By Ellie Terry, an economic policy analysis specialist, and John RobertsonJohn Robertson, vice president and senior economist, both of the Atlanta Fed's research department
Considerable discussion in recent years has concerned the "hollowing out of the middle class." Part of that story revolves around the loss of the types of jobs that traditionally have been the core of the U.S. economy: so-called middle-skill jobs.
These jobs, based on the methodology of David Autor, consist of office and administrative occupations; sales jobs; operators, fabricators, and laborers; and production, craft, and repair personnel (many of whom work in the manufacturing industry). In this post, we don't examine why the decline in middle-skill jobs has occurred, just how those workers have weathered the most recent recession. But our Atlanta Fed colleague Federico Mandelman offers an explanation of why this has occurred.
So how have workers in middle-skill occupations fared during the last recession and recovery? Let's examine a few facts from the Current Population Survey from the U.S. Bureau of Labor Statistics.
Chart 1 shows employment levels by skill category (using 12-month moving averages to smooth out the seasonal variation). From the end of 2007 to the end of 2009, the overall number of people working declined by more than 8 million. Middle-skill jobs were hit the hardest, declining about 10 percent from 2007 to 2009. As of September 2014, the level was still about 9 percent below the 2007 level. In contrast, employment in low-skill occupations is 7 percent above prerecession levels, and employment in high-skill occupations is about 8 percent higher than before the recession.
For full-time workers (working at least 35 hours a week at all jobs) the decline in middle-skill occupations is even more dramatic. From 2007 to 2009, the number of full-time workers whose main job was a middle-skill occupation fell more than 15 percent from 2007 to 2009 and is still about 11 percent below the level at the end of 2007.
Those in middle-skilled occupations were most likely to become unemployed
In the 2001 recession, the chances of being unemployed after one year were similar for those working full-time in middle- and low-skill occupations. During the most recent recession, the likelihood of becoming unemployed rose sharply for everyone, but much more sharply for those working in middle-skill occupations. At the recession's trough, almost 6 percent of people who were employed in middle-skill occupations one year earlier were unemployed, compared with about 3 percent of workers in high-skill occupations and 3.5 percent of workers in lower-skill occupations (see chart 2).
Underemployment has improved only slowly at all skill levels
The share of people who are working part-time involuntarily about doubled for workers in low-, middle-, and high-skill occupations. For middle-skill occupations, the share rose from around 1.7 percent to 4.3 percent and is currently around 2.4 percent. For low-skill occupations, involuntary part-time employment increased from 2.4 percent to 5 percent and was still 3.8 percent as of September 2014. And for those in high-skill occupations, the chances of becoming involuntarily part-time rose from 0.8 percent to 1.8 percent and are now back to about 1 percent (see chart 3).
Ready for some good news?
Those who held middle-skill jobs are more likely to obtain high-skill jobs than before the recession
Currently, of those in middle-skill occupations who remain in a full-time job, about 83 percent are still working in a middle-skill job one year later (see chart 4). What types of jobs are the other 17 percent getting? Mostly high-skill jobs; and that transition rate has been rising. The percent going from a middle-skill job to a high-skill job is close to 13 percent: up about 1 percent relative to before the recession. The percent transitioning into low-skill positions is lower: about 3.4 percent, up about 0.3 percentage point compared to before the recession. This transition to a high-skill occupation tends to translate to an average wage increase of about 27 percent (compared to those who stayed in middle-skill jobs). In contrast, those who transition into lower-skill occupations earned an average of around 24 percent less.
In summary, the number of middle-skill jobs declined substantially during the last recession, and that decline has been persistent-especially for full-time workers. Many of the workers leaving full-time, middle-skill jobs became unemployed, and some of that decline is the result of an increase in part-time employment. But others gained full-time work in other types of occupations. In particular, they are more likely than in the past to transition to higher-skill occupations. Further, the transition rate to high-skill occupations has gradually risen and doesn't appear directly tied to the last recession.
Authors' note: The middle-skill category of jobs consists of office and administrative occupations; sales; operators, fabricators, and laborers; and production, craft, and repair personnel. The other two broad categories of occupations are labeled high-skill and low-skill. High-skill occupations consist of managers, technicians, and professionals. Low-skill occupations are defined as those involving food preparation, building and grounds cleaning, personal care and personal services, and protective services.