A few posts ago, I put forward the idea that a decline in the workforce population may be what’s behind today’s low headline unemployment rate.
Supporters of Trump tout the low unemployment rate as if his policies had something to do with it, rather than demographics. Or they may tout decreased immigration, which actually started before he was elected, due to the shrinking disparity in economic conditions between the U.S. and Mexico (Mexico getting better, U.S. getting worse).
It’s an enduring paradox: on the one hand, politicians consistently claim that they cannot “interfere” in the “natural” workings of the free market economy when times are hard—they can only sit by and watch helplessly as it does it’s thing and wait it out. But when things are going well while they are in office, they take all the credit for it and insist it was 100% percent their policies that created the current conditions, and not the the fact that the market is cyclical.
In other words, it’s mainly down to luck.
But a decline in the unemployment rate does not tell the whole story.
There are two other important factors to consider here. One is the workforce participation rate. The unemployment rate might be lower because less and less people are counted as being actively in the labor market. That is, they become “unpersons.”
The other is the quality of the jobs created. We could create hundreds of thousands of new jobs as human footstools that pay sub-starvation wages and call it a great success because the unemployment rate went down.
Until now, all I’ve ever heard is the headline number of jobs created and the unemployment rate. But what I never heard in any of those discussions in the media was what kinds of jobs were created. Full or part time? Well-paid or not? Benefits? Are we just creating more bartender jobs while middle class jobs continue to disappear?
To the extent commentators did dive into the stats, in fact, the scenario above was in evidence: more and more jobs in low-wage service and retail, less and less in professional occupations across the board. What use is it in creating more and more dead-end McJobs that people can’t afford to live on?
This explains why even though the headline unemployment rate is low, there is tepid wage growth (which we covered last time). It also explains why so many people are struggling and unhappy with their circumstances even while hearing rosy statistics constantly blasted at them from the corporate media. It simply doesn’t comport with their lived reality. Under the current system, if you get even $1.00 a week from a “job” you’re considered “employed” and removed from the unemployment statistics. Hooray!
In fact, all the evidence indicated that the number of “good” jobs continues to shrink, which means that the competition for them is as fierce as ever, despite the overall growth rate in job numbers. “Opportunity hoarding” is still endemic among the elite upper classes in the U.S. And all of this may be due to structural factors in the U.S. economy, which are only going to get much worse in the years ahead.
1. Workforce participation rate.
You probably already know the trend here. Since the 1960’s the trend has been for ever-less men to be in the workforce. Meanwhile the number of women steadily increased from the late 1960s onward.
The number of women entering the workforce offset the men leaving it, such that the overall workforce participation rate across the entire population grew over time. As sort of Great Displacement, as it were.
Then it started reversing after about 2000 or so. We hit peak employment, and rates across the board started to fall for both genders after 2008. There was also a trend of older workers continuing to work, likely because of the switch from guaranteed pensions to the 401K scam where you provide for your own retirement out of your shrinking discretionary income.
The latest data has the workforce participation rate hovering around where it has bottomed out around 2012, with no signs of recovery. In fact, it is projected by the BLS to fall even further in the years ahead.
The bottom line is that there are historically less people working than in recent times, which skews the statistics, although not by a tremendous amount. The workforce participation rate is expected to shrink: more people will be permanently excluded from the musical chairs game going forward, especially men.
2. Job Quality
At long last, there is finally a discussion not just on the overall number of jobs, but on what type of jobs are being created.
A “Job Quality Index” has been created by Gallup, et. al. to go along with the unemployment rate. And what it has found is that the vast, vast, majority of jobs in the United States are fucking horrible.
That comports with what I have seen. While I have observed an enormous amount of “help wanted” signs of late, all of them are in establishments like fast-food franchises, restaurants, hotels, dry cleaners, mechanics yards, bus drivers, and so forth. These were disproportionately the jobs that were taken by illegal immigrants in the past several decades. Jobs that actually allow you to get ahead and have decent benefits are just as hard to procure as ever. This distorts the unemployment rate.
At the same time, the costs for the very basics of life—so called “nondiscretionary spending”—continue to skyrocket. Costs for housing, especially where jobs are plentiful, are escalating beyond people’s ability to pay for them, leading to an increase in the number of homeless people with jobs. And education is more and more out of reach for the average person, having risen 19 times faster than average family incomes since 1980. Access to many professional occupations is now only available to the fortunate few who chose their parents correctly. So much for social mobility and the “American Dream.”
What this has led to is widespread and dire poverty, even in the face of low unemployment numbers. This is why so many people react with incredulity, and even anger, when the rosy statistics are thrown in their face to argue that things have never been better, and if you’re struggling it’s only down to your own fault.
And a paper by the Brooking Institutions recently found that nearly half of Americans have poverty-level wages:
According to a Brookings Institution analysis, unemployment may be down, but there aren’t enough good jobs to go around.
They say 44% of American workers are employed in low-wage jobs that pay median annual wages of $18,000.
The report says their median hourly wages are $10.22. That’s higher than the federal minimum wage which sits at $7.25. The minimum wage in Louisiana is also $7.25.
That’s nearly half of the American workforce who don’t make what’s considered a living wage. According to MIT, a living wage for a single person in Louisiana is $11.28. The poverty wage for a single adult with two children is $9.99.
This isn’t just a problem for workers who are young or inexperienced, according to the report. The low-wage workforce is primarily made up of post-college age adults and older Americans.
56% of them are ages 25-50. 19% of them are ages 51-65.
23% of low-wage workers have an associate’s degree or more. Add in the number of workers who are in school or have some college education and that number jumps to 48%.
