This weekend I’m writing a draft of my new paper, “Biosciences and the Long-Run Economic Recovery.” Along the way I came up with three charts that I thought I’d share with you. I’m not going to put much gloss on these, because they are pretty much self-explanatory, and because I need to get back to the paper.
This first chart shows the change in wage and salary payments by major industry from 2000-2009, adjusted for inflation, using BEA data. We see that healthcare and social assistance generated $210 billion in real wage gains from 2000 to 2009 (all in 2009 dollars). Next biggest was state and local government, which generated $151 billion in real wage gains. (The exact numbers change a lot if I change the end dates, but the pattern stays the same).
On the other hand, the big losers were manufacturing (-$245 billion), information (-$56 billion), retail trade (-$24 billion), and transportation and warehousing (-$6 billion). It’s interesting that the industries in the global supply chain were the big losers in real wages, but I’m not sure quite what to make of it.
Now I’m going to take the same data and cut it by federal govt, state and local govt, and private sector. The short answer is that the public sector accounted for 55% of real wage gains between 2000 and 2009, while the private sector only accounted for 45%. Once again, this is not necessarily a surprise, but it’s still interesting.
Now we get to the third chart (having fun with 3D pie charts–like it?). What we see is that health and education (public and private) accounted for an amazing 75% of real wage and salary gains between 2000 and 2009. The rest of the economy–only 25%. Make that what you will.
Mandel on Innovation and Growth 
You trying to tell me something? I started life as a manufacturing engineer. I then moved into the software and IT fields. Look where both of them ended up.
However, have you accounted for the loss of jobs here? Is this per-head salaray, or total? It may well be that $200b has gone into healthcar, because they’ve added thosands of jobs. Give us the correlation to total indiustry headcount, and then calculate per-head salary. I think you’ll find it illuminating. I predict that the healthcare jobs are much lower paying than those in manufacturing and IT.
P.S. for anyone interested in trends, I am now working in healthcare IT. Be very afraid…
Actually, healthcare jobs in hospitals and doctors offices stack up pretty well, wage-wise. Here is the average wage and salary per FTE in 2009, in thousands
Ambulatory health care = $60.4
Hospitals = $56.4
Manufacturing = $57.4
Construction = $52.3
All private industries = $51.6
federal = $73.8
state and local =$53.1
For me to care, you’re going to have to at least put these figures in per-worker terms.
What it says is that real wage/salary growth slowed in our now globally competitive economy, with the exception of highly govt subsidized and regulated sectors like medicine and education, which continued ripping everyone off and gaining wage increases through that. Also, I question the validity of whatever inflation measure you’re using, as we had huge gains in tech this decade, with much more powerful computers and the rise of mobile devices/internet along with the price of news/music/radio dropping a lot, that are tough to measure. However, the internet is about to come after education and medicine too, so those sectors will soon be decimated by tech in the coming years, as they have gotten fat and lazy at the public trough and are completely incapable of competing. TV/Movies, ie video, is next to be destroyed, then the education sector will be raised, with medicine and law next.
umm, that should be razed, not raised. 🙂
Theory:
…the government subsidized sectors used the state to steal from the other sectors…
Or sheltered.
TV/Movies are already getting hit hard by the effects of the Web – and adapting to some degree. Expect the theater business to become inconsequential by 2020, with people only going to them to see an occasional spectacle (in the same way that people occasionally go to see stage plays). Expect the demise of the sale of recordings (videos, cds, etc) and the rise of pay-channels for access.
Education is going to be hit, but there are limits on how much labor you can substitute with technology, short of some truly amazing telepresence stuff.
A lot of law is going to be hammered, but it won’t erase the need for trial lawyers and the like. They’ll just become much less common (sucks to be a law graduate in the next decade).
Adjusted by headcount would be nice, but aggregate numbers certainly also convey something. And even adjusting by headcount will be prone to the “Bill Gates enters the room” effect.
Gates wouldn’t affect the numbers much because they only include wages and his money is mostly investment returns, with his salary probably fairly low for his position. In fact, I wonder if a large portion of the flattening of real wages isn’t because we have moved away from wages towards other forms of compensation at many companies, particularly for high-paid service jobs. Most tech companies pay a large portion of their total compensation using stock options. Wall Street firms pay a relatively low base salary of $150-200k and then pay a cut of the individual’s revenue stream for the usually much larger remainder. One of the reasons many of these real wage stats are down is that medical insurance premiums got much larger, so the total wage did grow much more, but these base salary stats don’t count benefits. I don’t know which of these effects this particular set of BEA stats take into account, but I suspect it doesn’t account for any of them.
The same effect shows up in the real compensation figures (as opposed to the real wage figures), only not quite as large.
Also, cutting low-wage workers in an industry could look like a increase in wages and salaries per person.
Is this possibly skewed by the fact that 2000 was a peak year, and 2009 a recession year? What happens if you set the comparison to 2008?
I checked different years….it changes the exact numbers for sure, but not the patterns.
Thanks Mike. It seems clear that work that must hand done in the US ( medicine, government, law) still commands wages that rise with the overall economy. They’re the real economy.
Things that are done more efficiently or cheaply with the use of machines (construction, entertainment, manufacturing) or outsourced labor ( manufacturing, IT) are increasingly dropping people out of the US economy.
Our empire is collapsing. It’s foundation is being weakened in order to transfer more wealth to the upper tiers. Welcome to the second world but without a national healthcare option.
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