Blue Collar Workers are no Longer Singing the Blues

Source: Bureau of Labor Statistics

Perhaps surprisingly, the acceleration in recent years is not coming from highly educated occupations, but rather from blue-collar occupations. Using ECI data by occupation, we have constructed wage growth measures for blue-collar and white-collar occupations. The two measures are shown in chart two.

Blue collar occupations include:  construction, extraction, farming, fishing, forestry, installation, maintenance, repair, production, transportation, material moving, healthcare support, protective service, food preparation and serving, building and grounds cleaning, and personal care and service occupations. White-collar occupations include management, business, financial, professional, sales, office and administrative support occupations.

The chart shows a significant acceleration in recent years in blue collar occupations. Their wage growth rate is almost back to the 2007 level.  However, the acceleration in the wage growth of white-collar occupations was much milder and is still almost one percentage point lower than in 2007.

Chart 2

Source: Bureau of Labor Statistics

Chart Three shows the annual growth rate of the last four quarters compared to the previous four quarters for the nine main groups of occupations. It shows that the five groups in the blue-collar occupations are all growing faster than any of the four groups in the white-collar occupations. The group with the fastest wage growth is transportation and material moving.

Chart 3

Source: Bureau of Labor Statistics

Chart Four shows the gap in the wage growth between the latest numbers and the last four quarters and 2007, which was the period with the fastest growth rate before the financial crisis. Most groups of occupations are still experiencing wage growth that is slower than in 2007, but production workers and workers in transportation and material moving are experiencing faster wage growth than in 2007.

Chart 4

Source: Bureau of Labor Statistics

The faster growth in wages for blue-collar workers is somewhat surprising, especially since throughout most recent history, white-collar wage growth was higher. In a future blog, we will discuss some of the potential reasons for the faster acceleration in wage growth of blue-collar occupations versus white-collar, and the reasons for the very fast growth in the wages of transportation workers.

We expect labor markets to continue to tighten in the coming years, which will only apply more wage and price pressures across the economy. There are already signs that faster wage growth is already spilling over to producer prices. Producer price index for transportation and warehousing of goods, reached almost 5% in the past 4 quarters. As higher labor costs continue to chip away at corporate profits, companies across many industries will be forced to raise prices, which is one of the reasons why a growing number of economists and the Federal Reserve are becoming more worried about inflation.