Third Quarter 2018: New Kid on the Block Means Lower Wages

by Erik Knoder

April 10, 2019

Most people would probably guess that new workers would have lower wages than existing workers, and that seemed to be exactly the case for Oregon in the third quarter of 2018. Sometimes economics yields surprises, and sometimes it confirms hunches. In this comparison of new jobs versus all jobs, our hunch was that new jobs would pay lower wages. And this was the case for every major industry.

This analysis compares the median hourly wage for all jobs in Oregon covered by unemployment insurance in the third quarter of 2018 with the jobs worked in the third quarter but not in the previous quarter. In other words, we compared all jobs with new jobs, where a job is defined as an individual working for a given employer. Individuals can have more than one job. The median wage for all jobs was $19.85 per hour, but the median wage for new third quarter jobs was only $13.78 per hour.

New jobs paid less than all jobs in every major industry, although the difference varied. Industries that had higher hourly wages tended to have larger differences. The information industry, state government, and local government paid median hourly wages of around $30 per hour for all jobs, but workers in new jobs in these industries made roughly 40 percent less. At the other end of the wage scale, leisure and hospitality, natural resources and mining, other services, and retail trade paid median wages of around $13 to $16 per hour for all jobs, and workers in new jobs in these industries made about 10 percent to 11 percent less. The wage penalty for being the new kid on the block is much smaller in lower-wage industries.

The wage differences between all jobs and new jobs for different industries is somewhat matched by the differences in turnover by industry. It is likely impossible to say if larger wage differences cause less turnover, or even which direction any influence might work. Leisure and hospitality, natural resources and mining, other services, and retail trade all had annual turnover rates of 10 percent to 15 percent in 2017, according to the Census Bureau’s Longitudinal Employer-Household Dynamics program. Turnover for the information industry and public service was 5 percent to 8 percent. Higher overall pay and higher pay for seniority seem to be associated with lower turnover.

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