s, about as much as it did throughout the entire 1980s.
``What's driving the average wage up is not so much an improvement for each individual worker but that the mix of jobs is improving,'' said David Wyss, an economist at DRI/McGraw-Hill, a forecasting firm in Lexington, Mass. That is, the number of higher-paying new jobs is rising faster than the number of lower-paying ones.
Other factors - bigger bonuses for executives and record amounts of time-and-a-half overtime pay for factory workers - are also helping to push up pay.
To be sure, progress on the pay front has been extremely modest compared with that of the palmy 1960s or even the troubled 1970s. Another recession could wipe out some of the gains, at least temporarily. And the increase in average pay conceals a decline in the pay of many workers, especially those with little education or experience.
Indeed, even as average hourly pay and average family income have been edging higher lately, there is evidence that the hourly pay of at least the bottom half of the work force - those at the midpoint or below - continues to slip.
The rising average shows that the economic pie for workers as a group is growing and that there are more good jobs to go around. And it suggests that millions of men and women - in particular, those with education and specialized skills - are beginning to see benefits from the efficiency-minded reorganizations that have roiled corporate America in the last few years.
This painful restructuring, which spread from the factory floor to the service sectors in the last recession, continues to disrupt the lives of millions of workers and provoke anxiety for many more.
But one result is that the average American worker now produces about 6 percent more an hour than at the beginning of the decade. Many economists are optimistic that productivity, which ultimately determines how fast wages can grow in real terms, will grow somewhat faster in the 1990s than in the 1980s.
And the group that is reaping the immediate benefits, while hardly a majority of workers, is nonetheless a fairly big one. Managers and professionals now count for one in four workers. As a group, their number is double, 34 million against 17 million, that of the factory workers who are often cited as typical of workers.
On the national income measure, average hourly pay for all workers climbed to $15.43 by mid-1994 from $13.44 in 1990. That is 2.5 percent more an hour after inflation. Over the same period, total hourly compensation, including fringes, edged up to $17.63 an hour from $15.09. That is a post-inflation gain of about 3.5 percent.
That might sound unimpressive. After all, in the golden 1960s hourly compensation rose by nearly 30 percent and in the troubled 1970s by almost 15 percent.
Still, the early 1990s compare favorably with the entire decade of the 1980s, which began with a steep recession and ended in an economic slowdown, when the average hourly wage rose just 3.2 percent after inflation and average hourly compensation rose 2.9 percent.
The source of much of the improvement is the service sector, which is supposed to have been able to produce only low-wage jobs like hamburger flipping and baby-sitting.
Service companies - from McDonald's to J.P. Morgan - have dominated job creation in the economic expansion of the last three years, just as they did during the Reagan administration years. But in an information-age economy that values skills, experience and education ever more highly, these companies have not been hiring just fast-food cooks, nurse's aides or cleaners.
More than two-thirds of the new jobs in the last several years have been in managerial and professional ranks, according to the Labor Department. Much of this new hiring is coming from health care, education, business services, banking, retailing and telecommunications.
Outplacement counselors confirm that the demand is for people to fill higher-paying jobs. Lee Hecht Harrison, an outplacement firm in New York, says it is placing many of its clients in insurance, health care, entertainment and a host of professional firms from advertising agencies to accounting firms.
The new management jobs tend to be in high-growth fields, frequently at smaller firms where managers actually run businesses and develop new accounts rather than churning out reports for the next layer of bosses to read.
``Nobody is adding layers of bureaucracy anymore,'' said Stephen Roach, an expert on the service economy at Morgan Stanley. ``That's not changing.''
It is the growing presence of managers and professionals in service companies, labor economists agree, that appears to be most responsible for pushing up the pay averages. Managers include everybody from the chief executive making seven figures to the former checkout clerk who oversees the local grocery store.
They push up the average wage level for all workers because they earn 60 percent more than the median wage for all private workers - $635 a week against $394 - and three times what people in low-paid fields like cafeteria work or cleaning earn. Professionals fare almost as well as managers.
The trend toward better jobs is hardly new - the economy's mix of jobs was improving in the 1980s, too - but a recent Labor Department study of job growth by occupation suggests that the shift from lower-paying to higher-paying jobs may have speeded up recently. While managers and professionals accounted for three-fourths of the job growth in the last four years, they accounted for less than half over the 10 years from 1983 to 1993.
Even some leading economists seem a bit surprised by the recent trend. But they agree that it is happening.
``If you believe average productivity is growing,'' said Lawrence Katz, an economist at Harvard University and until recently the Labor Department's chief economist, ``you have to believe that average compensation per hour has gone up.''
by CNB