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Economic Progress: Where Did the Good Jobs Go?

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As the economy gets more productive and the nation gets richer we should expect that jobs get better through time, right? Well that’s not the way the economy works anymore, and it’s especially not the way that it has been working the current business cycle. 

My colleague at the Center for Economic and Policy Research (CEPR), John Schmitt, examined the movement in the share of “good jobs” in the economy during the current business cycle. He found that the share of good jobs in the economy was actually 2.3 percentage points lower in 2006 than it was in 2000, the peak of the last business cycle.

Schmitt uses a straightforward definition of a good job. It must pay at least $17 an hour. This was the wage for a typical male worker back in 1979, not an especially high benchmark. To qualify as a good job, the job must also provide pension and health care benefits.

The share of job meeting the wage cutoff is up a very modest 0.6 percentage points since 2000. This isn’t much, but at least the direction of change is in the right direction. By contrast, the percentage of jobs offering health insurance coverage is down 3.1 percentage points and the share providing pension coverage is down by 4.9 percentage points. 

Even these figures understate the true decline in health care and pension coverage. Many employers are now requiring much higher co-payments from workers for their health insurance coverage. In the case of pensions, traditional defined benefit pension plans are rapidly being converted into defined contribution plans, in which workers assume investment risk.

The decline in the share of good jobs in this business cycle has been harder on men than on women. The share of good jobs for men fell by 4.4 percent since 2000 compared to 1.9 percent for women. The story here of course is that men had good jobs to lose, whereas the vast majority of women did not.

You can get the full story on the CEPR website, but this is yet more evidence that most workers have not benefited from the economy in recent years. While the “talented” folks who produced multi-billion dollar losses at the country’s leading financial institutions (e.g. Citibank, Merrill Lynch, Fannie Mae, and Freddie Mac) are doing just great with severance packages in the tens of millions of dollars, typical workers have yet to see the benefits of their brilliance tickle down in the form of better paying jobs: maybe in the next millennium.


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Just a clarification, please:

It must pay at least $17 an hour. This was the wage for a typical male worker back in 1979,...

1979?
Asjusted for inflation? or is it the actual dollar amount from 1979?

Re: To qualify as a good job, the job must also provide pension and health care benefits.

A pension, or some general form of retirement benefit (i.e., as 401k)? If the former, then there are very few good jobs indeed as pensions are going to way of the dinosaur outside the public sector. And I really don't think old-fashioned pensions are a good benchmark of a "good job" since they simply are not structured for a world where most people change jobs every few years. Nor should we wish for a world where people are locked into a job for the sake of the benefits.

I like the $17 measure; it's within a couple bucks an hour of both the housing wage (what you have to earn such that fair-marlet rent on a two-bedroom apartment is no more than 30% of your pay,) and the national median income.

Another way to look at this is that only about half of Americans have "good jobs" where they can at least afford their own apartment. 

I miscalculated. $17/hr is only $35360/year working 40 hr weeks. Quite a bit less than the median, but still pretty close to the housing wage. So a "good job" is about what it takes to afford a decent apartment.

It seems that one of the obvious solutions to this problem would be stop importing low skill labor. As the result, employers would have to pay more for low skill labor and switch to more intensive use of technology that would increase demand for more trained but not college educated workforce.

Yes, but the labor imports itself. So to exert the wage pressure we would have to seal our borders to a Soviet level.

Another approach is to enforce workplace rules, making employers afraid to risk hiring illegals. Complications of valid ID can be handled more easily than trying to close our border.

Depend on where the 2-Bedroom apartment is at, New York City or Des Moines, IA ...!!

I do not think any illegals are getting the "good jobs". H1 Visas are accounting for them or they are "offshored".

I'm sure if there is a will, we can enforce workplace rules the way we inforce work safety minimum wage and other rules. However, making the borders more secury is also helpful.

Of cource imported low skilled worforce is not imported for taking good jobs.
However, this import prevents transforming
"bad" jobs into "good" jobs.

H1 jobs in tech are usually at 40K/yr or more. Hence these are "good jobs". But recently a levy of $2400 is being put on each H1 application. But this still does not seem to deter the employers ...

