Were Middle-Skill Workers Hurt Worse in Great Recession?

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For many years, economists have tried to figure out why wages are stagnant for all but the top 20 percent of households. There are many, many explanations, but the debate this week is about whether corporate cost cutting in recessions hits middle-income workers hardest, and whether in jobless recoveries, employers hire high and low-skill workers but not folks in the middle, like administrative assistants, sales people, construction workers and manufacturing workers.

A Duke University and University of British Columbia professor wrote a paper for the National Bureau of Economic Research suggesting that middle-income workers are hit hardest, saying that 93 percent of job losses in the 2008-2009 Great Recession happened in those fields, and they are not recovering, even as hiring rebounds in other areas.

Monday, the Urban Institute released a paper using Census data that follows the same people from 2004-2006 and from 2008-2010 that questions those conclusions. The researchers there divided all workers into three groups by pay. Middle income was defined as those making between $13.51 and $22.83 an hour. In Connecticut, that range covers some low-skill workers, such as certified nursing assistants, and some medium-skill workers, but there are also many administrative assistants and manufacturing workers who make more than that.

Those researchers found that it was the lowest-paid workers who were most  likely to be out of work more than six months if they were unemployed. It also found that both the top third and the middle third workers had to take 20 percent pay cuts when they found work again. If middle-skill workers were less in demand in the sluggish recovery than computer programmers and business analysts, you would expect they would have to take bigger wage cuts to get back to work than those who had higher-level jobs.

Josh Mitchell, one of the authors of the Urban Institute paper, said their paper suggests the problem is not that job market is changing so much that there are millions of unemployed secretaries, construction workers and factory workers whose choices are either become warehouse workers and busboys, or go back to school to become nurses.

Instead, what their research shows, he said, is that there is “general slack in the economy.”

 

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