President Obama bemoaned the rise of inequality in his January "State of the Union" address, French economist Thomas Piketty’s book on inequality is on the number one on Amazon.com and Hillary Clinton’s talks about the “Cancer of Inequality” in her new book Hard Choices. These liberals are right that the rich gained income and the middle class substantially lost income since 2009. But it was middle-wage workers falling into low-wage jobs that caused the inequality to grow. The Obama Administration’s tax, regulatory, and healthcare policies drove up employer costs and job categories formerly middle class are now low-wage.

The Bureau of Labor Statistics hourly wage data by job type provides average hourly wage data of all employees for 489 different industry and job types on a monthly basis.  By using this data, real aggregate earnings can be determined by multiplying the total number of hours worked for each job by the average hourly wage. 

Jeffrey Rosen of Briefing.com created three categories of wage earners so that each category consisted of about one-third of the total hours worked. Jobs offering an average hourly wage that was a half “standard deviation” above the mean average were categorized as a high-paying job. Those jobs that had wages a half standard deviation below the mean were labeled low paying. The rest were categorized as medium-wage jobs. This resulted in 126 categories of high-paying jobs, 226 categories of medium-paying jobs, and 137 categories of low-paying jobs.

The aggregate earnings for medium-wage jobs fell by $4.9 trillion during the Great Recession from 2008 to 2009, but have only grown back during the subsequent recovery by $2.6 trillion for a net loss of $2.3 trillion. The number of medium-wage jobs shrank by 2.0 million workers from their pre-recession levels.

The aggregate earnings of high-wage jobs fell by $1.9 trillion during the Great Recession, but have recovered $4.3 trillion for a net gain of $2.4 trillion. All high-wage jobs lost during the recession were recovered and another 362,000 jobs were added. 

The aggregate earnings of low-wage jobs fell by $1.7 trillion during the Great Recession, but recovered $3.6 trillion for a net gain of $.2 trillion. All the low-wage jobs lost during the recession were recovered and another 2 million were added.

What this analysis demonstrates is that only 18% of middle-wage jobs moved up to high-wage, whereas the vast majority of former medium-wage workers and young people joining the work force over the last five years became low-wage jobs.

President Obama, Thomas Piketty, and Hillary Clinton have embraced the term “middle-out economics,” arguing that economic policy should aim first and foremost to boost middle-class living standards. They claim that “the U.S. labor market remains deeply depressed and has never come close to a full recovery from the Great Recession.”  Their answer is to double down on more taxes, regulation, healthcare spending. 

Liberals seem to be blaming conservatives for failing to address inequality in America.  But despite horrible weather, falling GDP and international tensions the U.S. job market has recovered and recent report show strength in hiring. But looking at the economic numbers from the Bureau of Labor Statistics on hourly wage data by job type and the analysis above, this U.S. labor market is growing from the “bottom out.”

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