As the economy gets more productive and the nation gets richer we should expect that jobs get better through time, right? Dean Baker

Yeah? Why?

Increased productivity is the result of investment in capital assets -- either by the already wealthy or by workers' retirement funds, the ROI on the latter investment coming not in the form of present increased wage income but in the form of retirement income.

And we have to thank the Chinese and the rest of the world for getting us "richer" by lending us money, money, money. Don't see why workers should get pay raises because the Chinese are nuts, do you?

Inflation adjusted -- we're not hacks.

I don't think you can turn "bad" jobs into "good" jobs. Retail for example has always paid low wages. Walmart did not start that trend.

=== Retail for example has always paid low wages. Walmart did not start that trend. ===
The unionized retail clerks at Sears Roebuck, Montgomery Ward, and the large family-owned grocery chains in major metro areas historically made a decent wage with some benefits. Not enough to get rich, but enough to pay for college tuitions as a second income or even for a single mother to get by.
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sPh

Don't see why workers should get pay raises because the Chinese are nuts, do you?

Of course.

They’ll live better lives. That’s one of a handful of reasons we have a country.As in Life , Liberty and the pursuit of happiness.

If the country is more productive that means more stuff has been created , however that happened. And however that happened everyone should get some more of that stuff otherwise the country isn’t meeting one of its reasons for existence. (Maybe over time if a large portion of the country doesn’t share in the productivity gains there might be a price to pay . If only in reduced public spirit when sacrifices are required for the common good.)

There’s another reason I think workers should obtain some of the happiness from sharing in the productivity gains of the country. I want them to. I learned in a logic course years ago that “you can not argue first priniciples.” For some people ,for example private property is a first principle. If something has to give they will argue to protect that because they have a strong feeling that that’s right. I respect that's their principle. Mine is that the mean standard of living of , say , the bottom 20% of the income distribution should improve. I don’t expect you , or anyone else, to agree with me , nor do I agree with what I take to be your first principles. You’ve got yours. I’ve got mine. .

Mine is that the mean standard of living of , say , the bottom 20% of the income distribution should improve.

No problema. But, of course, that's not the quintile which is the subject of Baker's essay. He's talking about the middle quintile (+ or -) -- that is, workers who are performing the "good jobs."

But has Baker demonstrated/shown/proved that workers qua workers "ought" (as a philosophical term) to share in so-called* productivity increases?

* ["If the country is more productive that means more stuff has been created . . . ."] Hmm. It could mean lenders are just loaning money faster than they used to. NINA loans (no income-no assets)? They're fast, fast, fast and very productive.

Corvid

Re illegal immigration, consider what the President's Council of Economic Advisers said about the recent "comprehensive reform" bill in Congress: The council estimated that if the bill had passed, it would have depressed (or, I suppose, continued to depress) US wages to the tune of about $350 billion a year.
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Since the administration favored the bill, it's safe to assume this was either the council's true best estimate or an understatement. It's also true that they estimated a $380 billion gross benefit to the economy, most of which would have gone directly into the pockets of employers paying lower wages than they would have otherwise.
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So, in essence, what we're talking about when we regularize illegal immigrants or encourage more such immigration is a huge, regressive tax on working Americans at the middle and lower 30 percent or so of the wage scale. And keep in mind, these aren't just crap jobs: Illegals are a big factor in construction and meat packing, which, within baby boomer memory used to provide decent work and solid middle-class wages and benefits.
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Unionization would be good, but it becomes much harder to organize when you have a large and growing oversupply of labor that, to top it off, is ethnically and racially splintered.
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One awaits the Democrat who will declare that, in order to rescue working Americans, we will abandon our crypto-imperialist globalization policy and declare a moratorium on all immigration, scrap the H-1 visa program and formulate a transparent trade regime that deals with other nations on a case-by-case basis, taking into account what's best for all US citizens rather than a few, hyper-favored corporate interests. Finally we need linkage--a fixed ratio (say 10 to 1) built into every corporate charter linking the total compensation for top corporate officers and their least-compensated employees on a per-hour basis.
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The Berkeley economist Brad DeLong recently asked a series of questions on his blog that boiled down to the single question of why it should matter in the least where, globally, products and manufactured, where management is formulated and implemented, or from where services are provided. The answer, as I see it, is that these things should matter only if your country matters, or only if your countrymen and women matter.
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Too many of our leaders are trying to frighten us into believing that we're in some kind of death-grip struggle with a) global terrorism, or b) other economic powers determined to seize markets, or c) some combination of both. As long as we continue to fall for this garbage, they'll continue to hollow out our country.

