Economics, Pethokoukis

Obama’s low-wage jobs recovery

National Employment Law Project

National Employment Law Project

The current job market recovery has been an historically slow one. It was only in March that private-sector employment surpassed its former peak reached in January 2008, or 51 months from its February 2010 nadir. During the 1981-82 recession by contrast, it took private-sector employment just 10 month to surpass its old high. If the current jobs recovery had been as robust as the ones during the Reagan and Clinton years, we would have around 6 million more private-sector jobs right now.

But the problem isn’t just the quantity of jobs created, but the quality, too. From an updated study by the National Employment Law Project (and see above chart):

We find that during the labor market downturn (measured from January 2008 to February 2010), employment losses occurred throughout the economy, but were concentrated in mid-wage and higher-wage industries. By contrast, during the recovery (measured from February 2010 to February 2014), employment gains have been concentrated in lower-wage industries. Specifically:

– Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.

– Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.

– Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.

Today, there are nearly two million fewer jobs in mid-and higher-wage industries than there were before the recession took hold, while there are 1.85 million more jobs in lower-wage industries. Service-providing industries such as food services and drinking places, administrative and support services, and retail trade have led private sector job growth during the recovery. These industries, which pay relatively low wages, accounted for 39 percent of the private sector employment increase over the past four years.

Now as the jobs recovery has plowed forward, low-wage jobs have become a smaller and smaller portion of the total jobs created. Back in 2011, for instance, 73% of the new jobs were low-wage jobs. Yet four years into the current jobs recovery, it trails the recovery after the 2001 recession:

National Employment Law Project

National Employment Law Project

For some time, economists have worried that automation and offshoring are hollowing out the broad middle class. A recent study from Goldman Sachs of the 1990 through 2007 period finds each recession has seen sharp drops in the middle with no accompanying sharp rebound during the recovery. As Goldman concludes:  “ … hollowing out in the middle is real, it is not unique to the post-crisis period.”

This trend would seem to make the case for wage subsidies at the bottom, but also polices that support more breakthrough innovation (including reducing crony capitalism that creates barriers to entry for startups and government backstops for incumbents) to create the middle-and-high paying jobs of the future.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

5 thoughts on “Obama’s low-wage jobs recovery

  1. I have a feeling this “Obama’s Low Wage Jobs Recovery” title will be parroted by many who will not read the bit about this being a 24 year trend of low-wage recoveries, thus ignoring actual causation.

  2. I’m degreed and approaching 60 years old, been down-sized multiple times in various sectors over the last 15 years (last one in, first one out). It has taken me 10 years to earn what I did 25 years ago. The bad news is houses, gas & food are 4x’s more expensive and my retirement fund worth 1/10th of projected. : /

  3. In addition to the disparity in low vs. med/high wage jobs during the recovery, I believe there is also a significant difference in FT vs. PT jobs, and I don’t believe the linked study addresses that. It would make the jobs picture even more dismal.

    • Part-time jobs are slightly down from four years ago. All recent job growth has been full-time and private sector.

  4. I’m so glad I spent 6 years getting an accounting degree when I would probably have been better off at home with my child! Now I have student loan debt AND no job! Thanks big business!

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