FindingJun 24, 2020

The Pandemic Recession’s Disproportionate Effect on Wage Earners

US private sector employment contracted by about 21% between mid-February and late-April 2020, with workers in the bottom quintile of the wage distribution experiencing a 30% employment decline through May, and those in the top quintile only a 5% decline

Using data from ADP¹ one of the world’s largest human resources management companies, to measure changes in the US labor market during the early stages of this “Pandemic Recession,” the authors find that paid US employment declined by about 21% between mid-February and late-April, 2020. Given that US private employment in February was 128 million workers (on a non-seasonally adjusted basis), the ADP data suggest that total paid employment in the US fell by about 26.5 million through late April. As of late May, paid employment is still about 19.5 million jobs below its mid-February levels.

The authors reveal that employment declines were disproportionately concentrated among lower-wage workers: 30% of all workers in the bottom quintile of the wage distribution lost their job, at least temporarily, through May. The comparable number for workers in the top quintile was only 5%. Finally, the authors reveal that businesses have cut nominal wages for about 10 percent of continuing employees, about twice the rate during the Great Recession, while forgoing regularly scheduled wage increases for others.

1 ADP processes payroll for about 26 million US workers each month, representing the US workforce along many labor market dimensions. These sample sizes are orders of magnitude larger than most household surveys that measure individual labor market outcomes at monthly frequencies.