.  .  .  The council estimated that if the [recent "comprehensive reform" bill in Congress] had passed, it would have depressed (or, I suppose, continued to depress) US wages to the tune of about $350 billion a year.

Is "$350 billion" a lot?  a little?  how much is it in percentage terms? 

But has Baker demonstrated/shown/proved that workers qua workers "ought" (as a philosophical term) to share in so-called* productivity increases?

I've no doubt that philosophers think deeply about the concept of "ought":useful? required
by the "natural law"? whatever? As a layman I can't get any further than the idea that for any individual his "ought" should have a logical connection with her basic values-that "ought" is always personal.I'd be inclined to leave Baker's "ought" at that.


"If the country is more productive that means more stuff has been created"

Seems to me that for a country to be called productive it has to produce more products. A factory that produces a million widgits in 2005
wouldn't be called more productive if in 2006 it produced that same old million but did it with greater use of lenders' capital.

I thought that when calculating productivity economists used labor hours, not capital investment.  Was I wrong?

scrap the H-1 visa program
It wouldn't make any difference, companies would just outsource jobs abroad.
formulate a transparent trade regime that deals with other nations on a case-by-case basis, taking into account what's best for all US citizens rather than a few, hyper-favored corporate interests.
Let's make sure that we don't screw up HighTEch companies that have huge export and are responsible for most of prosperity we have.
Finally we need linkage--a fixed ratio (say 10 to 1) built into every corporate charter linking the total compensation for top corporate officers and their least-compensated employees on a per-hour basis.
Why and how would you restrict total compensation of Google founders or Steve Jobs?

The problem on hand is to provide "good" jobs for non college educated Americans and not to destroy American economy.

Probably right. But Baker used the word "productive". That could start a longer discussion and I've used up enough space already.
Cheers.

Errrm, this is a shock to whom??? Sorry but I don't need an economist to tell me things are bad and getting worse. While most of them have been blowing sunshine up our skirts (or pantlegs,) it's been a race to the bottom for the workforce since Reagan targeted the air traffic controllers.

Corporate greed has replaced worker equity. Quarterly reports trump a nation's collective economic health. We have been outsourced blind despite our productivity and dug a huge hole of debt for our kids and grandkids to pay off.

If this is news to anyone, they must have been asleep longer than Rumpelstiltskin.

Corvid

Re scrapping H-1 visas: US companies wouldn't be so inclined to outsource if they had a fixed and linked wage ratio as I suggest. There'd be no cost advantage in India if you had to pay someone there what you paid better tech folks here. Of course, if the techies over there were really qualitatively better, then you could outsource.
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How do we implement that compensation linkage? First off, I wouldn't have any such linkage for real entrepreneurs. If you invent a widget in your garage and consumers go wild for it, fine, contract out production to some corporation, demand a fabulous percentage of the profits and thereby make your billions. But within the confines of a chartered corporation, those who grant that charter (namely us) can specify anything we damned well please. A reasonable ratio (I think 10 to 1 is fine and allows plenty of scope for wage incentives) would ensure that, once again, rising tides would raise all ships.

But if any sort of compensation linkage offends one's sensibilities, how about this? Have two different types of corporate charter: You'd have J (for jerk) corporations, in which there is no linkage and which would be taxed at, say, double the rate of L (for linkage) corporations. We use taxes to encourage and discourage all sorts of behavior, so this should pass muster. And the J corporations' executive officers could actually earn part of their outsized pay by explaining exactly why shareholders should endure doubled taxation while the CEO walks away with 500 times the average workers' compensation.