Job Quality Index data appears to back up the analysis. It assesses job quality in the United States and measures the “direction and degree of change in high-to-low job composition.”
While the JQI chart shows increases and declines in job quality since its inception in 1990, the trend has generally been a downward one.
According to the index, job quality has declined by 14.3% since 1990. The index most recently began to trend upward in 2012 but started to drop again in 2017. You can see it here.
Most workers appear to feel it. A CBS report in October said 6 in 10 workers rate their job quality as “mediocre to bad.”
A study conducted by the Brookings Institute found that 53 million Americans between the ages of 18 and 64 (or 44 percent of the workforce) yearly earn a median average of $18,000 (or $10.22 per hour). What this means is that a large section of our society can’t afford even small mistakes, let alone major emergencies. It only takes one bad move or shock for a low-wage worker to be irrevocably thrown into a catastrophe. CBS’s post about the Brookings report appeared the day after it aired the 60 Minutes episode on Seattle’s homeless crisis.
…the working class can’t thrive on low unemployment rates alone. For the median job-seeker in Trump’s America, the odds may be good, but the good jobs are an oddity. Amid all the encouraging signs in Friday’s jobs report, wage growth remained bizarrely tepid. In a labor market as tight as this one, conventional economic models would predict a bidding war between understaffed employers, and thus, accelerating wage growth. And yet, even as the unemployment rate has fallen in 2019, the pace of wage gains has actually slowed.
A lot of factors have contributed to this textbook-defying state of affairs. But an excellent new Washington Post feature on the disappearance of administrative assistant jobs illustrates some of the most essential ones.
Contrary to Andrew Yang’s grim prophecies, automation is not rendering vast swathes of the public unemployable. What technology and trade have done, however, is displace millions of Americans from their middle-class jobs, and send them hurtling down the income ladder into less remunerative occupations. And while some dimensions of this development have inspired widespread political attention (if not meaningful political action), others have gone all but unmentioned.
The plight of the downwardly mobile manufacturing worker is familiar to most Americans. But that of the displaced administrative assistant is less so. And yet, they are two sides of the same story: Since 2000, the U.S. economy has shed 2.9 million jobs in (disproportionately male) production occupations, and 2.1 million in (disproportionately female) administrative and office-support roles.
As the Post notes, such clerical jobs have been for non-college-educated women what manufacturing employment once was for non-college-educated men — a route to lifelong economic security. But as administrative assistant roles have been off-shored, automated, or — at the C-suite level — refashioned into elite positions staffed by lawyers and MBAs, that path to prosperity has been foreclosed to millions of working-class women. For middle-aged workers who had built careers in the field, this has meant sudden and harrowing downward mobility.
According to the Urban Institute, more than half of all workers over 50 in the U.S. eventually lose their jobs involuntarily, and 90 percent of those workers get consigned to lower-paying work for the rest of their careers. Meanwhile, for the typical millennial non-college-educated worker, our ascendant “barbell economy” (which concentrates job growth at the top and bottom of the income ladder) doesn’t even provide ephemeral opportunities for middle-class employment.
Critically, this is not because our society has no use for blue and pink-collar labor: Of the ten occupations expected to add the most jobs to the U.S. economy over the next decade, six are “low-skill” roles that pay less than $27,000 a year. This trend would be alarming enough in a world where America didn’t have an extortion racket for a health-care system, runaway inflation in its higher education sector, and housing markets beset by artificial scarcity. In the world we actually live in, the collapse of middle-income job opportunities has coincided with a meteoric rise in the costs of middle-class life…
Gallup’s headline finding is that, as measured by its index, only 40 percent of Americans currently have “good” jobs. But a more telling (and less ambiguous) finding from its survey may be this: While 59 percent of U.S. workers say their wages have increased over the past five years, no more than 37 percent say any other key marker of job quality has improved over that period. In fact, roughly as many workers say their job’s non-cash benefits have gotten worse in recent years (21 percent) as say they’ve gotten better (23 percent). Meanwhile, majorities report no gains in their job’s sense of purpose, enjoyability, or the stability and predictability of its wages — all factors that respondents rated as being more important to job quality than overall pay…
…Right now the JQI is just shy of 81, which implies that there are 81 high-quality jobs for every 100 low-quality ones. While that’s a slight improvement from early 2012—the JQI’s 30-year nadir—it’s still way down from 2006, the eve of the housing market crash, when the economy regularly supported about 90 good jobs per 100 lousy ones.
Or, in plainer English, the US labor market is nowhere near fully recovered from the Great Recession. In fact, the long-term trend in the balance of jobs paints a more ominous picture.
“The problem is that quality of the stock of jobs on offer has been deteriorating for the last 30 years,” says Dan Alpert, an investment banker and Cornell Law School professor who helped create the index. (Along with Alpert, the index is built and maintained by researchers at Cornell University Law School, the Coalition for a Prosperous America, the University of Missouri-Kansas City, and the Global Institute for Sustainable Prosperity.) The “whole story” told by the index, he adds, is “the devaluation of American labor.”
The prevalence of low-quality jobs suggests that there’s still a lot of slack in the labor market—meaning, people could be working more or using their skills more fully than they currently are. This is pretty much the opposite conclusion you’d draw from the ultra-low unemployment rate, robust job creation numbers, and other conventional headline data.
The conclusion to be drawn is that the unemployment rate has very little—if it ever did—to deal with what the labor market is actually like for Americans. In order for it to get better, it will take a much more activist approach, rather than simply letting the market decide, or even actively suppressing labor movements (as has been the case historically). So don’t let the statistics blindside you to what’s really going on, because I suspect that’s going to be a major effort by politicians and the media over the next year. Don’t be fooled!