We’re Not Drowning in Lousy Jobs, but Awash in Untrained Workers : Economy: Current wage and jobless trends send a clear message: Skilled workers are welcome; unskilled workers need not apply.
Commentators increasingly worry about the decline in middle-class jobs. The U.S. economy has produced 35 million new jobs since 1972, a record that is the envy of other industrialized nations. But many of these jobs pay too little to buy a middle-class lifestyle.
After decades of erratic but robust increase, earnings growth has virtually ceased in recent years. In the first 25 years after World War II, the inflation-adjusted hourly wages of production workers rose more than 70%, a little more than 2% a year. During the 16 years ending last year, hourly earnings fell 6%, or about 0.4% each year. Even during the economic expansion that began in 1983, average wages have continued to fall. If job quality is measured by hourly wages paid, there is little doubt that the average quality of production jobs has tumbled.
Equally disturbing, the disparity in wages has risen as the average wage has shrunk. Workers who initially earned high wages have continued to enjoy healthy gains. Workers stuck near the bottom of the job market have slipped farther behind.
This trend is especially pronounced among men. (Wage disparities began to rise among women only recently.) Between 1967 and 1977, earnings for all jobs rose, although gains were faster at the higher-paying end.
Since 1977, however, wages in the bottom half of the job scale have fallen sharply, while those at the very top have continued to climb. Earnings of the bottom fifth fell 13%; those at the top shot up 11%. The middle has shrunk.
The sudden rise in wage inequality is associated with a leap in the earnings premium men can expect from completing college. In the late 1960s and early ‘70s, economists detected a gradual erosion in the earnings gap between college graduates and workers who never went beyond high school. By 1979, the median earnings of male college graduates aged 25-34 was only 31% higher than the median earnings of those with no more than a high-school degree. But during the 1980s, the earnings premium of college graduates soared, reaching an all-time high of 64% by 1987.
One explanation for these wage trends hinges on shifts in the composition of the work force. The entry of women and the baby-boom generation into the job market certainly made a splash. The rise in the number of less-skilled workers, particularly new entrants and women with little work experience, raised the percentage of all workers receiving low wages. It also heightened competition for less-skilled jobs and drove down wages on these jobs relative to earnings in more skilled occupations.
This explanation made sense in the late 1960s and the 1970s, when the baby-boom generation entered the work force. It makes less sense in the 1980s and 1990s, with baby-boomers nearing middle age. The large group born between 1946-64 are skilled and experienced; they have reached or are nearing their peak earnings years. Indeed, the age and experience profile of the ‘80s work force changed in a way that should have accelerated the pace of wage growth and reduced the share of workers who should receive low wages. Rising wage inequality has occurred despite broad demographic trends that should have reduced it.
Another explanation focuses on the country’s changing industrial mix. Well-paying industries--manufacturing and construction--employ a shrinking share of workers. Growing industries--mainly in the service sector--pay lousy wages. A growing percentage of American workers toil in fast-food restaurants, theme parks and other low-paying service industries unable to earn enough to achieve a middle-class lifestyle, according to this theory. Put another way, this explanation holds that we’re becoming a nation of hamburger-flippers and floor-sweepers.
Although partly accurate, this theory explains only a little of what is going on.The decline of manufacturing and other highly paid industries actually accounts for a small part of the growth in low-wage employment. More important has been the growth of low-wage jobs across a wide variety of industries, including those that once paid high average wages. The loss of manufacturing jobs has hurt workers at the bottom of the job scale. But they have been hurt more because their wages fell across a spectrum of industries, including manufacturing. Meanwhile, the earnings of highly compensated and highly educated workers have soared across a wide variety of industries and occupations.
It is widely assumed that employers are creating an excessive number of jobs that require little skill or intelligence and thus pay low wages. If employers were truly doing this, today’s labor market would look very different. Businesses would go begging for less skilled labor. Unskilled workers would see their unemployment rate fall in comparison with that of skilled workers. Unskilled wage rates would be bid up as firms found it harder to fill vacancies.
The current job market looks very different. Unemployment rates of unskilled workers have risen relative to those of skilled workers. Unskilled wage rates have fallen. The help-wanted sign in the window of your local fast-food restaurant might imply a different story. But the wage posted on the sign is usually less than that offered 10 or 15 years ago.
We are not drowning in a sea of lousy jobs. Rather, the labor market is awash with a surplus of unskilled workers. Current wage and unemployment trends send a clear signal: Skilled workers are welcome; unskilled workers need not apply. For a variety of reasons, employers now require an increasing level of general education and skill. By the wages they offer, employers show their willingness to reward skill in a tangible way.
This probably sounds like the warning of your high-school guidance counselor. Twenty years ago, however, the unskilled worker could anticipate that his wages, though low, would rise in lock step with wages in general. The current job market holds no such promise. Wages for those with average skills are stagnant; wages for the unskilled are falling. Only workers with demonstrable skills appear to be gaining ground.