What about CEO of Honda, Nokia, and other internnational companies that have American workforce?

Corvid

That's where trade policy comes in. I'm sure most of these people would get into line rather than risk losing the entire US market.
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Corvid

Good question anytime anyone starts slinging around words ending in "-illion." If you're talking about, say, 30 percent of the working population of 140 million Americans--or about 42 million people at the bottom end of the scale--that comes to $830 a year out of the average paycheck. I'd say that's a lot if you're making substantially less than the $42,000 median household income.
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But then you have to add in the notion that the presence of such downward pressure not only costs these folks $830 a year in the here-and-now but also makes it that much less likely they'll ever recover that amount and then gain enough traction in the workplace and politically to begin to substantially narrow our now insane income gap in this country.
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You know, this is not the land of opportunity. If you're born poor here you're more likely to stay poor than someone born in Western Europe--even Scandinavia. We don't have the political will or even the basic trust across our weak, insular and atomized society to do much about it by public means, and we don't have anything like the kind of economic structure or ethic that would give workers the tools to fight on behalf of their own interests. And trying to fix things with the current crop of Democratic pols is like trying to reassemble a V-8 with a foam rubber wrench.

Re: It wouldn't make any difference, companies would just outsource jobs abroad.

Not necessarily. There are some very serious downsides to outsourcing jobs as many companies discovered to their cost. That's why the outsourcing boomlet has pretty much fizzled. You can outsource jobs if the entire outfit can move abroad, management and all (as has happened with many manufacturing jobs), or you can outsource jobs that are pretty much stand-alone, not requiring a high degree of coordination with other workers (as in many customer service jobs, although here there is a danger of losing business from disgruntled customers). But if you try to outsource jobs piecemeal the result is disastrous, so if your whole operation can't move abroad then you have to keep the coordination-required jobs at home where time zones, language barriers and cultural problems do not create the sort of friction that can bring a company to grinding halt. Hence the alternative of the H1-B visa for a lot of this sort of work.

I am the guy this discussion is about. I am a skilled blue collar worker in NC who makes $17.25 and has a really good 401k and health plan. I'm 47 and I do not see the guy coming up behind me who can do my job. When I started in this business (irrigation) 20 years ago guys with some college were common. On the first crew I worked with at my present company, in 1990, all 4 of us had some college.

Now the American guys we get are high school at best. Most are drop-outs. We get smart, motivated, Hispanic immigrants, but they lack the communication sklls to run a crew or do service (my job) and deal with customers one on one.

I really hate to sound like an old fart but I have watched as Americans have become less inclined to do a job that requires getting your hands dirty. Those "good jobs" in the construction and service spheres go wanting.

Double posted by accident.

Consider the shift from praising work to praising wealth. Americans don't mind dirt, but know that the big money is elsewhere. They also haven't been encouraged to seek engineering or other practical higher ed like sciences. Instead the greed guys extol MBA programs.

General labor has taken the hit along with engineering and other skilled labor. With no reasonable expectation of supporting a family as skilled labor, why would Americans study those skills?

My son wanted to follow me in show biz so I couldn't argue. Still, he was never unwilling to get dirty, working for the park district of our town, emptying garbage and watering trees, etc. I asked him recently if he would pick cabbage for 17$/hr. He said "in a heartbeat."

It's not so much that Americans are just less inclined, it's the dollar equation. There are no "jobs Americans won't do" except the ones that are losers. Make them both respectable and financially useful and there will be no problem finding workers.

The country has to side with the worker against the owner, it's that simple.

And the owners send their capital abroad.  What do you propose to do, then?

This is a mistery for me. If Americans don't want to do a good job that requires getting your hands dirty, what kind of jobs they are getting?

There was no capital flight in the twentieth century, until the Reagan devolution. American companies were American companies, and the money was safer here than elsewhere.

Capital flight does not occur because workers are well paid, and owners not coddled. It occurs when there is economic collapse or runaway inflation.

