Reports from the Economic Front

a blog by Marty Hart-Landsberg

A Failing Grade For U.S. Job Creators

In a fancy bit of marketing U.S. capitalists have been reborn as “job creators.”  As such, they were rewarded with lower taxes, weaker labor laws, and relaxed government regulation. However, despite record profits, their job creation performance leaves a lot to be desired.

According to the official data the last U.S. recession began in December 2007 and ended in June 2009. Thus, we have officially been in economic expansion for almost five years.

It is a given that we will experience another recession; the business cycle comes with capitalism.  Since times will always be tough for the majority during a recession (by definition), we have a right to expect that things will go well for the majority during the expansion that follows. More precisely, we should expect that the gains from the expansion will be strong and broad based enough to ensure real progress for the majority over the course of the business cycle.

If that doesn’t happen, it is sign that we need a change in our basic economic structure.  In other words, it would be foolish to work to sustain an economic structure that was incapable of satisfying majority needs even when it was performing well according to its own logic.

A recent study by the National Employment Law Project titled The Low-Wage Recovery: Industry Employment and Wages Four Years Into the Recovery provides one indicator that it is time for us to pursue a change in the U.S. economic structure.  As it shows, the current economic expansion continues the U.S. transition into a low wage economy.

In net terms, the U.S. economy lost private sector jobs every month from January 2008 to February 2010.  The private sector posted positive net employment gains every month from March 2010 to March 2014 (the last month considered by the study). Coincidentally, total private sector employment finally recovered its pre-crisis January 2008 peak in March 2014.

Figure 1 from the National Employment Law Project study shows the net private sector job loss by industries classified according to their medium wage from January 2008 to February 2010 and the net private sector job gain using the same classification from March 2010 to March 2014. As we can see, the net job loss in the first period was greatest in high wage industries and the net job creation in the second period was greatest in low wage industries.

chart

Figure 4 presents a visual picture of job growth by industry over the period February 2010 to March 2014.

job bubble

As the study explains:

 The food services and drinking places, administrative and support services (includes temporary help), and retail trade industries are leading private sector job growth during the recent recovery phase. These industries, which pay relatively low wages, accounted for 39 percent of the private sector employment increase over the past four years.

While the study focused on private sector job creation, Figure 4 also shows one consequence of the continuing attack on the public sector: all levels of government have been forced to dramatically slash their employment.

In short, if the hard times of recession disproportionately eliminate high wage jobs and the “so called” good times of recovery bring primarily low wage jobs, it is time to move beyond our current focus on the business cycle and initiate a critical assessment of the way our economy operates and in whose interest.

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