The pay and benefits gap between workers in declining industries such as steel and mining is now more than $10,000 more than pay and benefits in growth businesses like restaurants and health services, a study prepared for the Joint Economic Committee of Congress said Thursday.
Although such a shift in employment patterns has been occurring since the end of World War II, its acceleration during the '80s has created an "unprecedented drag on pay growth," said the report prepared by University of Massachusetts economist Robert Costrell.In the 1950s, pay and benefits for workers in expanding industries averaged $6,133 a year below those in contracting businesses, as measured in 1987 dollars. The gap narrowed to $647 a year in the 1960s, widening slightly to $811 in the 1970s, the report said.
But this decade it has increased more than tenfold.
In the 1981-87 period, during the Reagan administration, jobs in expanding sectors of the economy paid an average of $21,983 a year - $19,154 in wages plus $2,829 in health, pension and other benefits, including employer contributions to Social Security, the report said.
However, that is $10,404 a year below the average compensation of workers in retreating industries, where the average wage was $26,193 plus $6,194 in benefits, or a total of $32,387.
Only part of the gap is due to difference in hourly wage rates, about $3.08, according to the report.
Another factor is that the jobs in manufacturing and other retreating industries usually offered overtime opportunities with an average workweek of 40.4 hours. Jobs in the expanding areas of the economy had an average workweek of only 32.7 hours, the report said.
The committee's chairman, Sen. Paul S. Sarbanes, D-Md., said the study reflects "serious setbacks experienced by exporting and import-competing industries in a prolonged period of policy indifference."
Republicans were quick to criticize the report, with Sen. William Roth, R-Del., calling it "Creative Economic Analysis 101."
"It should come as no surprise that, in this election season, the author of this study is from Massachusetts, the home state of the liberals' favorite presidential candidate," Democratic Gov. Michael Dukakis, Roth said.
"By concentrating on 1981-87, Mr. Costrell includes the recession year of 1982 during which unemployment rose dramatically but excludes the gains in employment made thus far in 1988."
Costrell acknowledged that the report does not include data from this year, with its strong rebound in manufacturing employment.
But he said he found two turning points in labor market shifts in the past: 1973 when energy prices jumped and 1981 when U.S. trade deficits began emerging and energy prices started falling, reversing the pattern of the 1970s.
"It's possible that analysis of this sort a few years hence will discern another turning point around 1987 if recent trade gains continue and energy prices start rising again," Costrell said.
He said the effect of jobs shifting more rapidly from higher-paying to lower-paying industries this decade has "retarded the recovery of real wage growth from the slowdown of the '70s."
After adjustments for inflation, the average real compensation of workers this decade has grown about one-half percent or an average $126 annually, still ahead of increases averaging less than $100 a year in the 1970s. But it would have grown a full percentage point or about $239 per year had there been no shift in employment, the report said.