Reading the Employment Numbers: The Reshaping of the US Labor Force

By Bill Barclay, Chicago Political Economy Group

OK, the April employment report continued the string of now 50 straight months of job growth in the private sector – almost unprecedented – and we’re roughly back to where we were in late 2007, just before the official beginning of the “Great Recession.”  The top-line number for the report on April job creation was 288,000 new jobs and a decline in the unemployment rate to 6.3%.  In many economic recoveries in the post-WWII years, this would be good news and worth celebrating.  But the Long Depression that began in 2007 is far from over, and I don’t mean just that the number of long-term unemployed remains higher than in any other post-recession period or that the labor force participation rate is lower than at any time since the early 1980s, both of which are true.  I mean the underlying problem, that the US economy is a failure in achieving the core goal of any modern economy: generating living wage jobs for all willing and able to work.

It is in comparison to this goal that an overview of the job creation occurring in the past 50 months is striking.   Although low-wage jobs – those paying less than $13.50/hr in 2013 dollars – represented only 22% of total jobs lost during the Great Recession, this sector has accounted for 44% (twice as much) of the new jobs created.  In contrast, while mid-wage jobs (paying $13.70-20/hr) were 37% of jobs lost, they are only 26% of new jobs created.  Meanwhile, the high-wage job sector has generated only 30% of new jobs although 41% of the jobs lost were in this category. 

What we are seeing is a reshaping of the US labor force into one in which the low wage sector is the engine of job growth.  And, this is a labor force that already had one of the largest low-wage sectors as a percent of total employment among wealthy countries.  Even before the 2008 financial panic, more than one of every six workers in the US made less than half of the median wage, compared to fewer than one of every 12 in most OECD countries and as low as only one of every 16 in Denmark. 

I think that the shift towards a low-wage economy is the underlying reason for the widespread feeling that the recession never actually ended.  It is certainly the driving force behind the failure of new high school and college graduates to find employment that can serve as the basis for a career, leaving the family nest, starting a family, etc. 

In the years since the housing bubble collapsed, the rate of what economists call “household  formation” has dropped dramatically.  In the 2001-2006 period, the number of new households averaged 1.35 million annually; in contrast, from 2007-2013, the number of households rose by an average of only 569,000 a year, less than half the earlier rate.  This shift is reflected in the slow 2%/year growth of the US economy during the latter period.

The social dynamics connecting low-wage jobs, low levels of household formation and slow economic growth are simple.  Let’s start with the low-wage jobs.  While the unemployment rate for new high school and college graduates has long been significantly above (often double) that of the economy as a whole, there has been a shift in the jobs that these new grads have been able to obtain.  Low-wage jobs are those most readily available in an economy that has more than three people unemployed for every job opening, and these are the ones that new entrants into the labor force usually get.  Today, almost 45% of college grads aged 21-27 are working in jobs that do not require the college degree they just finished spending time and money obtaining.  We have a large – and growing – number of baristas and cashiers, but stagnant or declining numbers of people employed in publishing, telecommunications or teaching.  The former average less than $12.50/hr, while the latter average over $20/hr.  And, construction, one of the long-time sources of high-wage jobs for those with less than a college degree, now employs only 75% of the number of workers employed in the years prior to the 2008 financial panic. 

So, who can afford to move out of their family’s home to create a new household?  Many fewer than in the past.  The proportion of 18-34 year olds living with their parents and not in school has increased by almost 15% compared to the years prior to the Great Recession.   And when the move does occur, it is more often into an apartment – probably with a roommate – rather than into a single-family house.  While this may be positive from an environmental perspective, multi-family building construction generates only half the number of new jobs as construction of single-family housing. 

The neoliberal economy that emerged in the 1970s was driven largely by asset-price bubbles, with the two largest ones being the dot.com and housing bubbles.  The failure of this economic paradigm is not only evident in the continuing high levels of un- and under-employment.  (A large part of the reason for the decline in the April unemployment numbers and rate was the loss of over 800,000 people from the labor force.)  It is also starkly etched in the failure of the “job creators” to actually create jobs that have a future. 

We have a choice.  On the one hand, there is the neoliberal path towards “global competitiveness” by paying people less than in other wealthy countries, that is, the continued expansion of a low-wage sector.  Alternatively, we can recognize that lack of aggregate demand in the economy can best be addressed by a real jobs program such as that proposed by Rep. John Conyers in HR 1000, the 21st Century Humphrey-Hawkins Full Employment and Training Act.  The Act has picked up some additional sponsors in recent months.  Check to see if your representative is a co-sponsor by going to thomas.gov, selecting "bill number" and entering HR 1000.  Depending on the result, thank your representative or arrange a meeting and insist that they sign on.

Bill_Barclay.jpgBill Barclay is a founding member of the Chicago Political Economy Group and co-chair of Chicago DSA.

 

 

 

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