Friday, March 13, 2015

Which Boats Get Lifted Fastest by a Rising Tide?

The old saying goes, “A rising tide lifts all boats.” In today’s context, this means that the recovering economy should be improving the lot of all workers. I was wondering, however, whether some boats are rising faster as the tide comes in. In other words, which types of occupations are getting the biggest boost from the improving economy?

I decided it would perhaps be most revealing to look at the places where the tide is coming in fastest—the metropolitan areas that have seen the largest gains in real personal income. Thanks to a dataset from the Bureau of Economic Analysis, I was able identify 20 metro areas in which real personal income increased by more than 6 percent between 2011 and 2012. I then looked at the increases in wage-and-salary occupational employment, for each metro area, over the same time period. Rather than deal with hundreds of occupations, I looked at the increases for major groups of occupations.

Then I computed the correlations between these employment increases for occupational groups and the real-personal-income gains in the 20 fastest-rising metro areas. Here’s what I found:

Occupational Group
All Occupations
Transportation and Material Moving Occupations
Life, Physical, and Social Science Occupations
Installation, Maintenance, and Repair Occupations
Construction and Extraction Occupations
Office and Administrative Support Occupations
Computer and Mathematical Occupations
Business and Financial Operations Occupations
Management Occupations
Sales and Related Occupations
Architecture and Engineering Occupations
Legal Occupations
Production Occupations
Healthcare Support Occupations
Healthcare Practitioners and Technical Occupations
Arts, Design, Entertainment, Sports, and Media Occupations
Food Preparation and Serving Related Occupations
Building and Grounds Cleaning and Maintenance Occupations
Protective Service Occupations
Community and Social Service Occupations
Personal Care and Service Occupations
Education, Training, and Library Occupations
Farming, Fishing, and Forestry Occupations

These results make more sense if you’re aware that several of the 20 metro areas that figure into these calculations are in the oil patch: Odessa, Texas (10.2 percent real-income growth); Midland, Texas (9.6 percent); and Victoria, Texas (6.9 percent); and Grand Forks, North Dakota (7.3 percent). The occupational groups that are growing fastest are those that are important for getting oil out of the ground and moving it to refineries.

It’s also interesting to note that some occupational groups that grew fastest nationwide over this same time period show low correlations to income growth in these metro areas. For example, Personal Care and Service Occupations grew by 5.3 percent nationwide, faster than any other group, yet it grew by only 1.2 percent in these 20 metro areas and shows a negative correlation with income gains there. Farming, Fishing, and Forestry Occupations grew at the same rate nationwide and in these 20 metros (4.4 percent), but it also shows a negative correlation to income gains there. Food Preparation and Serving Related Occupations actually grew faster in these 20 metros (4.4 percent) than nationwide (2.9 percent), but it also shows a negative correlation to income gains there.

These anomalies can be explained partly by the difference between the economies of these 20 metro areas and that of the nation as a whole. But understand that a rising tide of income in an occupation does not necessarily bring a commensurate increase in employment for the same occupation—at least, in the short run. In many occupations, income can rise because existing workers are able to put in longer hours. Eventually, the rising income should attract new workers, but there is always a lag because of barriers to job entry, such as licensure and other credentialing, plus (at the regional level) geographical distance.

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