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UC Berkeley Press Release

Economic recovery marked by more jobs but falling wages, UC Berkeley Labor Center study finds

– In the face of job growth in California and the country, a new analysis by the University of California, Berkeley's Center for Labor Research and Education nevertheless finds a slack labor market and wages taking a turn for the worse.

UC Berkeley research economist Arindrajit Dube reports that even with growth of 300,000 jobs in California in the past 12 months and 2 million new jobs nationwide, there are still 2 percent fewer working-age adults now employed in California and the United States than at the start of 2001, indicating further room for economic recovery.

The soft labor market gives employers little incentive to raise wages to attract and retain workers, Dube said. So, he said, it's no surprise that workers in California and the United States have experienced a dip in inflation-adjusted wages in the past year. This makes the second year in a row that Californians have seen their earnings drop after accounting for price increases.

The lowest-paid third of the U.S. workforce has seen its wages decline for three years in a row, Dube said. But in California, the lowest-paid third of workers (those who earn $12 an hour or less) saw some improvement, largely due to a minimum wage increase to $6.75 an hour in 2002.

Dube found that job categories in California experiencing growth in the past year paid $2.50 an hour less than job categories undergoing reductions.

California saw growth in high-wage jobs (those paying over $18 an hour) and a reduction in low-paying jobs early in the recovery from 2002-2004. But Dube said that trend has been reversed in the past year with net growth in service and sales jobs in food service, retail and accommodation that pay under $12 an hour and a loss in higher paying professional and managerial jobs in high-end business services.

On another note, Dube found that net new jobs in construction and real estate accounted for 21 percent of all jobs added by California's growing job categories in the past three years, compared with 14 percent throughout the country. This sector's share of all employment in California rose from 9 percent in 2000 to 11 percent in 2005, while rising from 9 percent to 10 percent for the country as a whole.

Growth in construction and real estate was particularly important for middle-paying jobs (where workers earn more than $18 an hour) in California, accounting for 31 percent of added jobs in this category. Yet the numbers are cause for concern, Dube added, as both jobs and wages could be in trouble if there are significant price corrections in California's still hot housing market.

Dube's report is online at the labor center's website.