Reversing the Middle Class Jobs
Deficit Alan B. Krueger Chairman Council of Economic Advisers April 26, 2012

Figure 1: The 2000s Saw
Far Weaker Job Creation Than Each of the Previous Five Decades Nonfarm Payroll Employment Millions 180 160 2000s 140 1990s +20% 120 1980s +20% Jan. 2000- 1970s Dec. 2007 100 +5.7% +27% 1960s 80 +31% 1950s 60 +24% 40 20 0 1950 1960 1970 1980 1990 2000 2010 Source: Bureau of Labor Statistics; CEA calculations. 1

Figure 2: Real Earnings for
the Median Year-Round Worker Stagnated Real Median Earnings for Full-Time Year Round Workers, 1981-2010 2010 Dollars 46,000 44,000 42,000 2010 40,000 38,000 36,000 34,000 32,000 1981 1986 1991 1996 2001 2006 Note: Earnings adjusted for inflation using the Consumer Price Index for all urban consumers. 2 Source: CEA calculations based on Current Population Survey March Supplement.

Figure 3: The Share of
Workers Earning a Middle-Class Income Has Been in Decline Over the Past Three Decades Share of Full-Time Year Round Workers With Annual Earnings Within 50 Percent of the Median Percent 68 66.1 66 64.8 64 62 60.2 60 59.5 58 56 0 1980 1990 2000 2010 Source: CEA calculations based on Current Population Survey March Supplement. 3

Figure 4: Economic Growth Turned
Positive in 2009:Q3 and Has Continued for 10 Straight Quarters Real GDP Growth Annualized Quarterly Percent Change 6 3.6 3.8 3.9 3.8 4 3.0 3.0 2.5 2.3 1.7 1.7 1.8 2 1.3 1.3 0.5 0.4 0 2011:Q4 -0.7 -2 -1.8 -4 -3.7 -6 -6.7 -8 -8.9 -10 2007:Q1 2008:Q1 2009:Q1 2010:Q1 2011:Q1 Source: Bureau of Economic Analysis. Shading denotes NBER recession. 4

Figure 5: Jobs Have Been
Growing Since February 2010 Change in Private Nonfarm Payrolls Thousands, Seasonally Adjusted 300 300 Feb-10 150 150 0 0 -150 -150 -300 -300 -450 -450 -600 -600 -750 -750 -900 -900 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: Bureau of Labor Statistics. Shading denotes NBER recession. 5

Figure 6: Job Growth in
the Current Recovery is Closely Tracking the Early 1990s Recovery Private Payroll Employment During Recoveries NBER-Defined Cycle Trough = 100 108 106 104 1991 102 100 2001 Current 98 (June 2009 Trough) 96 -36 -30 -24 -18 -12 -6 Trough 6 12 18 24 30 36 Months from Trough Source: Bureau of Labor Statistics; CEA calculations. 6

Figure 7: Strong Economic Growth
in the 1990s Helped Lift Incomes for All Quintiles Annual Growth Rate of Real Income Across the Family Income Distribution, 1979 to 2010 Percent 3.5 3.0 2.5 2.0 1.5 1.2% 1.0 0.6% 0.5 0.3% -0.4% 0.1% 0.0 -0.5 Lowest fifth 2nd fifth Mid fifth 4th fifth Top fifth Annual Growth Rate of Real Income Across the Family Income Distribution, 1995-2000 Percent 4.0 3.5 3.2% 3.0 2.5 2.2% 2.3% 2.1% 2.2% 2.0 1.5 1.0 0.5 0.0 Lowest fifth 2nd fifth Mid fifth 4th fifth Top fifth Source: Census Bureau; CEA calculations. 7

Figure 8: The Manufacturing Sector
Provides a Path to the Middle Class, Especially for Workers with an Associate’s Degree or Less Percent of Workers With Annual Earnings Within 50 Percent of the Median, 2010 Percent 100 90 Associate's Degree or Less 80 All Workers Manufacturing 70 Manufacturing 63% Non- Non- 60 56% Manufacturing Manufacturing 47% 49% 50 40 30 20 10 0 Note: The median annual earnings is based on full-time year-round workers. Source: CEA calculations based on Current Population Survey 2011 Annual Social and Economic Supplement. 8

Figure 9: Manufacturing Employment Fell
Beneath Its Normal Bounds Early in the 2000s Manufacturing Employment Millions 22 20 18 16 Dec. 2000- Jan. 2010- Dec. 2007 Mar. 2012 -3.4 million +470,000 14 Dec. 2007- Jun. 2009 12 -2.0 million 10 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Bureau of Labor Statistics, CEA calculations. 9

Figure 10: Domestic U.S. Manufacturers
Are Increasingly Competitive Change in Manufacturing Unit Labor Costs, 2002-2010 Percent 100 79.0 80 67.6 60 44.1 40.8 40 20.8 20 14.1 17.1 -23.0 2.1 2.9 -10.8 0 Singapore Japan U.K. Korea SwedenGermany France Canada Italy United -20 States Taiwan -40 10 Source: Bureau of Labor Statistics, International Labor Comparisons; CEA Calculations.

0 0 10 30 40
60 70 10 30 40 60 70 20 50 20 50 Turkey Portugal Percent Percent Italy Mexico Mexico Turkey Czech Rep. Italy Slovak Rep. Czech Rep. Austria Slovak Rep. Portugal Poland Hungary Korea Germany Greece Greece Austria Slovenia Hungary Chile Spain Poland Chile Iceland Slovenia Estonia France Spain Ireland Finland Iceland Switzerland Belgium Netherlands Luxembourg United States Germany Sweden Denmark Belgium Sweden Israel Norway France Source: Organization for Economic Cooperation and Development, Education at a Glance 2011. Japan Denmark Australia Netherlands Share of 25-34 Year Olds With a Post-Secondary Degree Share of 55-64 Year Olds With a Post-Secondary Degree U.K. Switzerland Luxembourg U.K. Degree in 2009 by Birth Cohort New Zealand Finland Norway Australia Ireland Estonia Japan New Zealand Canada Canada Korea United States Figure 11: Share of Population with a Post-Secondary 11

Figure 12: College Completion Rate
by Income Quartile Fraction of Students Completing a Bachelor's Degree, by Income Quartile and Birth Year 0.75 1979 to 1982 birth cohorts 0.54 1961 to 1964 birth cohorts 0.5 0.32 0.36 0.25 0.21 0.09 0.17 0.14 0.05 0 Lowest Quartile 2nd Quartile 3rd Quartile Top Quartile Source: Bailey and Dynarski (2011) based on National Longitudinal Survey of Youth, 1979 and 1997. College completion is 12 measured by age 25.