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The job-quality debate

Are newly created jobs the equivalent of those that were lost?

By Lou Dobbs

Lou Dobbs
Department of Labor (DOL)

(CNN) -- The domestic debate this election season has centered on job creation, with both candidates using Labor Department statistics to support their own arguments. But now that the economy has been added nearly 2 million jobs since last summer, economists are looking critically at the quality of these new jobs, to determine whether they are paying less than the ones we've lost.

A new study from the University of California at Berkeley, using the most detailed classification of jobs and distribution of wages so far found that, since 2001, job categories that are growing pay an average of 10 percent to 12 percent less than jobs categories that are shrinking. A new full-time position would therefore pay about $4,000 a year less than one of the jobs that were lost.

Compared with overall job creation, data on the quality of jobs are not as straightforward. There are no official government statistics on the pay of jobs lost versus the pay of jobs gained. That's why there has been a sudden flurry of studies rebutting one another on the issue of job quality.

"The shortcoming thus far has been to not do a full, comprehensive analysis of the jobs," said Arindrajit Dube, an economist at UC Berkeley's Institute of Industrial Relations and the author of the latest study. "But if one doesn't do it comprehensively, you can cut it different ways and draw different conclusions."

A June study by USA TODAY and concluded that lower-wage jobs were growing faster than higher-wage jobs, based on analysis of lower and higher-paying industries. Morgan Stanley's chief global economist, Stephen Roach, drew similar conclusions in his July study by industry.

It's possible, however, that generally lower-paying industries, such as the restaurant industry, are adding more higher paying jobs such as chefs and managers, researchers at noted. In a July study, used new Bureau of Labor Statistics data to conclude that a more detailed breakdown of occupations within industries suggests that job quality is actually increasing.

The Economic Policy Institute countered by using the same BLS data to arrive at the opposite conclusion. The study forgot to weight its sectors by their contribution to overall employment, the EPI pointed out.

Dube's study attempted to overcome each of these flaws and anticipate others. He looked at both occupations and industries to create 440 job categories. Rather than just use average earnings, he looked at the entire distribution of jobs and the wages they pay. And to back up the findings, Dube showed his conclusions were consistent over various time periods within the nearly four-year scope of the study. The result, he said, is a clear picture of a wage gap between growing and shrinking jobs.

In one positive sign for job growth, however, Dube's study showed jobs in the middle sector, such as electronics manufacturers and clerical workers, have been recovering from large losses during the 2001 recession.

"The good news is that finally there seems to be some growth in jobs at the middle," Dube said. "But the bad news is that growth in jobs in the bottom third outpaces those in the middle by roughly two to one. The other bad news is that finally middle-wage jobs are growing, but that's typically at the expense of higher-paying jobs."

Add to this the past year's trend of stagnant wages, which Dube also shows in his study, and a difficult employment environment prevails. After all of the slicing and dicing of employment data, one conclusion is incontrovertible: this economy, despite strong economic growth, is still not creating a sufficient number of jobs, high paying or otherwise. Therein lies the challenge for the next administration, whomever is elected on November 2.

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