Academic Literature

Wages of New Hires in US – Stronger growth for women compared to men

There is substantial interest in measuring not just the quantity of new jobs but the quality as well. Existing surveys by the Bureau of Labor Statistics describe the number of new jobs created each month, as well as wages of incumbent workers, but not wages (or other characteristics) of newly created jobs. This paper aims to fill that gap by describing the creation of a new job quality metric for newly hired workers. Drawing on publicly accessible data from the Current Population Survey and Occupational Employment Statistics, I construct a job quality index of new hires based on occupation, which is more closely tied to skill demand and wages than measures based on industry. The New Hires Quality Index accounts for changing demographics of hires, can be consistently constructed from 2001 forward overall and for subgroups, does not rely on self- reported wages, and can be updated monthly. It also permits decompositions to illustrate which groups are affecting changes in the index. It should serve as a valuable new tool in gauging realized labor demand.

Examining the NHQI broadly, there was little growth between 2001 and 2005, mild growth between 2005 and 2009, and then very sharp growth in the tail end of the recession and its immediate aftermath. During the recovery, growth was essentially flat until 2015, when the NHQI again grew quickly for about one year. Over the past year and a half, the index has again been relatively flat.

Over the Great Recession, hiring volume fell by 15 percent. While it has recovered somewhat, it is still below its previous peak and its level in 2005, and in fact is roughly at the same volume reached in the trough from the early 2000s recession. That the NHQI wage rose sharply over the recession as hiring volume fell implies that the composition of individuals who managed to get hired during the recession was quite different than those who got hired before or after.

More succinctly, individuals hired during the Great Recession were more highly skilled, taking higher-paying occupations and having greater demographic advantages (age, education) than previously.

Perhaps a larger surprise is that during the recovery as hiring volume began to grow, the NHQI wage did not fall but instead plateaued.

Figure 8 considers the first example of men and women. To ease comparison, the series are normalized so that the values equal 100 in the year 2005 for both sexes. The most dramatic pattern from the figure is the stronger growth for women compared to men. The NHQI hourly wage index for women is 7.3 percent above its 2005 level, whereas for men the index is only 3.0 percent above its 2005 level. Most of this gap has opened since the Great Recession ended. Interestingly, besides an 18-month period in 2015 and 2016, the wage index has moved in opposite directions for men and women, likely because of changes in the occupations most in demand.

Chosen excerpts by Job Market Monitor. Read the whole story at “The New Hires Quality Index: A Wage Metric for Newly Hired Workers” by Brad J. Hershbein

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