Thursday, September 2, 2010

NYT: New Job Means Lower Wages for Many

Lost in the discussion of job creation or losses is what sort of jobs are being created ... and how much they pay.  The implications are enormous for the middle class and anyone paying attention should be noticing the increasing bifurcation among Americans as the middle is eroded, while both ends of the barbell (higher end, lower end) get crowded.  I called this the coming 'pooring of America' back in 2007, 2008 - haven't used that term much lately, but this New York Times article does a good job of highlighting what is going on even as we get net 'job creation'.  [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?]  Please keep in mind as we look to tomorrow's job report, that figure is only a 'net' - each month millions of jobs are lost and created... the net of the two is what is reported in the media.  The focus of this story is on the creation side - something as simple as moving a blue collar union auto job from Michigan to Mississippi is neutral to job creation - but a sharp drawdown in pay/benefits.  One can extrapolate from there.

On a tangent, the easy dogmatic retort to this type of story is always the same "cut taxes" (we've been doing that for 2 decades in 'trickle down economics 101') and "get more education".  Those are black and white answers in a gray world.  There will always be a bell curve in a society - hence always the need for work for the bottom 50 percentile.  Not everyone can be an investment banker or paper pusher in the Department of Agriculture.  What we are seeing is many of the jobs that those folks on that half of the bell curve used to do, now being sent overseas.  That does not mean their skill set is any worse (or better) than it was 25 years ago; their opportunities are far fewer.  As for "get more education", be careful what you ask for - the unemployment rate for university educated is relatively low, at least versus the broader population.  If suddenly you took 10% of the workforce and took them out of the lower end of the bell curve, and pushed them into the job market for high skill jobs, you need to ask what jobs they would be going after?  The national job seeker to job opening ratio has been anywhere from 5 to 6:1 the past few years.  So all you have done is shifted the problem from one end of the spectrum to another and unemployment rates among college educated would spike.  As I said, it's not so black and white as the talking points would have you think.  Unfortunately, rather than having a national discussion and long term planning on the subject - we'll revert back to the knee jerk talking points and get nowhere fast in potential solutions.

  • After being out of work for more than a year, Donna Ings, 47, finally landed a job in February as a home health aide with a company in Lexington, Mass., earning about $10 an hourChelsea Nelson, 21, started two weeks ago as a waitress at a truck stop in Mountainburg, Ark., making around $7 or $8 an hour, depending on tips, ending a lengthy job search that took her young family to California and back.
  • Both are ostensibly economic success stories, people who were able to find work in a difficult labor market. Ms. Ings’s employer, Home Instead Senior Care a company with franchises across the country, has been expanding assertively. Ms. Nelson’s restaurant, Silver Bridge Truck Stop, recently reopened and hired about 20 people last month in an area thirsty for jobs.   Both women, however, took large pay cuts from their old jobs — Ms. Ings worked for a wholesale tuxedo distributor, Ms. Nelson was a secretary. And both remain worried about how they will make ends meet in the long run.
  • Ms. Ings had worked in a variety of office and administrative roles in the wholesale tuxedo industry. Her wages of just over $16 an hour were enough to build a relatively comfortable life for her and her daughter, Jillian, now 21 and in college.
  • With the country focused on job growth .... comparatively little attention has been paid to the quality of the jobs being created and what that might say about the opportunities available to workers when the recession finally settles. There are reasons for concern, however, even in the early stages of a tentative recovery that now appears to be barely wheezing along.
  • For years, long before the recession began, job growth had become increasingly polarized in this country. High-paid occupations that require significant amounts of education and training grew rapidly alongside low-wage, service-type jobs that do not.
  • The growth of these low-wage jobs began in the 1980s, accelerated in the 1990s and began to really take off in the 2000s.  (obviously coinciding perfectly with the growth of outsourcing) Losing out in the shuffle, Dr. Autor said, were jobs that he described as “middle-skill, middle-wage” — entry-level white-collar positions, like office and administrative support work, and certain blue-collar jobs, like assembly line workers and machine operators.  The recession appears to have magnified that trend.
  • From 2007 to 2009, the paper said, there was relatively little net change in total employment for both high-skill and low-skill occupations, while employment plummeted in so-called middle-skill occupations. (fascinating data when it is viewed that way... low end service type work pretty steady, highest end white collar pretty steady, but the vast 'middle skill' taking the bulk of the blows)
  • A new analysis.... takes a different approach, identifying industries that have experienced job growth in 2010 and examining their median wages.   It found that job expansion to this point had been skewed toward industries with median wages that are low to middling, with a disproportionate share of job growth happening in industries whose median wages fell below $15 an hour.  ($15 hour = $31K a year gross approx)
  • “There’s a striking contrast so far between which industries have lost jobs and which ones are growing,” said Annette Bernhardt, policy director for the law project. “If this kind of bottom-heavy job creation continues, it could pose a real challenge to restoring consumer demand and making sure working families have a way to support themselves.” 
  • Both studies are disquieting because of the potential import for many who had once scratched out middle-class livings and are now looking for work. A unifying theme is the stubborn march of labor-intensive, low-paying service jobs, like the ones Ms. Ings and Ms. Nelson found.

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