Middle-skilled workers still making up for lost ground on earnings
When the U.S. Census Bureau reported in September that household incomes grew by a record margin in 2015, the collective response seemed to be, “finally.” Seven years into the recovery from the Great Recession, good news on earnings had been hard to find. Although the unemployment rate has steadily fallen to less than half its level from late 2009, inflation-adjusted average hourly earnings barely budged for most of the post-recession period. The 2015 trend suggested that a real earnings comeback might finally have begun.
At the same time, other census data released that same week shows that the earnings recovery has been highly uneven for workers with different levels of education. In particular, “middle-skilled” workers—those with some postsecondary experience but less than a bachelor’s degree—have suffered more than others.
The data, from the 2015 American Community Survey, continue to show that the more you learn, the more you earn. In 2015, median earnings for adult workers without a high school diploma were approximately $21,000 compared with $67,000 for those with a graduate degree. Workers with “some college” or an associate’s degree—the most common level of educational attainment tracked in the survey—earned about half the typical salary for workers with a graduate degree, at roughly $34,000.
Despite earnings growth, each of these groups had lower median earnings in 2015 than before the recession in 2007. The decline was steepest for middle-skilled workers, whose inflation-adjusted median earnings were down more than 8 percent from their pre-recession level. Declines were more modest for other groups, from 6 percent for workers with only a high school diploma, to 4 percent for those with a bachelor’s or graduate degree. All groups experienced gains from 2014 to 2015, but middle-skilled workers’ earnings had previously dropped more steeply and for a longer period of time.
Of course, the national trend camouflages the distinctive experiences of workers across hundreds of local labor markets. Earnings data from 94 of the largest U.S. metropolitan areas confirms that the decline in middle-skill earnings was widespread, but steeper in some areas of the country than others. (The 94 metro areas represent those among the 100 largest whose geographic definitions did not change significantly between 2007 and 2015.)
Altogether, median earnings for all workers were significantly lower in 2015 than in 2007 in a little more than half the major metro areas (52 of 94). The declines ranged from 3 percent in the San Francisco area to 17 percent in Riverside-San Bernardino in southern California. Just seven metro areas, including Boston and Pittsburgh, posted significantly higher median earnings for all workers in 2015 than 2007.
Many more metro areas—71 of the 94—posted significant earnings declines among workers who possessed only some college or an associate’s degree. Earnings declines were also larger on average for middle-skilled workers than other groups, ranging from 4 percent in Salt Lake City to 21 percent in Las Vegas. As was true for all workers, middle-skilled workers in the South and West experienced some of the largest earnings declines, including those in Riverside and Stockton in California, and Jacksonville, Miami and Tampa in Florida. But earnings also dropped considerably for middle-skilled workers in Atlanta, Detroit, Indianapolis and Richmond. No major metro area saw middle-skilled workers’ earnings increase between 2007 and 2015.
What’s going on here? For one thing, the Great Recession destroyed large numbers of jobs in manufacturing, which has traditionally paid decent wages to workers without four-year college degrees. In addition, as the U.S. Department of Labor recently noted, the first few years of the recovery were marked by sluggish recovery in middle-wage sectors of the economy. Only in 2014 did middle-wage sectors begin to bounce back strongly.
This larger national pattern is reflected in Midwestern metro areas such as Columbus, Detroit, Indianapolis and Toledo, where middle-skilled workers’ wages have not yet recovered from the effects of steep manufacturing job losses. In many Sun Belt labor markets, meanwhile, middle-wage workers suffered amid broad-based employment declines precipitated by the housing market crash. In Riverside, for instance, workers in every educational category experienced large declines in median earnings.
Although the very recent trend in middle-skill workers’ earnings is promising, there is still a lot of ground to make up. Moreover, as McKinsey research has observed, advances in automation could portend further declines in middle-skill jobs involving activities such as data collection and processing.
None of this means that postsecondary education short of a four-year degree isn’t worthwhile. The economic pressure may be mounting, however, for workers to obtain specific skills that are in high demand in the local labor market through certificate or associate’s degree programs. These types of metro-led, industry-focused training efforts are multiplying, from advanced manufacturing in northern Kentucky, to petrochemicals in Houston, to health care and transportation/distribution/logistics in Chicago. Making such training more the norm in metropolitan areas represents one key step toward restoring a healthy and resilient American middle class.