I propose restoring to effectiveness the National Labor Relations Board, and actually enforcing existing law protecting organizing activities. I propose restoring the Kennedy tax rates, which allowed the US at that time to be the fastest growing economy, while being the scientific, inventing, engineering, manufacturing, and cultural leader.

I propose reducing taxes on the middle and lower end of the income range, and increasing taxes on capital gains and dividends. That some wealthy bondholder makes less profit is not a large factor in the economy; that a large number of middle and lower class citizens have a bit more discretionary income would add up to a large effect.

I would propose more college loan assistance for engineering, science, history, arts, and vocational training, and less for MBA programs.

Enough for starters? 

Pre-Reagan (or maybe, pre-Nixon; you don't want to emulate the '70s, do you?), the world was a different place. There were very few developing and emerging markets and most had severe restrictions on foreign investment. Financial globalization/liberalization has altered the investment landscape, drastically, and the rear view mirror isn't very helpful.

There's always a balance to be struck between rate of return and investment security. Lower the rate of return in secure economies (America, Europe, et als.) and investors will be induced to move to less secure emerging and developing markets.

rE: There was no capital flight in the twentieth century, until the Reagan devolution.

I don't think this can be blamed on Reagan, or on any politicians. Technology made outsourcing possible, end of story. Carter and Mondale could have sat in thwe White House during the 80s and that would be no different.

Paper pushing and telephone dialing jobs. Mystery solved.

Can we agree that UK, France, and Germany are not failed states? They have higher tax rates and do not suffer significant capital flight. 

This is all beside the point. The main issue is the denigration of labor. The "ownership society" still needs employees, and preferably well-trained ones. But the NLRB and laws on the books that protect union organizing aren't well enforced. (Quelle surprise.)

Not quite relevant to capital flight, but things could in fact be different if salaries paid to overseas workers were not deductible as a business expense.

Are those jobs paying more?

A few do, most don't. But before singing yet another dirge for the "factory rat" of yore, let's remember that those jobs were often bad jobs in ways that had nothing to do with pay and benefits: they were dirty, boring, repetitive and often dangerous. The solution is not to bring back jobs like that but to make the jobs we have better.
No, I don't have a magic solution to that problem, not claiming I do. But all in all I think it's a better thing that machines nowadays often do work that used to put too many people in an early grave.

The H1 jobs are still here in the US.

No, the decline of good jobs in the US can be tracked through the almost universal push of business to offshore jobs. Both big and small businesses are working to send as many good jobs as possible overseas. Small businesses can't even get VC funding without some overseas component in their business plan.

I have a magic solution, free market and technology progress. But this is not going to happen if employer can import a cheap labor to take "dirty, boring, repetitive and often dangerous" jobs.

"This is a mistery mystery for to me. If Americans don't want to do a good job that requires getting your their hands dirty, what kind of jobs they are are they getting?"

"I have a magic solution, a free market and technology technological progress. But this is not going to happen if the employer can import a cheap labor (or a cheap labor force) to take the "dirty, boring, repetitive and often dangerous" jobs."

You're almost there, davai; just a couple more hours with the grammar book. :-)

 

Thank you Ellen, the one thing I'll never learn is the usage of the articles :-)
See, how great America is, with my grammar skills, I'm able to get a good job that doesn't
require getting my hands dirty.

Just don't try that with the French!  But seriously --

Your mistaken pronoun is interesting, too.  As an American I think of "Americans" either in the first person (we Americans) or the third person (Americans).  I couldn't make the error you made.

But because you think of Americans in the second person (you Americans), you did.  As I said -- intriguing. 

Sometimes I'm not sure if I should say we Americans, because I'm not an American even so I'm US citizen. It's much easier for my children.

Maybe we need to look to Fabulous Las Vegas. Many service inbdustry jobs out there pay surprisingly well and inlcude benefits. No, you won't get rich being a hotel maid at the MGM, but you can keep a roof over your head and send your kids to the doctor. And even the presence of lots of immigrants doesn't matter.
The secret? Its starts with a "u".

Hack?

Can you give me the data for the wage in 1979?

I spent several hours wading through census data and can't locate any data providing nonsalaried average wage.

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