Low Unemployment and Those Who Lose

Statistics without analysis and understanding can push people to draw unwarranted conclusions. Particularly when the numbers are based on averages, where a few very high numbers at the top create higher averages but do very little to reflect the big picture lower down the calculation.

“Unemployment is hovering near a five-decade low, workforce participation is at the highest level in six years and Federal Reserve Chairman Jerome H. Powell recently called the labor market ‘strong.’

“Yet, 44% of Americans ages 18 to 64 are low-wage workers with few prospects for improving their lot, according to a Brookings Institution report.

“An estimated 53 million Americans are earning low wages, according to the study. That number is more than twice the number of people in the 10 most populous U.S. cities combined, the report notes.

“The median wage for those workers is $10.22 an hour and their annual pay is $17,950.

“Although many are benefiting from high demand for labor, the data indicated that not all new jobs are good, high-paying positions.

“The definition of ‘low-wage’ differs from place to place. The authors define low-wage workers as those who earn less than two-thirds of the median wage for full-time workers, adjusted for the regional cost of living.” Bloomberg, November 10^th.

In short you don’t have to make much money to be deemed employed, and if you have totally given up on the job market, you are not even counted. Oddly, a very powerful constituency in Donald Trump’s base are in that low wage arena. Making America Great Again means that they expect to get back the wage rates such workers used to earn. With union membership slipping away, many people are making a whole lot less in inflation-corrected earning power than was paid at the peak of the earnings market. Not so at the top of the job market.

As major corporate CEOs have ramped up to earn hundreds of times what their average employee makes, de-unionization, globalization and increasingly automation have eroded buying power for those at the bottom. Where once the mighty Teamsters ruled the road, today “independent drivers” often have to work 50% more to make 50% less. Many in the low wage bracket may lack skills that are in demand or live in pockets of lower employment of generally lower wages. Moving to better job markets is both expensive and disruptive; many just cannot afford to try.

“‘We have the largest and longest expansion and job growth in modern history,’ Marcela Escobari, coauthor of the report, said in a phone interview… That expansion ‘is showing up in very different ways to half of the worker population that finds itself unable to move,’ she said.

“The millions of Americans in low-wage jobs are likely to stay there. Workers who make $10 to $15 an hour have a 52% chance of remaining in that wage bracket when they switch jobs… For middle-wage workers, or those earning $19 to $24 an hour, there’s a 46% chance that a job transition would result in lower pay. That’s bad news for the nearly 3.5 million workers who quit their jobs in September alone.

“The demographics of low-wage workers span race, gender and geography, but women and minority groups are more likely to earn low wages… Black workers are 32% more likely to earn low wages than whites, and Latinos are 41% more likely.

“Nearly half of low-wage workers are concentrated in just 10 occupations, according to the report… The largest group is retail salespeople (4.5 million), followed by information and records clerks (2.9 million), cooks and food preparation workers (2.6 million), building cleaners and janitors (2.5 million), material movers (2.5 million) and food and beverage servers (2.4 million).

“Rounding out the top-10 list are construction trade workers (2.3 million), material dispatchers and distributors (1.9 million), motor vehicle operators (1.8 million) and personal care and service providers (1.8 million).

“As for the future, the main concern is displacement, Escobari said… ‘Both the industries that are growing and the industries that are shrinking are low wage,” and available work “is going to be more low-wage work,’ she said.” Bloomberg. 

Democrats, increasingly viewed as a “liberal elite,” seem to have long-since lost their focus in support of these workers. Trump’s GOP populism has made replacement promises that cannot be delivered… but at least provide hope. But this is a deep and chronic problem that only gets worse as our government cuts taxes for the rich and eliminated programs to help the rest. Are these Americans simply a total write-off? Really?

              I’m Peter Dekom, and systemic under-employment just might be the elephant in the room.