New Jobs: a Minus in the Middle

In his acceptance speech before the Republican Convention, Vice President George Bush pledged that, if elected, he would “create 30 million new jobs” over the next eight years. During the course of the next week, journalists and economists pointed out that according to the Administration’s own experts, there will only be about 13 million new people to fill those jobs.

The only way to approach Bush’s target would be to import millions of new immigrants, get the unemployment rate down to absolute zero--and force every spouse, teen-ager and retiree not now working into the labor market. Even then, we would not have enough people to fill 30 million new jobs--assuming they could be created by 1996. To put it plainly, the vice president’s promise was economic and demographic nonsense.

In an August speech before the third annual High Tech/World Trade Seminar at La Jolla, Commerce Department Under Secretary Robert H. Ortner asserted that “77% of the new jobs from the fourth quarter of 1982 to the second quarter of 1988 paid $600 per week or more.” That is more than $30,000 a year for full-time work. Unfortunately, the undersecretary--who should know much better--forgot to adjust his data for inflation.

Given the 20% rate of inflation over this period, you only needed $500 a week in 1982 to purchase what cost $600 a week by 1988. When that stubborn fact of life is taken into account--and the undersecretary’s own agency makes such calculations all the time--it turns out that only about a third of the new jobs created since the recession of 1982 paid more than $600 a week in 1988 purchasing power. In plain words, the undersecretary’s assertion was not honest.

What’s going on here? Not in recent memory have respected political leaders and their appointees so blatantly distorted the message emerging from economic data produced regularly by official agencies such as the Bureau of Labor Statistics (BLS) and the Census Bureau.

What this data truly reveals is the dark side of the American job market. Simply put, the job market is splitting increasingly into a small, high-wage top and a big, poverty-level, low-wage bottom, with a declining share of working people falling in between. In terms of wage and salary incomes, we are experiencing the polarization of America.

To set the record straight, you must do your sums correctly and go back to 1979 for a base line. That is the peak year before the economy was plunged into the recessions of 1980 and then 1981-82 by the high-interest-rate, tight-money policies of the Federal Reserve Board and by the anti-union and wage-depressing policies of the Reagan Administration. In 1979, about 31% of those people with at least some wages earned less than $12,000 (in 1988 purchasing power)--roughly the equivalent of the official poverty line for a family of four.

Since then, more than half of the net additional employment has paid those low wages (adjusted for inflation)--57% to be precise. At the other end, in 1979 only 4% of the work force earned more than four times the 1988 poverty line, or $48,000 a year. Since 1979, about 10% of the “new jobs” paid that much.

By simple subtraction, the middle--people earning between $12,000 and $48,000 in 1988 dollars--has been shrinking as a share of the total. In 1979, two-thirds of all workers were in middle range. Since then, only one-third of the new jobs have paid middle-class wages.

But, say the Republicans, why not ask how well we have done in creating “good” jobs once the 1981-82 recession was over? Well, if you insist.

Let’s go back to Under Secretary Ortner’s comparison of changes in weekly wages between December, 1982, and June, 1988. He was drawing on official (but unpublished) data from the “usual weekly earnings” question on the monthly BLS survey of households. We have checked those numbers very carefully.

In December, 1982, 34% of all workers reported usual weekly wages of less than $250 (in 1988 dollars)--roughly the equivalent of the poverty line. But since the depths of the recession, 40% of the new jobs paid wages that meager. The low end has been rising right through the recovery. In December, 1982, 16% of the work force earned Ortner’s $600 a week or more (again measured in 1988 dollars). Since then, 33% of additional U.S. employment was at the $600 or above level. So the high end was rising, too.

But then the middle group, earning between an inflation-adjusted $250 and $600 each week (accounting for exactly half of all employment in the trough of the 1982 recession), has accounted for only 27% of the new jobs generated during the recovery. That is polarization. The poorest- and highest-paid are growing in numbers--the middle is shrinking.

That the top of the wage range has grown more than the bottom since December, 1982, is partly a product of the choice of the base line year. In a recession, workers in cyclically volatile but higher-paying industries, such as auto and steel, tend to be laid off disproportionately in relation to employees in supermarkets, insurance companies or software firms. When they are recalled during the subsequent recovery, that “artificially” adds more high-paid workers to the labor force--until the cycle is over.

Similarly, during recessions, part-time workers are less likely to lose jobs than full-time workers. As full-timers return to work in the recovery, the share of full-timers among all workers goes up, and so does the proportion of people making relatively high wages. But whether you figure correctly, using a 1979 base line, or do it wrong--as the GOP campaign is doing it now, measuring from the depths of the 1982 recession--the underlying story is the same. America is producing a profusion of low-wage jobs. For every new high-wage job created since 1979, five new low-wage jobs have been generated.

The once-broad middle stratum of America’s work force is now in trouble. The kinds of jobs we are creating should be a central issue in the current presidential campaign, along with who is--and who isn’t--getting those jobs, and what an activist, concerned government can do to help.

Hiding reality behind a smoke screen of distorted numbers only risks ignoring a serious problem that will challenge the nation in the decade to come.