Friday, May 2, 2014

The Low-Wage Employment Recovery - The Illusion Continues

The National Employment Law Project (NELP) recently updated its analysis of job trends after the Great Recession in a new report that examines the types of jobs that have been created in its wake.

Let's open by looking at what has happened to private sector employment in the United States since the beginning of 2007:

In January 2008, employment in the private sector peaked at 115.977 million.  It fell rather sharply, hitting a nadir of 107.187 million in February 2010, a total loss of 8.79 million jobs.  It took until February 2014 to retrace most of its plunge and in March 2014, for the first time in six years, the number of employees in all private industries in the United States finally passed its January 2008 peak, hitting 116.087 million employees.  This gives us a sense of just how bad the downturn was and how slow the economy and the employment situation was to recover.  But has that recovery, particularly for America's workers, been a good thing?

NELP's study tracks job losses and gains in the private sector from January 2008 to February 2014, a period of just over six years in length and divide the data by time, looking at jobs lost between January 2008 and February 2010 and jobs gained between February 2010 and February 2014.  They then further divide jobs gained and lost by wage level as follows:

Low-wage industries - $9.48 to $13.33 per hour
Mid-wage industries - $13.73 to $20.00 per hour
Higher-wage industries - $20.03 to $32.62 per hour

Here's the result in graphic form with jobs lost in blue and jobs gained in red for each of the wage levels:

1.) Low-wage industries accounted for only 22 percent of jobs lost during the downturn but have accounted for 44 percent of jobs gained over the four "recovery years" with total net job gains of 1.851 million. 

2.) Mid-wage industries accounted for 37 percent of jobs lost during the downturn but have accounted for only 26 percent of jobs gained over the four "recovery years" with total net job losses of 958,000.

3.) High wage industries accounted for 41 percent of jobs lost during the downturn but have accounted for only 30 percent of jobs gained over the four "recovery years" with net job losses of 976,000 jobs. 

Basically, what the recovery since the Great Recession has done is to replace high-wage jobs with low-wage jobs.  The report notes that the past four years have seen the strongest job growth in food services and drinking places, administrative and support services including temporary help and retail trade.  These low-paying industries are responsible for 39 percent of all employment increases over the past four years.  Strong employment growth was also seen in the education and health services sector which actually added jobs over both the downturn and the recovery as shown here:

Unfortunately, just under one-third of the jobs in this sector are in low-wage occupations including social assistance and nursing care facilities which employ millions of workers at a median hourly wage of between $10.10 and $12.08 an hour.

The other sector that would normally be associated with job creation during a recovery has seen the number of jobs destroyed far outweigh the number of jobs created as shown on this graph:

The construction sector lost 2.293 million jobs during the downturn and has only seen 532,000 new jobs created since January 2011 for a net loss of 1.761 million jobs.  Jobs in construction are normally considered to be "good paying" with average wages of just over $19.00 an hour across the sector.  Unfortunately, those jobs are much harder to find now than they were six years ago.

As I've noted in other postings, while there is no doubt that the economy is creating jobs, it's creating millions of jobs that barely provide a living wage for America's workers.  For millions of Americans, the "recovery" is just an illusion.  As well, with so much of economic growth relying on growing consumption by households, replacing relatively high-wage jobs with much lower-wage jobs is going to make it harder for the economy to grow as would normally be expected five years into a recovery.

And even the Fed doesn't have an answer for that!


  1. How do we reconcile the April jobs report that showed 288,000 jobs being created and 806,000 people dropping from the work force with economic reality? The question then arises as to how this will spill over to economic policy.

    My take on the recent jobs report is that as spring comes upon us ever optimistic and more desperate Americans are being pushed into making a decision as to whether to leave the work force or take a lower paying job that is often part time. Yes, people are busy scurrying around, but it should be clarified not at a fast pace. More on why we should not be overly excited about this report in the article below.

  2. In most previous recoveries low wage jobs are the first to come back.

    Higher wage job recovery typically lags behind.

    The depth of this crisis due to its root as a financial crisis and the lack of stimulus spending (such as infrastructure), as opposed to a recession such as the early 80s recession which was caused by a large increase in interest rates, is why this recovery seems worse.

  3. This past economic downturn was NOTHING compared to the downturn in the late 1980's! Unemployment rates at 13% nationally, lots of homeless people, etc. At least we did not see that with this downturn.

    1. But at what cost? The FEDs balance sheet has exploded. The nation's debt is unsustainable.