The economy is producing way too many low-wage jobs

Readers of this blog know that at Michigan Future we believe the mission of economic policy should be income based, not employment or economic growth based. The reality is you do not have a good economy––no mater how low the unemployment rate or how high the economic growth rate or stock market––when 43 percent of Michigan households cannot pay for basic necessities.

The prime reason for 43 percent is that there are way too many low-wage jobs. 60 percent of Michigan jobs pay less than $20 and hour and 40 percent pay less than $15 an hour.

Two recent reports dive deeper into the reality of way too many low-wage jobs. Martha Ross and Nicole Bateman, for the Brookings Institution, wrote Meet the Low-Wage Workforce. The title of their report summary article says it all: Low unemployment isn’t worth much if the jobs barely pay. (You can find the report here and overview article here.) They write:

In a recent analysis, we found that 53 million workers ages 18 to 64—or 44% of all workers—earn barely enough to live on. Their median earnings are $10.22 per hour, and about $18,000 per year. These low-wage workers are concentrated in a relatively small number of occupations, including retail sales, cooks, food and beverage servers, janitors and housekeepers, personal care and service workers (such as child care workers and patient care assistants), and various administrative positions.

Just how concerning are these figures? Some will say that not all low-wage workers are in dire economic straits or reliant on their earnings to support themselves, and that’s true. But as the following data points show, it would be a mistake to assume that most low-wage workers are young people just getting started, or students, or secondary earners, or otherwise financially secure:

• Two-thirds (64%) of low-wage workers are in their prime working years of 25 to 54.

• More than half (57%) work full-time year-round, the customary schedule for employment intended to provide financial security.

• About half (51%) are primary earners or contribute substantially to family living expenses.

• Thirty-seven percent have children. Of this group, 23% live below the federal poverty line.

• Less than half (45%) of low-wage workers ages 18 to 24 are in school or already have a college degree

Steve Denning, for Forbes, provides an overview of the second study. Once again the article title says it all: Understanding The U.S. Economy: Lots Of Rotten Jobs. Denning writes:

When U.S. unemployment is at a 50-year low, why do so many people have trouble finding work with decent pay and adequate predictable hours? A new economic indicator—the US Private Sector Job Quality Index (JQI)—gives the answer: we have lots of jobs, but they are increasingly low-quality jobs.

… What do the new jobs actually look like? The JQI White Paper paints a grim picture. “The success of superstar companies like Google or Apple or Pfizer should not blind us to the fact that today Leisure & Hospitality is our largest sector with 14.7 million non-management employees. It’s a sector that pays such workers $16.58 an hour and the average worker works just 25.8 hours a week – resulting in average weekly income of $428. (Benefits like health insurance in the sector are small to nonexistent.)”

These reports make clear we are not going to grow our way out of an economy where lots of jobs are low paid. Nor are we going to educate our way to a solution. There simply are lots of tasks that need to get done that are structurally low-wage work.

If we want––and we should––an economy that as it grows benefits all we are going to have to figure out how we increase wages and benefits of those working in low-wage jobs. This is the economic challenge of our times: figuring out how you get an American capitalism that as it grows benefits all.

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