Thursday, June 7, 2012

Why were manufacturing jobs a ticket to the middle class but service jobs are not?

The loss of manufacturing jobs as a ticket to the middle class has been a constant lament not just lately but since the 1980s when the economic supremacy of the United States was threatened by Japan. An Economist survey of manufacturing (gated) showed that while this decline was temporarily arrested in the late 90s the share of workers in manufacturing has continued on a downward slide since 2000. (Chart reproduced below.)

Moreover, earnings in the manufacturing sector also tends to be higher. See reproduced chart from the Economist below.

What has been missing from the discussion has been the role service jobs play as a road to the middle class (if any). One exception is this presentation at an FRBSF conference. Kathryn Shaw, et. al. explore the possibility that employment provided by “Modern Retail” defined as high growth retail stores could provide a way for workers to gain higher future earnings. These stores include Abercrombie, Staples, Wal-Mart, Whole Foods, Cotsco, Starbucks and others. They emphasize that while wages are low, unlike traditional manufacturing, these stores provide opportunities in terms of promotion from within - unlike traditional manufacturing and small retail firms. They also identify medium sized retail establishments as those that are likely to match the returns to education provided by the traditional manufacturing sector. (Two of their slides are below.)

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