How do changes in sectoral composition affect wages?

From Isaac Sorkin (pdf, or try this link):

… changes in sectoral composition depressed real pay growth by 2.9 percentage points from 1990 to 2016. This change in pay, however, overstates the change in the overall value of jobs because the economy is moving toward sectors that are more desirable along nonpay dimensions. Changes in nonpay compensation offset about half of the decline in pay, so that sectoral composition changes led to the equivalent of a 1.4 percentage point decline in pay since 1990. Is the role of changing sectoral composition big or small? From 1990 to 2016, real weekly earnings grew by 11.2%. All else being equal, then, these sectoral shifts were the equivalent of about three or four years of real wage growth.

The importance of manufacturing jobs — in good and bad ways — is one of the ideas which has risen in status most rapidly in the last five years.


So Google (Alphabet) can pay less since a desirable place to work? That's my five second takeaway.

Yes. The environment is part of the compensation package.

Well the perceived environment at least. In my experience companies tend to focus more on marketing themselves as a great place to work rather than being a great place to work.

Amazon does pay an 5-10% premium for the same labor as Google. More when you adjust for cost of living (Seattle vs Palo Alto). Mainly because it's a much less pleasant workplace.

As we move into a new era of trade with China, from one dominated by American firms which chose to shift production of the American firms' goods to China to one dominated by Chinese firms which produce Chinese firms' goods, will the American firms shift production back to America to produce goods to compete with goods produced in China by Chinese firms, or will American firms continue to produce goods in China to compete with goods produced in China by Chinese firms. If American firms shift production back to America, It's assumed that more manufacturing jobs in America will boost wages in America. Will that change in sectoral composition come at the expense of (for example) what we refer to (incorrectly in my view) as the tech sector? If American firms shift production back to America, will Cowen lose his friends in China and Singapore?

Depends on the goods.
For low value stuff, like textiles, production is already shifting away from China to cheaper places like Viet Nam and Bangladesh.

But for the high value stuff, you need to distinguish between output and jobs. "American" firms have already shifted a lot of manufacturing back to the US. But not jobs. I recall a Hula-Hoop company that used to employ 200 folks in Ohio, outsourced the job to China, then brought the production back home to a shiney new American factory -- that employed only 20 people (and lots of machines).

So, manufacturing that requires large numbers of mid-skilled humans will stay in China. Capital intensive manufacturing that requires few but highly skilled workers may come back to the US. This is a problem of mid- to low- skilled Amerians, a boon for high-skilled Americans.

Also, for the true "multi-nationals" like Unilever and Apple, it's not too useful to think about "American Firms" vs "Chinese Firms." The relevant question is "how much of the value-add in the the chain of production happens at each locale."

Thanks, Tyler(h). When the tide shifts and American firms start complaining about unfair competition from China, after using China for low cost production, the hypocrisy will be expected and effective.

Well stated.

Hula hoops are high value?

'The importance of manufacturing jobs — in good and bad ways — is one of the ideas which has risen in status most rapidly in the last five years.'

Truly, in Germany, the importance of manufacturing jobs seems to have no 'bad ways' at all (OK, apart from likely being blamed for eurogeddon, whenever it arrives) - but then, what would one expect from such a socialist hellhole?

But the status seems to have remained roughly the same since the days of Bismarck, the man who created the first modern welfare state -

'He created the modern welfare state in Germany in the 1880s. According to Kees van Kersbergen and Barbara Vis, his strategy was:

granting social rights to enhance the integration of a hierarchical society, to forge a bond between workers and the state so as to strengthen the latter, to maintain traditional relations of authority between social and status groups, and to provide a countervailing power against the modernist forces of liberalism and socialism.[76]

Bismarck implemented the world's first modern welfare state in the 1880s.[77] He worked closely with large industry and aimed to stimulate German economic growth by giving workers greater security.[78] A secondary concern was trumping the Socialists, who had no welfare proposals of their own and opposed Bismarck's. Bismarck especially listened to Hermann Wagener and Theodor Lohmann, advisers who persuaded him to give workers a corporate status in the legal and political structures of the new German state.[79] In March 1884, Bismarck declared:
Franz von Lenbach's portrait of Bismarck in his 75th year.

'The real grievance of the worker is the insecurity of his existence; he is not sure that he will always have work, he is not sure that he will always be healthy, and he foresees that he will one day be old and unfit to work. If he falls into poverty, even if only through a prolonged illness, he is then completely helpless, left to his own devices, and society does not currently recognize any real obligation towards him beyond the usual help for the poor, even if he has been working all the time ever so faithfully and diligently. The usual help for the poor, however, leaves a lot to be desired, especially in large cities, where it is very much worse than in the country.'

Your employer buys your birth control for you, so don't expect a wage increase.

Rich societies buy and consume leisure through reduced wages and hours. Not news.

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